Competitive environment study guide

A market is a set of buyers and sellers who interact to exchange goods or services.

Competition is the rivalry between businesses that offer similar products or services to the same customers, aiming to attract more sales and market share.

A market structure where a single firm supplies a product or service with no close substitutes, giving it significant control over price and output.

Uncertainty refers to situations where the future outcome is unknown and cannot be predicted with confidence.

An individual who creates, organizes, and manages a business venture, taking on financial risk in the hope of profit.

The possibility that an event will occur which could have a negative impact on a business’s objectives.

Exam practice

• Which of the following best describes a market?
• Define competition and explain why it matters for a small manufacturer.
• An independent retailer in a town with several similar shops notices that customers are increasingly buying from a new discount store that opened next door. Which of the following is the most likely immediate effect on the retailer’s pricing strategy?
• Evaluate how the entry of a new online service provider might affect the market share of a small manufacturer that sells its products through a dedicated e‑commerce platform.
• Which of the following situations most likely indicates that a business faces minimal or no competition?
• Identify a real‑world situation where a business faces minimal or no competition and explain why this situation exists.
• Which of the following is not typically considered a risk that businesses face?
• Explain why uncertainty is inherent in all businesses.
• Which of the following best explains why entrepreneurs are willing to take risks when starting a business?
• Give one reason why entrepreneurs might choose to start a business despite the risk involved.
• Which activity is most likely to reduce the financial impact of an unexpected event for an independent retailer?
• Explain how a small manufacturer can minimise operational risk.