THE TECHNICAL UNIVERSITY OF KENYA

FAUCALTY OF SOCIAL SCIENCE AND TECHNOLOGY

SCHOOL OF BUSINESS AND MANAGEMENT STUDIES
DEPARTMENT OF BUSINESS ADMINISTRATION AND ENTERPRENEUSHIP
DIPLOMA IN BUSINESS ADMINISTRATTION AND MANAGEMENT
BUSINESS ENVIRONMENT ABBE316B3

1.

a) Analyze the various threats to a business entry into the market.

i. Competition: Existing competitors in the market can pose as a threat to new entrants.
Due to their well-established known brands, loyal customer base, and economies of
scale it is difficult for new business to compete.

ii. Economic factors: Economic factors such as recession downturn impact success of
new entrants. A weak economy may result in reduced consumer spending.

iii. Brand recognition: Customers may have strong loyalty towards existing brands
making it challenging for new entrants to gain market share.

iv. Access to distribution channels: The need that new entrants have to secure distribution
for their products, it can serve as a barrier to enter into market. In addition, intensive
distribution strategy can be used by early market entrants in order to limit the access
of new potential industry entrants to distributors.
 v. Government policy: Government policy can limit or foreclose entry to market, with
controls such as license requirements and access to raw materials.

b) Discuss the various market systems or types of competition in modern

business environment.

i. Perfect competition: Perfect competition is a market system characterized by infinite

number of buyers and sellers and are selling homogeneous products at fixed prices.
No buyer or seller has significant market power, and there are free entry and exist of
firms.

ii. Monopoly: Monopoly is a market system where there is only one seller of a particular
product or service, and there are no close substitutes available. The firm has
significant market power and can set prices as they want since customers have no
option and entry barriers are very high.

iii. Oligopoly: This is a market system where there are small number of large firms
dominating the market and are either selling homogenous or differentiated goods. The
firms are mutually dependent on one another when it comes to making pricing or
output decisions to maintain their market decision.

iv. Monopolistic competition: Monopolistic competition is a market system combining

elements of monopoly and perfect competition. In this market structure sellers offer
differentiated products perceived unique by their customers. Each firm has a degree of
market power but there is free entry and exist in market.

v. Monopsony: This is a market system where there are limited number of buyers for a
particular product or service. The consumer has significant market power and can
dictate condition to the supplier.

2.

a. Discuss the various types of customers that a business may interact with
and explain how each business should handle them.

i. Loyal customers: This are customers that have strong sense of commitment to your
brand and have an overall positive impression of your products and services.
How to handle them:
Business should start loyalty programs to reward loyal customers

ii. Discount customers: They are customers interested in your products just because
you’re offering them in discount prices.
How to handle them:
Make them understand the value you are adding even at the discounted price. This
will make the customer feel that they did get a good deal. Thus, they will value your
product more and will stick around for longer.
 Emphasize the extras that the customer will benefit from through doing business with
your company to inspire loyalty.

iii. Impulse customers: Impulsive customers have no prior intention to purchase your
products or services and instead buy them spontaneously.
How to handle them:
Make sure the customer experience is as smooth as possible and remove any hurdles
that might get in the way of the customer’s intention to buy.
Send them time-sensitive offers that build a sense of urgency and stimulate the urge to
impulse-buy.

iv. New Customers: They are customers that are engaging with your business for the first
time.
How to handle them:
Provide to them a clear and concise information about your products and services.
Respond to their inquiries.

v. Dissatisfied customers: These are customers that have made purchases from your but
are unsatisfied or unhappy with your brand or your services.
How to handle them:
Listen actively to their complains, empathize with their frustrations, and take
responsibility to resolving their issue.
Offer appropriate solution such as refunds, exchanges, or discounts and follow up to
ensure their satisfaction.

b. Analyze the emerging needs of customers that influence modern business.

i. Personalization: customers expect personalized experiences and products tailored to
their specific needs and preferences. Business must gather and analyze customer data
to understand individual preference and deliver customized offerings.

ii. Transparency and Trust: Customers now seek greater transparency from business,
regarding product sourcing, manufacturing processes, price changes, etc. Building
trust through open communication is important in establishing long term relation with
customers.

iii. Digital Transformation: with the increasing reliance on technology, customers expect
businesses to offer digital solutions such as online shopping, mobile apps etc.
embracing digital transformation is essential to meet customers expectation.

iv. Sustainability: there is a growing demand for sustainable and environmentally

friendly products and practices. Customers want business to prioritize sustainability
such as co friendly materials, reducing waste and adapting to renewable sources of
energy.

v. Convenience: customers value convenience and expect businesses to provide

frictionless experience. This includes offering fast and efficient services, easy to use
interfaces and flexible delivery options.
 3.

a) Explain importance of a business conducting competitor analysis

i. Assess strengths and weaknesses: competitor analysis helps in evaluating the

strengths and weaknesses of the competitors. By analyzing products, services, pricing
strategies, marketing tactics, and customer service the business gains insight in areas
competitors excel and fall short, thus they can be able to capitalize on the
competitors’ weaknesses.

ii. Gain customer insight: carrying out competitor analysis provides insight to businesses
on the customers preferences and behaviors. This will enable a business to understand
why a customer chooses the competitor over them thus guides business to enhance
their products and service to meet the customers need better.

