Why Competition may Sometimes be Helpful?

Market structures refer to a total number of businesses in the market, their share and extent of competition in those businesses. Competition is a crucial aspect which cannot be overlooked in business. This is because human needs are many but resources for satisfying them are limited. As a result, firms have to compete to ensure they provide required services at certain cost. The major objective to operate a successful business is to earn a profit. In this process, resources are deployed to generate profits and thus businesses have to allocate resources strategically to ensure maximum benefits are achieved. In some business models, competition is steep while in others, they serve as a monopoly. Monopoly markets exist where there is no competition from the outside. The business operates solely in the market and thus they can control the flow of goods and services. To prevent customer exploitation, the government has to intervene and regulate prices in monopoly markets. Monopolies are characterized by:

  • High barriers to entry– Most monopolies are established by the government to provide services to citizens. As result, high barriers are established to protect competition from outside business. For instance, monopolies provide electricity, gas or petroleum products. Complicated and lengthy procedures are mostly used to protect monopolies from new entrants.
  • Single seller– Due to high barriers, most monopolies serve as single sellers in the market. This makes them offer services without competitors. As result, monopolizes have high bargaining power since customers have no alternative rather than purchasing.
  • Price maker– Monopolies determine the prices of goods and services they offer. Forces of demand and supply in such markets do not affect pricing criteria. To avoid exploitation, governments have to establish ceiling and floor prices through oversight committees.
  • Price discrimination– Monopolies survive by establishing different market segments and allocate prices according to customer’s income behaviours. Price discriminations help to balance the gap between low and high medium income customers.

Monopoly offers poor services due to lack of competition. Introducing competition in market makes management to improve processes and operations leading to provision of better and cheap services. This entails embracing creativity to upgrade, customize and upgrade products with aim of adding extra value as well as minimizing cost of product.

As a result of high barriers to entry in monopolistic markets; many managers have taken stringent policies to exploit customers. Monopolies have been providing poor services to customers since they are the sole provider of service. This entails giving low-quality goods which do not comply with existing standards. When there is no competition in the market, entities become less aggressive in innovation and creativeness. This makes them stay in the old way of doing things which becomes boring to customers.

As technology advances, firms are obliged to take advantage of it and add value to existing products. For instance, to cut transportation cost, an entity can create an application whereby users can buy electricity by the click of buttons. Lack of competition makes such entities to stagnate and thus provide low services to customers. To eliminate this trait, the government has advocated for introducing competition in monopolies. This makes it possible for private companies to offer similar services. High competition makes firms to become innovative and creative. This is achieved by application of modern technology, recruitment of competent staff as well as understanding customer needs. As result, firms will try to strategize on the most effective means which will enable them to offer quality services at lower cost. Competition makes companies be responsible for their practice since a little mistake will make customers switch to competitors. Introduction of competition in markets creates substitute goods and thus customers have high bargaining power to select and purchase quality goods from competitors depending on the price charged.

In addition, Competition in markets ensures resources are widely available. For instance, suppliers of materials are more and substitute goods are more. This enables customers to have voice pertaining to services they receive from sellers thus determining which business to succeed and which to fail. In environment of competitions, firms with poor and low quality goods are eliminated while with quality products thrive competition. Most monopolies also have poor customer care service. Since customers don’t have alternative place to get services, they have to comply with such poor customer relations. Introducing competition opens platform where customers becomes sovereign and thus business have to listen to their grievances and respond effectively. Good customer experience establishes interactive platform where customers can express their complains and what needs to be improved in certain product. Through that, businesses are able to improve product value leading to better services which are affordable to customers.

Introducing competition in monopolies helps to reduce cost. Monopolies set prices depending on goals and objectives to be achieved. This implies that when high profits are expected, they tend to set high prices. Customers are exploited in between since there is no alternative place to get the same services. Introducing competition in markets enables customers to benchmark against other business and thus enabling them to make a wise decision. Competition makes the organization to standardize prices in order to remain in the market. For example, when a competitor is selling the product at $4, to win customer you can sell it at $ 3.7. Price reduction helps to reduce overall cost thus making customers afford goods sold at the marketplace. In addition, the government has to reduce taxes for firms to compete adequately. Low taxes help to reduce production and operational cost and thus enabling the business to set low prices to goods and services. In addition, competition will help management to embrace technical improvements and efficiency to enable them to produce goods and services at lower cost. This in the long run will make customers purchase goods and services which are convenient, quality and affordable rates by comparing prices from one company to another.

In conclusion, competition is crucial in the market since it makes business leaders be more innovative, creative and responsible for the daily transaction. Creativity and innovation improve efficiencies and thus leading to a reduction in production cost. As result, firms are able to offer quality services to customers at affordable prices.

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