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1.2 Markets and Competitive Advantage - Coggle Diagram
1.2 Markets and Competitive Advantage
Market structure and competition
(buyers + sellers exchanging goods/services)
supply
as price rises, firms generally supply more
demand
as price rises, consumers generally buy less
equilibrium price
quantity supplied = quantity demanded
above equilibrium → surplus → price falls
below equilibrium → shortage → price rises
perfect competition
many buyers and sellers
identical products
full information
easy entry + exit
firms take market price
Market power and monopoly
(ability to influence the price charged)
monopoly
1 seller
duopoly
2 dominant firms
oligopoly
few large firms
monopolistic competition
many firms + differentiated products
Competitive advantage
(a firm's position of superiority over competitors, creates more value)
cost
produce more cheaply and potentially charge lower prices
focus
serve a narrow niche market
product differentiation
offer something competitors do not
"Stuck in the middle"
a business trying to pursue incompatible strategies may become stuck in the middle
not cheap enough to compete with cost leaders
not unique enough to justify differentiation
Barriers to entry
(make it difficult for new competitors to enter, help sustain competitive advantage/profit)
intellectual property
patent
exclusive right to an invention for a period of time
copyright
exclusive rights over original works
trademark
protects identifying words, symbols, phrases, or designs
government regulations/licensing
high startup costs
control of scarce resources
economies of scale
happen when producing more unites reduces the average cost per unit