iii. Identify competitors: conducting a competitor analysis in a business helps identify

both direct and indirect competitors for the business. This helps identify major players
in the industry and how they position themselves., thus with this knowledge a
business can able to develop effective market strategy to stay competitive.

iv. Identifies under-served opportunities: Conducting a competitor analysis helps identify

any products or services that customers want but don't currently have access to. When
they determine these under-served opportunities, it gives them a chance to devise a
solution to fill the customers' needs.

v. Carrying out competitor analysis is also important since it enables businesses to come
up with strategies for their growth.

b) Discuss the various aspects that should be addressed in an effective

competitor analysis
i. Products and services:
An effective competitors’ analysis should analyze the range and quality of products
and services offered by their competitors. It should also address their pricing, and
features of their products and services compared to them and determine their unique
selling points.

ii. Market share and positioning:

An effective competitors’ analysis should address their competitors market share and
position in the industry. It must also identify their market segments and customer
profiles.

iii. Sales and Distribution Strategy:

It should evaluate your competitors’ sales strategies and distribution channels.

iv. SWOT analysis:

An effective competitors’ analysis should include a swot analysis for each competitor
 that is strengths, weaknesses, opportunities, and threats.

v. Industry Trends and Innovations

An effective competitor’s analysis should stay updated on industry trends and
innovation. Analyze how competitors are adapting to this trend and if they are
implementing any innovative strategies. This will help identify potential
opportunities.

4.
a. Explain various techniques a business may employ to gain competitive
advantage
i. Cost leadership: Becoming a low-cost provider in the industry can give your business
a competitive edge. Through optimizing operations, streamlining processes, and
negotiating favorable supplier contract, you can offer products or services at lower
prices than competitors.

ii. Innovation: continuously innovating and introducing new products, services or

processes can give your business a competitive advantage.

iii. Differentiation: Differentiating your products or services from those of your

competitors can be a powerful way to stand out from the market. This can be achieved
through unique features, superior quality, exceptional customer service etc.

iv. Marketing and branding: effective marketing and branding strategies can help
business stand out and attract customers.

v. Attract the best talent: Hiring an agile workforce to make your company a stronger
business is one of the best steps you can take. Well qualified and talented employees
will your productivity, creating a competitive edge for your company.

b. Discuss the positive and negative effects of consumerism

Positive effects of consumerism
I. Economic growth: consumerism stimulates economic growth by stimulating demand
for goods and services which creates jobs opportunities and stimulates income for
individuals and businesses.

II. Innovation and product development: consumer demand fuels innovation and
encourages business to develop new products and improve existing ones to meet
consumers needs and preferences.

III. Facilitates higher standards of living: consumerism provides access to wide range of
products and services, enhancing people’s quality of life and offering convenience
 and comfort.

IV. Consumerism leads to increased production of goods and services, as a result of

higher consumer spending, a rise in GDP can occur.

Negative effects of consumerism

I. The excessive production and consumption associated with consumerism contributes
to resource depletion, pollution, and the production of waste resulting in
environmental degradation and climate change.

II. Debt and financial strain: consumerism can lead to overspending and culture of debt,
as individuals may feel pressured to acquire material possession beyond their means.
This can lead to financial stress and economic instability.

III. Focuses on materialism: consumerism often places excessive emphasis on material

possession and external markers of success, potentially neglecting other aspects of
wellbeing such as relationships, personal growth etc.

IV. Social inequality: the pursuit of material possessions and status create a divide
between those who can afford luxury goods and those who cannot thus leading to
feelings inadequacy and exclusion.

V. Consumerism is often associated with globalization in promoting the production and

consumption of globally traded goods and brands, which can be incompatible with
local cultures and patterns of economic activity.

5.

a. Discuss the business scenario where suppliers barging power is:

I. High:
Limited number of suppliers: When there are limited number of
suppliers in the market offering a particular product or service, the
supplier bargaining power tends to be high since they have more
control over pricing and terms. Thus, buyers may have limited
alternatives, making it harder to negotiate favorable terms or prices.

Strong brand or reputation: supplier with strong brands have more

powers as buyers may be willing to pay a premium for their product or
service.

II. Low:
Plenty suppliers’ option: when there are multiple suppliers offering
similar products and services, the buyers have the choices and can
negotiate for better terms thus diminishing the suppliers bargaining
power. In such scenarios, suppliers may be more willing to offer
 competitive pricing and favorable terms to secure their business.

Low switching costs: when switching between suppliers is relatively

easy and inexpensive for buyers’ suppliers bargaining power tends to
be low. Buyers can easily explore other options without significant
financial and operational consequences making it difficult for suppliers
to exert leverage.

b. Discuss scenarios when the buyer purchasing power is:

I. High:

Large number of buyers; when there are numerous buyers in the

market and limited number of sellers, buyers hold more power. This is
because sellers must compete for the buyers leading to increased
negotiation power for buyers.

Customization or Differentiation: In markets where buyers have unique

needs and require customized or differentiated products or services
their bargaining power increases. The sellers may need to
accommodate specific demand to secure the business.

II. Low:

Few buyers and dominant sellers: In a situation where there are only
few buyers and a concentrated seller market, buyers have limited
option. This reduces their bargaining power as they have less leverage
to negotiate favorable terms.

Lack of information: if buyers have limited access to information about

alternative options, prices, and market dynamics, their bargaining
power may be reduced. This is because lack of information hampers
their ability to make informed decisions and negotiate effectively.