Competition - CCEA

Key facts about market competition:

Unique selling point (USP) and quality: knowing competitors' USPs and product quality helps in creating a distinctive and high-quality offering.

Product range and convenience: a broad product range and strategic, convenient locations are strengths.

Customer service: excellent customer service is a competitive advantage.

Promotion: effective promotion strategies are essential to stay competitive and attract customers.

Almost all businesses have some sort of competition, so understanding competitors’ strengths and weaknesses is extremely important. A competitor is any business that sells the same or similar products or services. Businesses may want to know certain things about their competitors, such as their USP, price, quality, convenience, location, product range and customer service.

What is the unique selling point (USP)?

USP stands for ‘unique selling point’. Examples of USPs include opening the first vegan restaurant in a neighbourhood, or selling high-quality products, such as unique designer handbags. Having a USP is a strength for a business. If an entrepreneur knows what their competitors’ USPs are, they can create their own USP that either rivals their competitors’, or is completely different.

What does quality refer to?

Quality refers to how well a product is made or how prestigious a service is. For example, a taxi and a luxury limousine could both get a customer to the same place, but a luxury limousine would provide a better quality of service. If a competitor offered a high-quality item, this would be seen as a strength of the competitor. However, if the competitor were selling a low-quality item, this would be seen as a weakness.

What does product range mean?

Product range refers to the number and types of products or services that are sold by a business. If a competitor only sells one product, this may be seen as a weakness as the competitor will have limited market reach. In contrast, if a competitor has a large product range, this could be seen as a strength, as the competitor is likely to be able to target a wider range of customers. It is usually important for an entrepreneur to make sure they have a varied product range.

Convenience and location

Convenience refers to how easy something is to purchase, reach or use. If a competitor has a product that is very easy to use, then it is important for an entrepreneur to try to make their product just as easy to use, otherwise it is unlikely to sell as well as the competitor’s product.

Convenience is also linked to location. For example, if a café is situated next to a train station, it is convenient for people travelling by train. Being situated in a convenient location is likely be a competitor strength.

Customer service

Customer service is extremely important for a small business. It refers to the service offered to customers by a business before, during and after a transaction has taken place. Most small businesses ensure they provide an excellent level of customer service, for example by serving customers quickly. If a competitor is slow at serving customers, this could be a weakness of the competitor.

Promotion

A small business will need to stay aware of how its products are perceived by existing or potential customers. Some or all of the following methods of promotion will be needed on an ongoing basis to prevent customers from being lured away by competitor firms:

All businesses are affected in some way by their competitors, and this may have an impact on the decisions businesses make. For example, if two businesses offer the same product and one of the businesses offers a discount for a limited time, the other business may need to do the same. Similarly, if a business brings out a new product (eg a seasonal coffee that will be available for a limited time only), its competitors may also wish to bring out a limited-edition drink.

Competition between businesses is good for customers because it means that businesses have to offer good-quality products and services at the right price. It also means that businesses need to keep updating and bringing out new products and services through innovation. For example, if two florists are next door to each other, they will each need to make sure their products are the best quality they can be with the aim of attracting more customers than the other business. In addition, if one of the businesses charges a higher price for a very similar product, that business will lose customers.

Competitors can be problematic for businesses. For example, some competition can be territorial (within the same location or area), where one business tries to force other businesses to close down by setting its prices extremely low or putting on offers that other businesses can’t compete with. For example, if two driving instructors operate in the same area and one offers ten lessons for £100 but the other offers ten lessons for £280, the more expensive instructor is unlikely to be able to compete with the cheaper one.

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