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Assess the likely effects on a business, such as Morrisons, of a more competitive environment. - Edexcel - A-Level Business - Question 1 - 2017 - Paper 2
Question 1
Assess the likely effects on a business, such as Morrisons, of a more competitive environment.
Worked Solution & Example Answer:Assess the likely effects on a business, such as Morrisons, of a more competitive environment. - Edexcel - A-Level Business - Question 1 - 2017 - Paper 2
Step 1
Where there is rivalry between similar companies within the same market
Answer
Morrisons faces competition from established supermarkets like Tesco and Sainsbury’s, as well as from rapidly growing discount supermarkets such as Aldi and Lidl. This competitive environment can influence consumer choices significantly.
Step 2
Negative effects
Answer
- Consumers may become more price-sensitive, opting for discounts provided by Aldi and Lidl rather than shopping at Morrisons.
- As a result, Morrisons could experience declining revenues, as consumers may not fully consider factors like customer service or product quality.
- The increasing market share of Lidl (growing by 17.9% in 2015) indicates that they are successfully attracting customers, leaving Morrisons at risk of losing its own market share, which was down by 1%.
Step 3
Possible counterbalance
Answer
- Morrisons' customers might remain loyal due to varying factors such as store location and product variety, which helps maintain a solid customer base.
- Compared to Aldi (4.3% market share), Morrisons still retains 11%, showcasing a relatively stronger market position despite the competition.
Step 4
Potential judgment
Answer
- In the short run, Morrisons may struggle to compete on price, potentially leading to reduced market share and profitability.
- Long-term strategies could mitigate these threats as Morrisons may leverage its greater resources for promotional campaigns to attract customers back to its stores.