why some markets are becoming more competitive

Why are some markets becoming more competitive? 🤔

Think of a market like a sports league. In the past, only a few teams (companies) could play, but now many new teams are joining, making the games more exciting and unpredictable.

• 📡 Technology – New tech lowers production costs and lets smaller firms enter the market.
• 🌍 Globalisation – Products can be sold worldwide, increasing the number of competitors.
• 💸 Lower entry barriers – Easier to start a business (e.g., online platforms, cheaper equipment).
• 🗣️ Consumer power – Shoppers now have more choices and can compare prices instantly.
• 🔄 Innovation cycles – Rapid product development keeps rivals on their toes.

These forces push firms to improve quality, cut costs, and innovate, which is why competition rises.

Analogy: The “Race to the Finish Line” 🏁

Imagine a race where the finish line keeps moving forward. Every time a company improves its product or price, the line moves a bit further. To win, firms must keep up or overtake competitors, which means constant innovation and efficiency.

Key Market Change Indicators

Exam Tip Box 📚

Remember: When answering questions about market competitiveness, look for causal relationships – explain why a factor leads to increased competition. Use the PESTLE framework to structure your answer:

1. Political
2. Economic
3. Social
4. Technological
5. Legal
6. Environmental

Give at least one example for each factor and link it to the rise in competition.

Quick Maths Check

Suppose a market has 5 firms. If each firm’s market share is 20%, what is the total market share? Answer: $5 \times 20\% = 100\%$.

Now, if a new firm enters and takes 10% of the market, how much share does each of the original firms lose on average? Answer: $10\% \div 5 = 2\%$ per firm.