The Competitive Environment

Every business has rivals

When customers can choose between businesses, those businesses are competing. To win the sale, a business has to give customers a reason to pick it over the others. This module covers what competition is, how to size up your competitors, and the sources of competitive advantage that make a business stand out.

Competition words

Four terms run through the topic:

Match each source of advantage to an example

What is a USP?

What is a unique selling point?

• Something that makes a product stand out from all rivals
• The price a business charges for a product
• The number of staff a business employs
• The total sales a business makes in a year

Ways to stand out

A business can build competitive advantage in several ways: - A lower price, or higher quality - A unique selling point rivals cannot copy - Excellent customer service, a strong brand, or a convenient location Few businesses win on all of these - the skill is choosing where to stand out.

How do you gain an edge?

Select the TWO genuine ways a business can gain a competitive advantage.

• Offering a unique product feature rivals lack
• Providing faster, friendlier customer service
• Copying a rival exactly in every way
• Ignoring what customers actually want

Compete on price or quality?

Two common strategies pull in different directions.

A new rival appears

A new rival opens nearby with lower prices. What is the most sensible response for your business?

• Differentiate by improving quality or service
• Do nothing and hope customers stay
• Immediately close the business down
• Raise your prices sharply

Put it together

Businesses face _____ from rivals selling similar products. To win customers they need a competitive _____, such as a lower _____, better _____, or a unique selling _____.

Size up the competition

Put the steps of analysing your competition into a sensible order.

• Identify who your competitors are
• Research their prices, products and service
• Compare their strengths and weaknesses to yours
• Find a gap or an advantage you can offer
• Decide how to stand out from them

Competitive advantage terms

Make the competitive call

Three decisions about competing well. Pick the strongest choice each time.

• Your small cafe faces a big coffee chain nearby. How can you best compete?
• You notice no one sells vegan cakes in your town. What is this?
• A rival cuts prices, but you do not want a price war. What is the better move?

Recommend an advantage

A new independent bookshop is opening near a large chain store. Recommend ONE source of competitive advantage it should focus on, and justify your choice against the competition.

• Name one source of competitive advantage (for example service, a USP, range or events)
• Explain how it would make customers choose the bookshop over the chain
• Consider what the big chain does well, and how your choice beats or avoids that
• Reach a clear recommendation

Recommend, and justify

Weaker answers just list advantages. Top answers recommend and justify: they pick the source of competitive advantage that best fits the business and its rivals, and explain why it beats the competition. Always weigh the competitor: what does the rival do well, and how does your choice avoid competing head-on where you would lose? Choose, justify against the competition, and conclude - top band.