Lesson 7.1.1.7

7.1.1.7 Competitive Environment Quiz: NCFE Business & Enterprise, Unit 7

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

In partnership with Revision Ninja

This lesson looks at the competitive environment: how the number and behaviour of rivals shapes prices, product choice and strategy. It covers new entrants, innovation and refresh cycles, differentiation and unique selling points, and the benefits of competition for customers against the pressure on business margins.

Key points

  • Competitors are firms chasing the same customers with a similar product, so a new rival nearby means existing shops must work harder.
  • When rivals charge the same price, firms differentiate through design, features or quality to give buyers a reason to choose them.
  • A unique selling point must be something rivals do not offer, because price cuts and loyalty cards are easily copied.
  • Strong competition benefits customers through lower prices and wider choice, but squeezes profit margins because firms cannot raise prices freely.
  • Short product refresh cycles mean a firm that stands still looks outdated and loses customers to newer models.
  • New entrants with a different way of working, like app-based banks, can overturn established firms, which must invest to match them.
  • Growth opportunities come from shifts in customer wants and technology, while a lone supplier faces little pressure to keep fares or prices low.

Key terms

Competitor
A business selling similar products to the same group of customers.
New entrant
A firm that has recently started trading in an established market.
Differentiation
Making a product stand out from rivals through design, quality or features.
Unique selling point
Something distinctive that rivals do not offer, giving customers a reason to choose the firm.
Profit margin
The share of each sale kept as profit, which price competition tends to reduce.
Innovation
Introducing new or improved products or ways of working to stay ahead of rivals.
Sole operator
The only business serving a market, with no rivals to push prices down.

Host it live on the board and students join with a game code on their own devices, or revise alone with Free Play. The answers are revealed in the game.

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The 20 questions

  1. What is the likely effect on existing barbers when a new rival opens on the same high street?

    • Rents fall instantly
    • Prices must double
    • Demand vanishes fully
    • Competition intensifies

  2. Which market condition drives smartphone makers to constantly add new camera features?

    • Sole monopoly
    • Low demand
    • Fixed prices
    • High rivalry

  3. Which trend creates the best growth opportunity for a sportswear brand?

    • Rising corporation tax
    • Stricter employment law
    • Higher import tariffs
    • Home fitness interest

  4. How has the rise of electric vehicles impacted established car manufacturers?

    • Removed raw materials
    • Stopped foreign trade
    • Opened a new segment
    • Eliminated all costs

  5. What do app-based banks taking customers from high-street banks demonstrate about new entrants?

    • Eliminating all taxes
    • Guaranteed zero risk
    • Overturning trading models
    • Free raw materials

  6. Which businesses should a local café include when listing its direct competitors?

    • Nearby food outlets
    • Accountancy firms
    • Hardware stores
    • Utility suppliers

  7. Why might rival trainer brands charging the same price redesign their range?

    • To fix interest
    • To stop trading
    • To raise taxes
    • To stand out

  8. What is a primary benefit for shoppers when market competition increases?

    • Wider consumer choice
    • Fewer product options
    • Higher utility bills
    • Increased tax rates

  9. What is a key drawback for a business operating in a highly competitive market?

    • Zero business rates
    • Guaranteed monopoly
    • Squeezed profit margins
    • Unlimited sales prices

  10. How can a small independent grocery shop best respond to a new discount rival?

    • Closing the store
    • Matching lowest prices
    • Stopping all marketing
    • Promoting local service

  11. What must a firm do in a market with many rival firms selling similar goods?

    • Copy rival stock
    • Raise all prices
    • Differentiate products
    • Stop advertising

  12. Why do firms in crowded markets frequently launch updated product versions?

    • To slow down sales
    • To reduce staffing
    • To prevent switching
    • To pay more tax

  13. Where do new growth opportunities in a competitive market usually originate?

    • Fixed old routines
    • New technology shifts
    • Declining customer base
    • Higher tax demands

  14. What is the likely impact when an innovative new firm enters an established market?

    • Rivals immediately close
    • Established firms adapt
    • Prices become fixed
    • Demand drops to zero

  15. What is the best strategic response for a high-street bank facing app-based rivals?

    • Increase paper forms
    • Close all branches
    • Ignore new technology
    • Invest in apps

  16. What is the main risk for a firm that never updates products while rivals launch yearly models?

    • Products become outdated
    • Brand loyalty triples
    • Sales increase rapidly
    • Costs disappear completely

  17. What action is a cafe most likely to take when new rivals open nearby?

    • Lower prices
    • Expand premises
    • Close down
    • Hiring staff

  18. What is the typical effect of strong market competition on consumers?

    • Higher prices
    • Poorer quality
    • Lower prices
    • Less choice

  19. Which action gives a high street bakery a unique selling point?

    • Gluten-free loaves
    • Leaflet drops
    • Loyalty cards
    • Price cuts

  20. What is the usual effect on passengers when a bus firm has a monopoly?

    • More routes
    • Lower fares
    • Better service
    • Higher fares

All NCFE Business & Enterprise quizzes