The Competitive Environment (Edexcel A Level Business): Revision Note
Exam code: 9BS0
Competition and market size
No business operates in a vacuum
The level of competition it faces and the size of the market it operates in both shape how it must respond to survive and grow
The degree and nature of competition
The competitive environment concerns the degree to which a business is affected by rivals that operate in the same market (more fully discussed in 1.1.1 The Market)
The threat competition presents to businesses operating in a market will determine how quickly a business responds
The greater the threat, the quicker the response required - and vice versa
Operating in a competitive market can have significant impacts on the marketing and operational strategy (see "Marketing Strategy in Different Types of Markets" in 1.3.5 Marketing Strategy)
How a small grocer may adapt to supermarket competition
Response | Explanation |
|---|---|
Focus on their unique selling points |
|
Adjust their pricing strategy |
|
Enhance customer service |
|
Expand product range |
|
Collaborate with other local businesses |
|
Market size
Market size is the number of customers and sellers in a particular market
Businesses entering niche markets may struggle to sell a high volume of goods due to limited demand, as the market size is small
For these businesses, the specialised knowledge or skills required may well limit the competition, and the higher costs of production may well put off new businesses from launching
Businesses entering large markets may face more competition from established businesses, higher costs of promotion and challenges in deciding their pricing strategy
Case Study
Kernel Coffee
Kernel Coffee is a specialist coffee roastery in Bristol, founded eight years ago by two former baristas who wanted to focus purely on rare, ethically sourced beans. Operating in a niche market, Kernel built a loyal following among independent cafés and coffee enthusiasts willing to pay a premium for quality and traceability.
When a major supermarket chain launched its own "artisan" own-brand coffee range at a fraction of Kernel's prices, the business faced a real threat. Rather than trying to compete on price, which its economies of scale could never match, Kernel doubled down on its competitive advantage: direct relationships with individual farms, small-batch roasting and detailed tasting notes for every bag.
The founders adjusted their marketing strategy to emphasise this expertise, hosting tasting events and offering roastery tours, while continuing to supply only independent cafés rather than chasing supermarket contracts. This kept Kernel firmly in its niche, where customers valued knowledge and provenance over low price.
Although Kernel Coffee remains a small player compared to national brands, its quick response to the new competition protected its reputation and kept its most loyal customers loyal
Examiner Tips and Tricks
Whatever the market conditions a business faces, its best chance of success lies in determining and working to its strengths. A business with a clear competitive advantage, such as outstanding customer service, a great product or technical expertise, will be in an excellent position to stand out against even the most intense competition.
Look for these specific strengths in case study evidence and emphasise their importance when recommending solutions or strategies - and be sure to consider how the strengths may be protected or extended to ensure future success. Each suggestion you make should clearly support and nurture these core strengths.
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