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Marketing and the Competitive Environment Marketing and Competitiveness

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Marketing and the Competitive Environment Marketing and Competitiveness The big will get bigger; the small will get wiped out. Meshulam Riklis – PowerPoint PPT presentation

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Title: Marketing and the Competitive Environment Marketing and Competitiveness


1
Marketing and the Competitive Environment
Marketing and Competitiveness
  • The big will get bigger the small will get
    wiped out.
  • Meshulam Riklis
  • In business, the competition will bite you if
    you keep running, if you stand still, they will
    swallow you.
  • William Knudsen
  • Concentrate your strengths against your
    competitors relative weaknesses.
  • Bruce Henderson

2
Marketing and CompetitivenessIn this topic you
will learn about
  • The possible impact of market conditions and
    degree of competition
  • Determinants of competitiveness
  • Methods of improving competitiveness

3
Market conditions
  • Firms need to be aware of market conditions.
    These are factors outside of the control of the
    firm that will have an impact on the firms
    activities
  • Interest rates higher interest rates will lower
    demand
  • Competitors what are they doing and how do they
    respond to you?
  • State of the economy are we in a recession or
    the boom stage of the business cycle?
  • New technology and innovations what are the
    latest products and technologies? How will they
    impact on your firm?
  • Firms should be aware of changes in these
    factors and amend their business plans to take
    them into account.

4
The Degree of Competition in the Market

MONOPOLY
DUOPOLY
OLIGOPOLY
MONOPOLISTIC COMPETITION
PERFECT COMPETITION
The spectrum of competition
  • The degree of competition in the market refers
    to the number of firms that exist within a
    market
  • Monopoly one firm dominates the market
  • Duopoly two firms dominate the market
  • Oligopoly a small number of firms are in the
    industry
  • Monopolistic Competition many firms compete in
    the industry selling differentiated products
  • Perfect competition many firms in the industry
    with no influence on market price

5
Monopoly
  • A monopoly exists where there is only one firm
    in the market. However, the Government refer to
    any company that has at least 25 market share as
    having monopoly powers.
  • Monopolies can exploit consumers by charging
    high prices. Therefore, monopolies are regulated
    in order to protect the customer.
  • Barriers to entry exist in monopoly markets that
    stop firms from entering the market. These
    include
  • high costs to enter the market, especially high
    capital costs
  • economies of scale experienced by large firms
    e.g. bulk buying
  • legal barriers e.g. only pharmacies can sell
    prescription drugs


6
Monopoly and the marketing mix


Monopoly will affect the marketing mix of a
firm Price monopolies are price leaders. They
can charge high prices but are often restricted
from doing so by government regulation. Product
with no competition product development is not as
important. Promotion with no competition
promotion is not as important. Monopolies will
still try to inform and persuade customers. They
can increase sales revenue through increasing
market size. Place the importance of this
depends on the type of product. For example, the
water companies must supply water to their
region. How Microsoft have been found guilty
of abusing their monopoly position.
You will need access to the internet to watch
this video clip
7
Duopoly
  • A duopoly exists where there are only two firms
    in the market.
  • Like monopolies, duopolies can also exploit
    consumers by charging high prices.
  • Similar barriers to entry that exist in monopoly
    markets also affect duopolies.
  • Duopolies tend to compete on non-price
    competition such as promotion.
  • Duopolies are often accused of collusion (making
    agreements between each other that restrict
    competition). This is illegal and firms that
    collude can be heavily fined.

8
Oligopoly
  • An oligopoly exists where there are only a few
    firms in the market.
  • Like monopolies and duopolies, oligopolies can
    exploit consumers by charging high prices.
  • Barriers to entry exist in oligopoly markets,
    particularly through advertising.
  • Oligopolies tend to compete on non-price
    competition such as promotion
  • and there may also be an element of collusion.
  • It is important for oligopolists to take into
    account the reaction of competitors when making
    decisions regarding the marketing mix. For
    example, if one firm cuts price, then others are
    likely to follow suit, resulting in a lower
    income for the market as a whole. Therefore,
    oligopolists are unlikely to lower price as a
    long term strategy.

9
Oligopoly and the marketing mix


Oligopoly will affect the marketing mix of a
firm Price oligopolies do not tend to compete
on price in the long run. However, oligopolists
might compete on price as a tactic. Product
oligopolists tend to spend heavily on developing
the quality of the product. Promotion this is a
very important element of the marketing mix.
Branding is crucial to an oligopolist. Place
this is also important to the oligopolist. Firms
must ensure that their products are accessible if
they are going to be successful.
10
Oligopoly and the marketing mix
  • The following markets are oligopolies
  • Soft drinks e.g. Coca Cola
  • Chocolate e.g. Mars Bars
  • Sports wear e.g. Nike


ACTIVITY
  • In small groups choose one of these markets and,
    using the internet,
  • research into the marketing mix for the major
    firms in these markets.
  • Present your findings to the rest of the class.

