Competition

Perfect Competition 
This occurs when there is many competitors each with an even amount of market share. 


Imperfect competition 
This occurs when there is one clear market leader and there is not an even distribution among the other competitors. 
Oligopoly
 An oligopoly is a market structure with few firms in a market, all of who consider rivals’ reactions before introducing new policies.


Monopoly- Is a theoretical market situation where a single producer supplies a particular market. 


A Cartel operates when a group of producers set prices and sometimes share their markets, this is illegal in most countries.


Game Theory

The game theory is a mathematical method that can be applied in business for calculating circumstances. A game theory is mainly to do with predicting the outcome of strategies that competitors may use when competing in the same market. This may be risky in anticipating a competitor’s strategy as it is possible that they may have a completely different strategy to what you anticipated. 

Brand proliferation 

This is where more items are brought in with new brand names. A business would have several brands in the same product category that are all categorised under the same brand type such as unilever who has more than 25 brands of ice cream. This is good because it increases the companies retail by offering a variety of products this increases the chances of the company making a profit because customers enjoy variety rather than the same product. Another benefit of this is that it keeps staff constantly motivated because of the range of products.However, there are downfalls relating to this method and one of the obvious factors would be that it increases the chances of competitors replying with competition. This could see competitors increasing advertisement to try and reduce the sales of the businesses products. Another downfall would be what’s known as brand cannibalization this is where a business has too many brands and therefore eliminates the competitions of their other brands. A prime example of this would be Heinz they have over 57 brands of sauces but most customers are unaware of these brands because Heinz tomato ketchup is too dominant.

Contestability 

 A contestable market is a market structure where there is freedom of entry and exit within the market; it involves a lot of non recoverable costs such as advertising. In a contestable market competition isn't a threat but monopoly power can be. It is therefore essential that businesses discuss the contestability of markets to ensure that their businesses don’t lose to other competitors. They need to take procedures such as market research so they can review what competitors are doing and take action on this. If they do not take action they run the risk of being out sold by competitors and not gaining enough market shares, therefore they could also have a market which is completely monopolized.

Limit Pricing 

This is where a business sets their prices so that it discourages more competitions to enter the market; this is illegal in many countries. This strategy makes it very difficult for a business that is entering this market as they have already spent a lot of money on promoting the product and developing the product. Therefore, the business needs to regain this money when they sell their products on the market however this is difficult if competitors are attracting customers to their businesses due to low pricing. It would benefit a business because it would mean they have less customers therefore they may have more potential to gain new customers within their market. However, a disadvantage would be that businesses entering the market for the first time may take a risk and reduce their prices despite this.