1 4.6 The relationship between businesses and the competitive environment

2 Candidates should be able to: assess the effects of changes in competitive structure (new competitors, dominant businesses (through takeover or merger), changes in the buying power of customers and/or changes in the buying power of suppliers) evaluate responses of businesses to a changing competitive environment

3 4.6 Porter’s five forces Porter argued that there are five forces which influence how much a business is able to affect the market in which it operates. These forces are: rivalry among competitors the threat of new entrants the threat of substitute products the bargaining power of customers the bargaining power of suppliers

4 4.6 Competition policy Competition policy This aims to prevent the abuse of p____ by firms. For example: Markets with few suppliers have a tendency for anti-competitive collusion. What is collusion? E.g.

5 4.6 The OFT and Competition Commission What can the OFT and Competition Commission do? E.g.

6 4.6 Porter’s three strategies Porter’s three strategies Cost leadership Differentiation Focus