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Lecture 4

MGMA01H3 Lecture Notes - Lecture 4: Monopolistic Competition, Cash Cow, Bargaining Power

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Sam J Maglio

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Lecture 4: The Competition
30 m/c, 5 sa, no calculator- midterm
- Market is defined by how much we sell and how much our competitors sell
- The market can be structured as pure competition, monopolistic competition, oligopoly,
and monopoly
- With a pure competition, convenience is important; how easy is the consumer to get the
- With monopolistic competition, firms have to stress the difference between them and
the competitor
- Oligopoly has small amount of firms, and they have a price agreed (similar prices to
avoid loss of profit)
- Monopoly is the only producer of a good/service is not able to be substituted, marketing
is not as important
SWOT (Strengths, Weaknesses, Opportunities, Threats)
- If its internal and favourable (Strength), internal and unfavourable (Weakness), external
and favourable (Opportunities), and external and unfavourable (threats)
- If it is internal (controllable), if its external (not controllable)
- Usually things that are unfavourable and external involve competitors
- Porter’s Five Forces:
o Bargaining power of suppliers: if there are many suppliers, there is less
bargaining power; however, with more buyers and only one supplier, buyers can
pressure supplier
o Threat of new entrants: how likely is new competitors getting in?
o Threat of substitutes: are there any products on the market that can replace
o Bargaining power of buyers: how many buyers to how many sellers
o Internal rivalry: competition within the market
- BCG: Growth-share matrix, measures different markets and market share of different
o Star: High market growth, high market share
o Cash cow: low market growth, high market share
o Question mark: high market growth, low market share
o Dog: Low market growth, low market share
- Relative market share = your market share/biggest (next biggest) market share (10
percent is a benchmark for market share)
- Harvest is to scale back operations, while divest is to sell off the business
PEST (Political, Economic, Social, Technological trends)
- Political and legal trends: how does political factors impact businesses (e.g. policy
changes, trade agreements)
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