9609 · 6.1.5
Competitors and suppliers — FAQ
Frequently asked questions for 9609 Competitors and suppliers. Direct answers first, then deeper explanation — then practise with marking.
Isn't all competition just about having the lowest price?
This is a common misconception. While price is a key competitive factor, businesses also engage in 'non-price competition'. They compete fiercely on product quality, brand image, customer service, and innovation. A strategy of differentiation, for example, aims to make price less important by offering a unique value that customers are willing to pay a premium for. Focusing solely on price can lead to destructive price wars that damage profitability for the entire industry.
If a supplier is small, does that mean it has no power?
Not necessarily. A supplier's power is not determined by its size, but by the importance and uniqueness of what it supplies. A small, specialist firm that is the sole provider of a critical, patented component for a large manufacturer has immense power. The large manufacturer's high switching costs (in terms of finding or developing an alternative) give the small supplier significant leverage to dictate prices and terms.
Can a business ignore its competitors if it has a very strong, unique product?
Ignoring competitors is always a high-risk strategy. Even with a strong, unique product, a business must constantly monitor the competitive landscape. Competitors will try to imitate the product, develop superior alternatives ('leapfrog' the technology), or find new ways to meet the same customer need. A lack of competitor analysis can lead to complacency and a sudden loss of market leadership when a rival makes a disruptive move.