2. Competition
Competition in business is the contest or rivalry among the companies selling similar products and/or targeting the same target audience to get more sales, increase
revenue, and gain more market share as compared to others. Businesses can see competition in the form of: price, quality, design, sales and location. Competition
can be found in almost every business process.
A good real world example of direct competitors could be the papa johns and dominos business rivalry. Both of these companies:
Operate in the same industry (fast-food)
Offer similar products (pizza and related fast-food products)
Satisfy the same need
Use same channels of distribution (retail chains, takeaway, and home delivery)
Target the same audience (working individuals)
This can be used in an exam when comparing similar businesses to eachother
3. Market Conditions
Market conditions relate to the attractiveness (or otherwise) of the overall market in which a business operates. Market conditions tend to affect all businesses in
an industry, although their ability to take advantage or, or respond to changes in market conditions will vary. Two key indicators of market conditions are:
Economic Growth- an increase in the value of goods and services produced by an economy over time
Market Demand-the total quantity demanded across all consumers in a market for a given good
4. Economic Growth
Key points to remember about economic growth:
The level of demand in most markets is influenced by the rate of economic growth
Economies vary in terms of their “normal” long-term growth rate
A mature economy like the UK has a long-term growth rate of around 2-3%
GDP growth will vary depending on the state of the economic cycle
An example of economic growth in the world today is through the apple app store across all of Australia- during the pandemic, the use of
the app store increased enormously since 2019 facilitating over half a trillion dollars in commerce
The App Store is home to 1.8 million apps and visited by half a billion people each week. Apple’s vibrant community of developers has
now earned more than $200 billion (US) to date through the sale of digital goods and services in 175 markets around the world.
5. Market Demand
Key points about market demand to remember:
The size and growth rate of a market is a key indicator of market conditions
A fast-growing market will encourage new entrants as well as benefit existing competitors
A slow-growing or declining market makes market conditions much tougher, with competitors fighting for their share of weak demand
When analysing market demand there are 8 different types you need to understand for your exams.
6. 8 types of market demand
analysis
Negative Demand: Negative demand for a particular product exists when consumers, generally, would be prepared to pay more than the price of the product to avoid having
to buy it, as in the case of unpleasant and painful medical treatment.
Unwholesome demand: The desire for goods, services, and activities that are deemed to reduce individual and social welfare. Examples include the desire for illegal drugs,
excessive amounts of alcoholic beverages, and driving at excessive speeds
Latent demand: Demand for a product which can satisfy a want which is unable to be satisfied by any existing product.
Declining Demand: the falling away of customer demand for a particular good or service, caused by the introduction to the market of a new innovation, competition from
substitutes or other factors.
Non existing demand: In this type of demand, a marketer thinks that there is a demand for the product in the market but in reality, there is no demand for the product. In
many cases, companies lose their market value by not analysing this demand.
Full demand: Full demand means that the demand is meeting the supply potential of the company. It also means that the markets are happy with the products of the
company and that people want to buy from the same company
Irregular demand: Irregular demand can be demand which is not consistent. The best example of irregular demand is seasonal products like umbrellas, air conditioners or
resorts. These products sell irregularly and sell more during peak season whereas their demand is very low during non seasons
Overall full demand: Overfull Demand takes place when the brand has a lower capacity to manufacture items than its high demand in the market. In simpler words, there is
more demand and not enough supply to satisfy consumers.
7. incomes
Income is money that a person or a business receives in return for working, providing a product or service, or investing capital. A person's income may also derive
from a pension, a government benefit, or a gift. To a government tax agency, income may be taxable, tax-exempt, or tax-reduced. To an economist, income may be
disposable or discretionary.
Key points about income:
Income is the money that people and businesses receive in exchange for working, producing a product or service, or investing capital. Some derive income from
pensions and government programs.
Businesses earn income from selling their goods or services for a price that exceeds their cost of production.
