- GCSE Revision for AQA Business Studies

2.6 The Competitive Environment

What is meant by a "market"?

A market can refer to:


Competition refers to more than one business trying to sell to the same customers. This can include:


A business with no, or very few, competitors is called a monopoly. Reasons for this include:

Without competition, prices may rise and quality may fall. This is bad for consumers!

The game of Monopoly is based on the concept of a single person dominating the housing market…

Illustration of a rich man's head

…and is also the cause of many family arguments!

Competing for Business

A business must compete with its competitors to make sales and profits, and secure its future. Typical ways to compete include:

Illustration of promotional labels

Promotions and sales — short-term price reductions and entice customers.

Disadvantage — reduced profit.

Illustration of a megaphone

Advertising — raising awareness of your product and trying to convince potential customers that you have a better product / price / service.

Disadvantage — cost

Illustration of a plus symbol

New products — identifying gaps in the market which competitors are not fulfilling and introducing new products to fill them.

Disadvantage — cost

Illustration of a rosette

Quality — introduce a better quality product.

Disadvantage — increased cost of manufacture / development may lower your sales and/or costs.

Price drop illustration

Price — pemanently reduce the price to less than your rivals are charging.

Disadvantage — reduced profits, competitors may also reduce their prices.

Illustration of shaking hands

Service — improved customer service (e.g. extra staff, faster delivery).

Disadvantage — increased costs.


Uncertainty is when a business cannot fully predict the outcome of a scenario

There are lots of things a business cannot be sure about.

These factors, and others, create risks to the company's sales, profitability, and existence.

Uncertainties include:

Reducing Risk

Risk can be reduced by effective research and planning.



GCSE Business Studies revision quiz