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COMPETITION IN A FREE MARKET

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Title: COMPETITION IN A FREE MARKET


1
COMPETITION IN A FREE MARKET
  • ENT 12

2
FREE-MARKET SOCIETY
  • Canadians live in a free-market society.
  • Free market an economic system that permits
    profit, private property and competition

3
PROFIT
  • Profit is the reward a businessperson receives
    for risking time, energy, capital and reputation
  • Profits may be re-invested, used to pay off debt,
    used to pay taxes, etc.

4
PRIVATE PROPERTY
  • A free-market society allows Canadians to hold
    private propertypeople can buy things and keep
    them, sell them, or give them away.

5
COMPETITION
  • Having a free market means that competition is
    allowed and encouraged.
  • There are 4 major market structures
  • Perfect competition
  • Monopolistic competition
  • Oligopoly
  • Monopoly

6
PERFECT COMPETITION
  • A market characterized by a large number of small
    companies, none of whom have an opportunity for
    market control.
  • It requires government legislation to restrict
    growth in order to prevent market dominance by
    any of the competitors.

7
MONOPOLISTIC COMPETITION
  • A market consisting of a large number of
    companies, each having an opportunity for a
    degree of market control.

OLIGOPOLY
  • A market with a small number of large companies,
    each with a substantial amount of market control.

8
MONOPOLY
  • A market in which a single company has complete
    market control.
  • The Canadian government regulates monopolies.

9
BENEFITS OF COMPETITION
  • Encourages creation of new businesses
  • Wide selection of goods and services offered to
    consumers
  • Increase in level of service offered by service
    businesses
  • Better products at better prices
  • New technology that improves our standard of
    living

10
DIRECT COMPETITION
  • Direct competition when companies with products
    that are very similar are competing for the same
    market
  • ie. A movie theatre with stadium seating vs. the
    downtown movie theatre that makes great popcorn

11
INDIRECT COMPETITION
  • Indirect competition when companies with
    products that are not similar are in competition
    for a consumers discretionary income
  • ie. You have 20do you spend it on pizza or a
    new DVD?

OR
12
COMPETITIVE ADVANTAGES
  • Businesses look for advantages over their
    competitionsome are temporary (development of a
    flavour of soft drink that is copied by a
    competitor) or sustainable or long term.

13
SUSTAINABLE COMPETITIVE ADVANTAGES
  • Methods by which a business holds on to its
    customers in spite of the competition by
  • Developing a unique selling proposition
  • Lowering production costs
  • Serving a niche market
  • Creating customer loyalty

14
UNIQUE SELLING PROPOSITION
  • Why would a target customer buy from me instead
    of from my competitor?
  • I advertise more.
  • I make that product in green.
  • I deliver.
  • This is a patented design.

15
LOWERING PRODUCTION COSTS
  • Using cost-efficient, high-tech systems to reduce
    costs
  • Building a plant in a country with lower taxes or
    labour expenses

16
SERVING A NICHE MARKET
  • Providing a product or service for a small market
    and keeping competitors out of that market
  • ie. Software packages for specific needs

17
CREATING CUSTOMER LOYALTY
  • The customer develops a strong relationship with
    the product or retailer and will not consider
    another unless the retailer makes a big mistake.

18
NON-SUSTAINABLE COMPETITIVE ADVANTAGES
  • Those which can be used by competitors to shift
    sales in their direction. They include
  • Promotion
  • Placement
  • Quality
  • Benefits of use
  • Price
  • Design features

19
PROMOTION
  • Achieving top-of-the-mind awareness for a brand
    (ie. Roll up the rim to win by Tim Hortons)

PLACEMENT
  • To compete, a product must have a placement in
    the marketit must be there.
  • ie. Seamans beverages (PEI) in Vancouver
  • ie. Bottled water at a fitness centre

20
QUALITY
  • Businesses try to make their products stronger,
    faster, lighter, easier to open, add features to
    improve the product, etc.

BENEFITS OF USE
  • The value is not in the product itself so much as
    in what that product will do for the person who
    buys it.

21
PRICE
  • All features being equal, price is only a
    competitive advantage if its product or service
    is less expensive than the competitors.

DESIGN FEATURES
  • Consumers will buy one product rather than
    another because they like the style, the way it
    looks, or the way the product makes the consumer
    look.
  • Package design also competes for customers
    attention.
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