the impact of competitors on business and business decisions

6.1 External Influences – Competitors and Suppliers

What are Competitors?

Competitors are other businesses that offer similar products or services. Think of them as the other players in a game of ⚽️. Their actions can directly affect your business.

Why Do Competitors Matter?

They influence pricing, quality, marketing, and even product features. If a competitor drops a price, you might need to adjust yours to stay competitive.

Analyzing Competitors

  1. Identify direct competitors.

  2. Study their strengths & weaknesses.

  3. Examine their marketing mix (product, price, place, promotion).

  4. Forecast their future moves.

Impact on Business Decisions

Decisions on pricing, product features, and marketing channels are often shaped by competitor actions. For example, a new feature in a rival’s app may prompt you to develop a similar or better feature.

Supplier Influence

Suppliers provide the raw materials. If a supplier raises prices, the cost of goods sold (COGS) increases. Example: a smartphone manufacturer may face higher chip costs.

Supplier Power

  • Few suppliers → high power.

  • Many suppliers → low power.

  • Unique product → high power.

Strategic Responses to Competitors

StrategyWhen to UseExample
Price MatchingIf competitor cuts price.Fast‑food chain matches rivals.
Product DifferentiationTo stand out.Apple’s iPhone features.
Cost LeadershipTo undercut rivals.Walmart’s low prices.

Case Study: Coffee Shops

Imagine two cafés: Starbucks and a local Bean Brew. Starbucks offers premium blends and a cozy atmosphere, while Bean Brew focuses on quick service and lower prices. If Bean Brew starts offering free Wi‑Fi, Starbucks might add a loyalty app to keep customers. This illustrates how a small change by a competitor can trigger a strategic response.

Key Takeaways

  • Competitors shape pricing, product design, and marketing.

  • Supplier changes affect cost and supply chain reliability.

  • Businesses must monitor rivals and adapt strategies.

Remember the formula for cost of goods sold: \$COGS = \text{Unit Cost} \times \text{Quantity}\$. Keeping this in mind helps you understand how supplier price changes impact your overall costs.