Edexcel Business A Level Revision

Porter's Five Force analysis - A tool to analyse five competitive forces that affect a market and the intensity of competition within a industry or market. Barriers to entry - The obstacles that a business has to face when it is considering competing in an exisiting market It considers the threat of new entrants to a market the bargaining power of suppliers the bargaining power of customers the threat of substitute products the degree of competitive rivalry amongst exisiting competitors. It attempts to provide a simple way to look at all the relevant issues related to the changing competitive environment in which a business operates. Five Forces can be used by a business currently in a market to assess the security of its market position. Or it can be used by a business thinking of entering a market. THREAT OF NEW ENTRANTS Refers to the potential effect of a new business entering the market, presuming that it will gain market share and rivalry will increase. T...

Growth - A common corporate objective which means expanding the sales revenue of a business, probably in the hope that profits will increase too. A business will aim to achieve greater market power, which gives it more control over its future, including a greater ability to increase prices. Greater dominance over customers means pricing control ; greater dominance over suppliers gives increasing power to keep purchasing costs down. This allows the business to gain a competitive advantage.

Dynamic markets - Markets which are constantly changing. The environment is dynamic, for example buyers may choose to buy less of one product and more of another. It can grow, change and decline very quickly Some markets are quite stable and change little over time. For example, the market for Kelloggs cornflakes has changed very little, although there are far more competing products than there were when they were invented in 1894. Market size and market share do not change much and there is little innovation. Other markets are far more dynamic, subject to rapid and continuous changes. All businesses must adapt to the changing nature of their markets. Reasons for dynamic markets constantly changing: Social trends Changes in technology Competitiveness Trends Consumer tastes Fashion Rising/Falling incomes Arrival of a superior product offered by competition External shocks Business have to adapt their marketing in response to these changes... If they do not keep up, the...

Competitive pricing (Loss leader) - Setting the price of a product or service based on what the competition is charging. This pricing method is used more often by businesses selling similar products, since service can vary from business to business, while the attributes of a product remain similar. Loss leader - is a product prominently displayed and advertised and priced below the normal price and even below cost to the seller. Business try to compete in various aspects of the marketing mix. The use of loss leaders is a method of sales promotion. A loss leader is a product priced below cost-price in order to attract consumers into a shop or online store. The purpose of making a product a loss leader is to encourage customers to make further purchases of profitable goods while they are in the shop. Aim : encourage people to buy complementary goods at full price. ADVANTAGE ▪ If a business undercuts it's competitors on price, new customers may be attracted and exi...