Business Competition

Meaning of Competition

To a particular business, competition usually refers to firms that market similar or substitutable products in the same geographic area. In general, the term business competition refers to the rivalry among businesses for consumer dollars. For example, the manager of a fast food outlet in an airport views all other fast food outlets near the airport as competition but probably does not think fast food outlets in other geographic areas as competition. In general, all the fast food outlets near the airport compete for passengers’ dollars.

Business Competition

In developing and implementing a marketing program, an organization must consider the types of business competition in its markets and assess the actions of its competition.

Types of Business Competition

The number of organizations that sell a product may affect the strength of competition. When there are many business selling a particular product, for example, price considerations and product differences are more important that when only one business is selling that product. The number of firms selling a similar product determines the structure of the market.

  1. A monopoly exists when only one firm marketing a product for which there are no close substitutes.
  2. An oligopoly exists when few firms are marketing a product and they control much of the supply of the product. Products in oligopolistic competition may be homogeneous (similar or uniform in nature), such as coal or steel, or differentiated (having real or perceived differences), such as cigarettes or airline services. In an oligopoly, each seller must consider the reactions of other sellers to changes in marketing activities.
  3. Monopolistic competition exists when many firms are marketing a product; each firm attempts to difference its product to convince consumers that its product is the one to buy.  Firms engaged in monopolistic competition have enough influence on the marketplace to exert some control over their own prices.
  4. Perfect competition, if it existed, would be a market with a large number of sellers, no one of which could significantly influence the price or supply of the products. Products would be homogeneous, and potential sellers of the products would have full knowledge of the market and easy entry into it. There is no market with perfect competition because social and economic factors make it impossible for all buyers and sellers to have complete information about the products. The closest example of perfect competition is the market for agricultural products such as corn, cotton, and soybeans.

Assessing Competition in Business

Business needs to monitor the actions of their competition and assess the changes their competitors are making. For example, a marketing manager should determine if, and why, major competitors are changing prices, product designs, warranties and service policies, packaging, distribution methods, or promotional factors such as sales force size and advertising. Knowledge of such changes helps the marketing manager to decide what adjustments to make to current marketing strategies and how to plan new ones. Marketers can obtain information about changes their competitors are making from direct observation, salespeople, customers, trade journals, marketing research, and distributors.

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