Impact of external influences - The changing competitive environment - 3.1.4

The changing competitive advantage  means that most markets are continually evolving, with businesses entering and leaving the market. In every market businesses are trying to keep at the cutting edge of product development and changes in customer tastes and fashions.

The competitive environment or market structure involves all the external factors that either compete with or have an impact on a business. It is constantly changing, it is dynamic and a business that fails to monitor these changes and take action runs the risk of losing market share or even failure.

Direct competitors – Businesses are likely to have direct rivals who produce very similar products and services, Domino competes directly with Papa John’s, Nationwide with Halifax, Asda with Tesco and so on. They are competing for the same consumer and will try to find more effective ways of competing.

Indirect competitors – are not direct rivals but they are competing for the same consumer spending power. If a consumer buys a new fitted kitchen they may have decided not to buy a new car. The kitchen provider and the car showroom are in indirect competition for that consumer’s spending power.