Competitive environment - AQAThe impact of businesses operating in a competitive market

A market exists where there are buyers and sellers who exchange goods and services for money.

These markets can be local, national or international. An increasing number of markets are now based online.

Almost all businesses have some sort of competition. A competitor is any business that sells the same or similar products or services. Businesses may want to know certain things about their competitors, such as their USP, price, quality, convenience, location, product range and customer service.

Different types of market

There are a number of different types of market depending on how many companies operate within it.

• In a market with lots of small or medium-sized businesses selling to large numbers of consumers, prices will generally be low to try to attract customers, especially if each firm is selling a similar product. Often these firms will have to compete through advertising, high-quality service and convenient locations. Examples of this type or market include hairdressers and fish and chip shops.
• In a market with a small number of large businesses, such as supermarkets or cinemas, they will often advertise the fact that their products are different. Prices may be high and firms will compete through advertising, a unique selling point (USP) or launching new products. This type of market can exist if the costs of entering the market are very high, such as airlines.
• A market with one business is called a monopoly. Prices may be high due to a lack of choice and little or no direct competition. True monopolies are hard to find in market-based economies. Royal Mail has a monopoly when posting a letter in the UK.