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AQA GCSE · Question 03.2 · Influences on business
Using the data in Table 1, explain one way in which competition affects STC.
Using the data in Table 1, explain one way in which competition affects STC.
How to approach this question
1. **Identify a trend:** Look at the "Number of direct competitors" row in Table 1. Describe what has happened between 2018 and 2020.
2. **Identify an effect:** Look at the other rows (Price or Market Share). Describe what has happened to them over the same period.
3. **Explain the link:** Connect the two trends. Explain how the change in competition has caused the change in price or market share. Use the data (numbers) in your explanation.
Full Answer
The data shows that the number of direct competitors has increased from 6 in 2018 to 12 in 2020. This doubling of competition has likely forced STC to lower its prices to remain competitive. This is shown by the average price per item falling from £65 in 2018 to £42 in 2020. This increased competition has also led to a fall in STC's market share, from 19% down to 14% over the same period, as customers now have more alternative businesses to buy from.
Competition is the rivalry between businesses selling similar products in the same market. Increased competition typically has several effects:\n* **Pressure on Prices:** To attract customers, businesses may have to lower their prices. Table 1 shows that as competitors rose from 6 to 12, STC's average price fell from £65 to £42.\n* **Reduced Market Share:** With more businesses to choose from, a company's share of the total market sales may fall. Table 1 shows that as competitors increased, STC's market share fell from 19% to 14%.\n* **Need for Innovation/Marketing:** Businesses must work harder to differentiate their products and promote their brand to stand out.\nYour answer must use the data from the table to evidence these effects.
Common mistakes
✗ Not using any data from Table 1. The question explicitly says "Using the data".\n✗ Identifying trends but not explaining the causal link between them. You must state that the increase in competition *caused* the fall in price/market share.
Practice the full AQA GCSE Business Paper 1
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