Tax authorities treat income earned through various means differently.
8. Interest rates
Interest is the reward for lending and the cost of borrowing. The interest rate is the percentage rate charged on a loan or paid on savings.
For example, an annual interest rate of 5% means £5 is paid in interest for every £100 saved or borrowed.
An increase in interest rates can affect a business in two ways:
Customers with debts have less income to spend because they are paying more interest to lenders. Sales fall as a result.
Firms with overdrafts will have higher costs because they must now pay more interest.
The impact of a change in interest rates varies from business to business. Firms that make luxury goods are hit hardest when interest rates
rise. This is because most customers cut back on non-essentials when their incomes fall as a result of interest rate rises.
9. demographic factors in
business
Demography is concerned with the size and composition of a population. Changes in population dynamics occur slowly but
can be significant for businesses.
Two key demographic changes in the UK that impact on many businesses are:
Ageing Population:
Some possible business implications are- Greater demand for services to support older people (e.g. healthcare)and increasing
disposable incomes of older people reflected in higher demand for goods and services (e.g. holidays)
High levels of net immigration:
Some possible business implications are-Higher costs of (but greater demand for) public services (e.g. education, health,
housing)and increase in size of labour force – potentially keeping wage rates lo
Businesses able to grow faster with a larger supply of labour (particularly in the agricultural and service sectors)
10. environmental issues
Some environmental issues that occur in business are: climate change, pollution, sustainability and waste reduction.
Climate change: change in global or regional climate patterns, in particular a change apparent from the mid to late 20th century onwards and attributed largely to
the increased levels of atmospheric carbon dioxide produced by the use of fossil fuels.
Pollution: the presence in or introduction into the environment of a substance which has harmful or poisonous effects.
Sustainability: avoidance of the depletion of natural resources in order to maintain an ecological balance.
Waste reduction: Waste reduction, also known as source reduction, is the practice of using less material and energy to minimize waste generation and preserve
natural resources
Being environmentally friendly can bring a number of benefits. For example:
Subsidies and grants – The government offers money to businesses willing to invest in environmentally friendly production methods. This can help to
reduce costs.
Lower costs – Changes to business activities that lower a business’ impact on the environment can often also lower the business’ costs. For example,
retailer Marks and Spencer has introduced driver performance software in its delivery vehicles that has reduced the consumption of fuel by 2.3 litres per
hour.
Increased sales – Concerned customers who are very aware of environmental issues are more likely to buy from businesses that act in an
environmentally friendly way.
11. Fair trade
Fair Trade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade.
Fairtrade enables consumers to demand a better deal for those that produce our food. Through choosing Fairtrade consumers can demand the highest standards from
business and government, ensuring people and planet are not exploited to create the products we enjoy.
Economic benefits: The Fairtrade Minimum Price is supporting the farmers that grow products such as cocoa, coffee and bananas to become more income-secure and less
vulnerable to poverty. Fairtrade is gradually empowering communities to organise into cooperatives and improve their negotiating position within the supply chain. This can
enable them to negotiate a higher price for their product than the conventional market price. Fairtrade improves access to agricultural services like organic training and
premiummarkets. As a result farmers have an incentive to farmbetter and sell more.
Environmental benefits: The Fairtrade Standards cover key areas for environmental protection, including energy and greenhouse gas emission reduction, soil and water
quality, pest management, biodiversity protection, prohibition of genetically modified organisms and harmful chemicals and waste management. The Fairtrade
Standards promote training for farmers, which can include advice on switching to environmentally friendly practices, such as developing nutrient-rich soils that support
healthy plants and encouraging wildlife to help control pests and diseases.
Social benefits: Farmers and workers who choose to participate in Fairtrade often feel a real sense of control over their future with greater power and voice.
Fairtrade can support workers to realise their rights and negotiate the terms and conditions of their work through trade unions and collective bargaining. Fairtrade
can provide producer support and expertise in deepening gender equality.
