Competitive Advantage & developing a Competitive Advantage over rivals.

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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.

 

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. A single Monopoly however is just one company which has 100% of the market share. A monopoly will produce less, at a higher price. It decides its price by calculating the quantity of output at which its marginal revenue would equal its marginal cost, and then sets whatever price would enable it to sell exactly that quantity.

In practice, few monopolies are absolute, and their power to set prices or limit supply is constrained by some actual or potential near-competitors. An extreme case of this occurs when a single firm dominates a market but has no pricing power because it is in a Contestable Market (A market in which an inefficient firm, or one earning excess profits, is likely to be driven out by a more efficient or less profitable rival.)

 

Oligopoly 

A definition of Oligopoly is ‘when there are a few large suppliers, whose business decisions affect each other.’

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(BPP Business Organisations, Competition and Environment Chapter 4 Page 108)

This is when only a few firms dominate a market. There are a few producers and many buyers, the action of one producer will affect the influences of other producers and vice versa. They can't dictate price and availability like a monopoly can, they often turn into friendly competitors, since it is in all the members' interest to maintain a stable market and profitable prices so often they get together and behave as if they were a single Monopoly, perhaps by forming a Cartel, (An agreement among two or more firms in the same ...

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