11
Monopolistic Competition
  • Monopolistic Competition exists where there are
    a large number of firms in the market selling
    differentiated products. This leads to a small
    degree of monopoly power as each firm offers
    something different to the others.
  • In this type of market barriers to entry are
    very low. Therefore, it is easy for firms to
    enter the market. This creates strong
    competition.
  • This mix between monopoly power and competition
    leads to the term monopolistic competition.
  • Firms within this market will try to brand their
    product. This might be through the building up of
    a reputation. There are numerous examples of
    this type of competition such as hairdressing,
    restaurants and the health and beauty industry.

12
Monopolistic Competition and the marketing mix


Monopolistic Competition will affect the
marketing mix of a firm Price non-price
competition is the norm in this type of
industry. Product this is a vital element of
the marketing mix. Although products are similar
it is often the quality of customer service and
the reputation that the firm builds up that
increase their customer base. Promotion firms
tend to work to a budget in such competitive
markets but there are limited forms of
promotion Place this can prove to be very
important in such a competitive market
convenience to the consumer is often a priority
13
How to be different in a crowded market


Reading Football Club, Coffee Republic, Pret, the
Eden Project, Ann Summers all these firms have
something in common. They work in markets where
there is lots of competition. Whether you are a
football club or sell coffee to the public it is
important that your product stands out. With so
many alternatives for people to choose from how
do firms make their product stand out from
others. Watch this clip to see how some
celebrity entrepreneurs differentiate their
businesses and products.
You will need access to the internet to watch
this video clip
2.19 Marketing and Competitiveness
14
Perfect Competition
  • Perfect Competition exists where there are a
    large number of firms in the market each selling
    homogenous products (Products that are the same).
    Firms in this type of market have no influence on
    price and are therefore price takers.
  • In this type of market there are no barriers to
    entry. Therefore, it is easy for firms to enter
    the market.
  • Consumers have perfect knowledge i.e. they are
    aware of the price of products sold in these
    markets.
  • In this type of market firms will not raise
    price as consumers will simply go to other firms.
    If a firm lowers price then all other firms will
    have to follow suit.
  • Some firms in the farming industry show elements
    of perfect competition.
  • However, this is more of a theoretical model and
    is unlikely to be assessed in the BUSS2 exam.

15
Types of market
  • ACTIVITY
  • Look at the following types of market
  • Monopoly
  • Oligopoly
  • Monopolistic Competition

For each type of market choose two firms from
different industries e.g. cars and music. In
table form describe each element of the marketing
mix for both firms.
2.19 Marketing and Competitiveness
16
Determinants of Competitiveness
  • Competitiveness refers to the degree to which a
    firm is successful at selling its products in the
    face of competition in the market.
  • A number of factors affect a firms ability to
    be competitive
  • Effective market research
  • Pricing strategies
  • Product
  • Promotion
  • Place
  • Reducing costs
  • Improving quality
  • Staff training

17
Methods of improving Competitiveness
  • The AQA specification distinguishes between
    marketing and non-marketing methods of improving
    competitiveness. Marketing methods include
  • Effective market research identifying the needs
    of the markets is important in meeting consumer
    requirements.
  • Price firms need to decide if they are to use a
    low price strategy or premium pricing. They will
    need to take into account the price elasticity of
    demand for their product to ensure that they
    maximise total revenue.
  • Product what products they produce and sell
    will enable the firm to differentiate their
    product in the market.
  • Promotion firms must make use of the
    promotional mix in order to inform and persuade
    the target market.
  • Place how a firm distributes and sells its
    products is a vital component in achieving
    competitiveness. New technologies have opened up
    a whole new world for small businesses and the
    advent of the Internet has provided a global
    market for firms.

18
Methods of improving Competitiveness
  • Non-marketing methods include
  • Reducing costs e.g. lower labour costs, cheaper
    sources of raw materials and stock, reduced costs
    of running the business. These will all allow
    the firm to lower their prices or increase their
    profit margins.
  • Improving quality increased product quality and
    customer service can differentiate a firm from
    their competitors.
  • Staff training firms should encourage their
    workforce to continually improve their skills, so
    that they can offer a better standard of service
    to their customers.

19
Activity Jamie Oliver and the School Restaurant
You will need access to the internet to watch
this video clip
  • Quality school dinners?
  • The school restaurant or canteen has come under
    attack based on the nutritional quality of the
    food served in schools up and down the country.
  • Jamie Oliver has led the way in trying to teach
    the nation about the importance of good food in
    schools.
  • You have been employed as a consultant working
    with Jamies Ministry of Food and looking to
    improve the competitiveness of the school
    restaurant.
  • Look at the following areas and give a
    presentation to the class on how the school
    restaurant could improve its competitiveness
  • Marketing
  • Reducing Costs
  • Improving Quality
  • Staff Training

2.19 Marketing and Competitiveness
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