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Monopolistic 
competition 
Monopolistic competition arises when the market comprises many producers who 
tend to use product differentiation to distinguish themselves from others.
Although their products may be very similar, because producers differentiate their 
products they are able to create a short-term 'monopoly', as customers see their 
product as unique. Therefore, for monopolistic competition to exist, consumers must 
perceive differences in the products offered by different firms.
Monopolistic competition tends to have fewer barriers to entry or exit than 
oligopolistic competition. 
9.2 Restrictive practices 
As well as 'imperfections' in the market, the market may also be subject to restrictive or anti-competitive 
activities; some examples follow. 

Dumping – selling product at a loss 

Exclusive dealing – being bound by contract to only buy from or sell to one business 

Price fixing – two or more businesses agree to sell at the same price

Refusal to deal – businesses refusing to use a certain vendor 

Limit pricing – effectively a monopoly which is intended to discourage entry into the market 

Retail price maintenance – reseller cannot set independent price 

Government subsidies – deemed to be unfair to competitors 
BPP Tutor Toolkit Copy

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PART A: THE BUSINESS ORGANISATION, ITS STAKEHOLDERS AND THE EXTERNAL ENVIRONMENT 
 
118
 
 
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The 
micro environment 
refers to the immediate operational environment, including suppliers, 
competitors, customers, stakeholders and intermediaries. 

 
For the 
organisation as a system
, we need to consider the various forces which have an impact 
internally and externally. 
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