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pearson btec level 3 unit 1 exploring business assignment 2 learning aim d
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PEARSON (PEARSON)
Business 2016 NQF
Unit 1 - Exploring Business
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Pearson BTEC Level 3 Unit 1
Exploring Business Assignment 2
Learning aim D
Market structure
Market is an actual or nominal place where force of demand and
supply operate and where buyers and sellers interact to trade
goods, services or contracts or instruments for money or barter.
For example,, include shops/high street or websites. 1
Market structure2 is the interconnection characteristics of a
market, such as the number and relevant strengths of buyers and
sellers and degree of collusion among them, level and forms of
competition, extent of product differentiation and ease of entry
into and exit from the market. For example, perfect competition.
Perfect competition describes a market structure, where a
large number of small firms compete against each other such as
newspapers and possibly basic food products. For example, there
are many firms/sellers.
In a perfect competition there is a high number of similar firms
meaning all firms sell identical products therefore the business
will be competing against each other and will be willing to be the
price takers and get more sales. The industry is characterized by
freedom of entry and exit. Free entry is a part of the perfect
competitor’s assumption that there are an unlimited number of
buyers and sellers in a market. The barriers to entry are very low
meaning any company can easily access and compete against
1 http://www.businessdictionary.com/definition/market.html
2 https://www.economicshelp.org/microessays/markets/
,other businesses. This will also increase the competition with this
business structure.
The nature of products suggest all firms have a relatively small
market share and their pricing power is low. Buyers know the
nature of the products being sold and the price charged by each
firm. Therefore, different buyers will have different price rates in
order to attract customers.
Imperfect competition occurs when at least one condition of
a perfect market is not met.
In an imperfect competition the number of firms are variable and
possibly not identical. Another feature is there are many different
types of businesses with similar products/substitutes such as
clothing but differentiated and therefore this would result in the
nature of the competition to be intense and compete with price or
quality in the business. Therefore, the business can determine
their own price, for example jewelry stores such as Ernest Jones,
H Samuel and Goldsmiths are price makers. They have a
relatively little pricing power and very low barriers to entry,
therefore anyone can enter and exit the business. The freedom of
entry is potentially significant. This means that other companies
can easily enter the same industry. This type of market structure
has less competition than perfect competition structure.
Nike is a monopolistic company. There are many similar
sellers for Nike such as Adidas, Puma, Reebok and other sports
companies3. This means that there are few dominant sellers
suggesting there will be intense competition. Adidas is one of
Nike’s top competitors. One of the key advantages of Adidas is
that it operates via both Adidas and Reebok; the combination of
both gives a strong valuation to Adidas as a top competitor of
3 https://craft.co/nike/competitors#:~:text=Nike's%20top%20competitors%20include%20Anta,Armour
%2C%20Skechers%20and%20New%20Balance.&text=Nike%20is%20a%20company%20that,%2C
%20equipment%2C%20and%20accessory%20products.
, Nike. Adidas competes with Nike on basic footwear, clothing and
accessories therefore it earns a worldwide revenue of £12.31
billion. Due to this Nike will have to work harder and maintain
their companies image and marketing. Nike tries to separate
themselves from the competitors in the way they sell Nike
products such as shoes, clothing and equipment; they have a
remembering and inspiring logo, their sponsorships and their
advertising. They are excelled at building a name through
collaborating with sports ideals such as Michael Jordan and
Cristiano Ronaldo; furthermore, they are good at convincing
consumers to buy their product making their business successful
due to the huge profit and staying as the top sports business
company.
Nike has great pricing power which means they are price makers.
The control over price is slightly limited with only some control,
but within certain limits. Nike have an average price of £21.92
and sell their product for £76.91 resulting in a profit of £54.99.
Due to Nike’s good quality product, good brand image and
multinational company, Nike is able to attract customers
worldwide allowing them to sell their product and make a huge
profit. Nike's major product categories include footwear, apparel
and equipment. The company is the largest seller of athletic
footwear which gains a revenue of £18.61 billion in 2019,
representing about 65% of the total revenue. Nike's nature of
product is similar to other companies due to their footwear,
clothing and equipment. This means Nike competes with clothing
businesses such as Zara, footwear companies such as Adidas and
other equipment companies therefore they have an intense
competition. However, their barriers of entries are really high
meaning other companies would not be able to produce the same
maintained products like Nike letting Nike still be in the top
successful company. This is proved by the difference in Nike’s and
Adidas’ revenue. Nike have a revenue of £26.42 billion and Adidas
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