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CS Professional · Strategic Management and Corporate Finance · Strategic Analysis and Planning

A strategy consultant describes an industry where products are standardised, many small sellers exist, entry is easy, and no firm influences price. Which type of competitive environment does this describe, and what does it imply for strategy?

This describes perfect or near-perfect competition, where standardised products, many sellers and easy entry leave firms as price takers. Strategy therefore centres on cost efficiency. Oligopoly has few interdependent sellers and monopolistic competition relies on differentiation, neither of which is described.

  1. APerfect or near-perfect competition; firms are price takers and compete mainly on cost efficiencyCorrect
  2. BMonopoly; the firm sets price and faces no rivals
  3. COligopoly; a few firms are interdependent in pricing decisions
  4. DMonopolistic competition; strong brand differentiation allows price premiums

Explanation

Standardised products, many sellers, easy entry and no price influence are features of perfect competition. Firms are price takers, so sustainable advantage comes mainly from lower cost. Oligopoly has few sellers and monopolistic competition relies on differentiation, which are not described here.

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