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...

Predatory pricing - When prices are set low for a short period of time to force competitors out of the market. Prices are then put back to where they were previously or even higher. This strategy is used by dominant businesses, who can afford to make a loss in the short run, to force new entrants out of the market. This is deemed as illegal in the UK. Once existing firms have been driven out and entry of new firms deterred, it can raise its prices. This is ANTI-COMPETITIVE and therefore not in the best interest of consumers in a market. The existing competitors in the market see the new entrant about to launch - and immediately begin to lower prices to retain their customers If the new entrants cannot match the lower price (or provide a product which customers still belive represents value for money) then they may have to choose not to enter the market. The big loser in this is the customers. They are denied a wider choice in products. This therefore means price...