An important external influence that businesses must navigate is the Competitive environment. This is the number of companies that operate within the same industry, offering similar products or services. Understanding the competitive environment is crucial for businesses to plan effective strategies that can give them a competitive edge.
Remember for the exam:
Number of Competitors
The number of competitors within an industry has a direct impact on the level of competition a business faces. For example, in the smartphone industry, numerous manufacturers such as Apple, Samsung, and Huawei compete fiercely to capture Consumers’ attention. This high level of competition drives companies to continuously innovate and offer unique features to stand out from the crowd, with regular refresh cycles adding in new features each year.
Growth Opportunities
Growth opportunities are another aspect of the competitive environment. These opportunities can arise from various places, such as changes in consumer preferences, technological advancements, or emerging market segments. For instance, the rise of electric vehicles has given growth opportunities for automotive companies to develop eco-friendly alternatives to traditional cars.
Businesses should be aware of new entrants to the market. For example, the entry of new fintech (financial technology) startups into the financial services sector has disrupted traditional banking models and created new avenues for financial transactions. Even X (formally Twitter, thanks Elon) has stated a desire to enter the fintech market.
Key Takeaways
- External influences significantly impact businesses, stakeholders, and decision-making.
- The competitive environment encompasses businesses within the same industry offering similar products or services.
- The number of competitors affects the level of competition a business faces. The high competition encourages innovation and differentiation.
- Growth opportunities arise from changing consumer preferences, technological advancements, and emerging market segments.
- New entrants to the market can disrupt traditional business models and create new competitive dynamics.
