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For the competitive market process, what sort of strategies are included?
price competition
Persuasive advertising
Product differentiation
Marketing
Brand imaging
Packaging
Design/style
Quality of product
Quality of service
What’s the importance of competition? why does it occur?
What can competition lead to?
occurs due to rivalry between firms
There are different degrees of competition in different markets, ranging from perfect competition through to monopolistic competition & oligopoly
Competition tends to lead to lower prices and lead to a greater choice of products
Why do firms improve their products?
Due to the level of competition firms will try to innovate in order to improve products
will lead to the firm gaining a competitive advantage
will lead to a niche market where the firm has differentiated its product from the competition
Why do some firms reduce their costs?
will lead to the firm gaining a competitive advantage
their cost curve is lower at all levels of output the firm will obtain supernormal profits
Over time this will be competed away
However, competition will lead to lower costs for all firms over a period of time
Why do firms improve their quality of service provided?
Due to the level of competition firms will try to provide a high level of customer service
will lead to the firm gaining a competitive advantage
Word of mouth and good reviews will lead to an increased customer base and higher revenues
Over time this will be competed away
However, competition will lead to improved customer service over a period of time
How does expenditure on research and development help firms?
maintain a competition advantage
By investing in research and development e.g. new product development
firm can increase demand and maintain brand loyalty
helps to lead to both innovation and invention
provides greater choice to the consumer
Diversification into different product areas will allow greater scope→ to increase revenues
Note 
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