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Competitive Advantage & developing a Competitive Advantage over rivals.

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Introduction

Contents Introduction Page 1 Section 1 Different Market Structures Page 2 Easy Jets Market structure Page 4 Market Forces and impacts on Easy Jet Page 5 Section 2 Competitive Advantage & developing a Competitive Advantage over rivals Page 9 Easy Jets Competitive Advantage Page10 Evaluation Page11 Conclusion Page12 References Page13 Bibliography Page14 Section 1 Different Market Structures There are 3 types of markets, one is Perfect Competition, another is Monopoly and lastly there is Oligopoly. Perfect Competition A definition of Perfect Competition is 'it exists when there are so many people in the market, and other conditions are such, that noone can influence the price, all other things being equal.' (BPP Business Organisations, Competition and Environment Chapter 4 Page 105) Perfect competition is very rare and it is so competitive that any individual buyer or seller has only a slight impact on the market price. Products are all the same and information is perfect. The products or services sold are exactly the same, which is known as 'homogeneous' which are all the same price. Firms earn only normal profit (the bare minimum profit necessary to keep them in business). If firms started to earn more than that the absence of barriers to entry means that other firms will enter the market and drive the price level down until there are only normal profits to be made. Even the technology used is the same throughout all the companies. www.economist.com www.oligopolywatch.com Monopoly A definition of Monopoly is 'it exists when there is only one supplier of a product or service.' (BPP Business Organisations, Competition and Environment Chapter 4 Page 106) Monopoly is a sole player and the Government defines a Monopoly as a business with at least 25% of the market share. ...read more.

Middle

customer prices www.tutor2u.com Price elasticity of demand is how much the quantity demanded changes when the price changes and it is calculated by % change in the quantity demanded % change in price It plays an important role because it is used when working out a price for the product. The price elasticity will usually be negative when the price goes up because the quantity demanded falls and vice versa. Fig.4. Shows infinite elasticity which is if the quantity demanded would be very sensitive to changes in prices. Fig 4.Perfectly elastic demand curve www.netmba.com Fig.5 shows that even if there was a large price increase there would be no impact on quantity demand. Fig.5 Perfectly inelastic demand curve www.netmba.com There are factors that influence price elasticity of demand: * Degree of necessity or luxury * Proportion of income required for product * Time period * Permanent or temporary price change Income elasticity of demand is the reaction of demand to changes in the household income. The way it is worked out is: % change in the amount demanded % change in income When worked out if the value is >1 demand is income elastic, but if the value is <1 the demand is income inelastic. Price elasticity of supply measures the reaction of supply to a change in price. % changed in the quantity supplied % change in the price If the % change in supply is greater than the % change in price then supply is elastic. If the % change in supply is less than the % change in price then supply is inelastic. www.economist.com www.oligopolywatch.com www.tutor2u.com No company can fight market forces and they have impacts on all companies sometime good, but sometimes bad. ...read more.

Conclusion

Competitive advantage - nearly all companies want to be the 'one on top.' Easy Jet's aim is to be in the monopoly market and to have an edge over its rivals. To do this they have to concentrate on new entrants, customers, suppliers and substitute products or services. I think Easy Jet has one problem and that is 'focus.' Easy Jet feels as though they don't require it, but I disagree due to the fact that they are increasing popularity with business people, so if they acquire target marketing they may increase profit. Future strategies could include; 1. Reach different target groups 2. Reach agreements with travel agents and airlines to promote their services 3. Regular competitions to guarantee browser loyalty and also designed to create a desire to visit the website on a regular basis thus maintaining a high daily 'hit' rate. 4. Employee competence 5. Use a systematic approach. www.iol.ie Conclusion As seen there are many factors that influence organisations when it comes to market forces and competitive advantage. Market Forces - any little thing can change the supply and demand of a product or service. Just by looking at Easy Jet, you can see that competition has an affect and for them to keep their customer base they have to cut costs so demand for the service will still be there. If they don't cut flight costs then they may lose the demand to rival budget airlines. The increase in Air Passenger Duty Tax and landing charge increases also affect the company and so therefore affect customers. Competitive advantage - to get an edge over your rivals you must adopt cost leadership strategy (producing at a lower cost), differentiation strategy (these may be colour or size differences or alternatives for different market segments) and focus strategy (concentrate on different market segments). ...read more.

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