The concept of competition arose relatively recently. This is due to the fact that all spheres of production and business began to develop rapidly only at the end of the 20th century. Nevertheless, a kind of rivalry always existed. And not only between people.
The essence of competition is that for the successful operation of economic activities, all market conditions must be taken into account for maximum effective functioning. This is a rivalry between business entities, in which the independent actions of each of them are limited to the ability of others to influence market conditions. From an economic point of view, competition can be considered in several basic aspects.
- As a level of competition in a particular market.
- As a self-regulating element of the market system.
- As a criterion by which you can determine the type of the industry market.
The competition of companies
Companies that sell their goods and services in one market are exposed to competition. This is manifested in the impossibility of a successful operation due to insufficient consumer demand. In order to eliminate these problems, companies are developing various strategies and competition mechanisms that would contribute to their economic prosperity.
Strategies for competition are plans that help achieve superiority over competitors. Their goal is to somehow surpass competitors in providing goods and services that are in demand to consumers. There are several types of strategies, because they are developed taking into account the internal features of the enterprise, the sphere in which it wants to take its rightful place and market situation.
- Leadership strategy for costs. To achieve this, it is necessary that the total costs of production are an order of magnitude lower than that of their competitors.
- The strategy of wide differentiation. It consists in offering buyers goods and services with consumer properties that are not currently available to similar products or services of competitors. Or by providing a higher consumer value that competitors can not provide.
- The optimal cost strategy. It consists in the distribution of goods and the reduction of costs. The goal of such a strategy is to offer the buyer a high consumer value product that meets his expectations for basic consumer properties and surpasses his expectations for the price.
Perfect and imperfect competition
Perfect competition exists in such areas of activity where there are quite a few small sellers and buyers of the same type of goods, and therefore none of them is able to influence its price.
Conditions of perfect competition
- A large number of small sellers and buyers.
- The product being sold is the same for all manufacturers, and the buyer can choose any seller of the goods for his purchase.
- Inability to control the price of the product and the volume of purchase and sale.
Imperfect competition is divided into three types:
- monopolistic competition;
- oligopoly;
- pure monopoly.
The main sign of competition is the presence on the same consumer market of several enterprises producing identical goods.
The development of competition
Competition in the current market conditions acquires a broader, more international character. There are new forms and methods of competition, among which, non-price competition is developed, based on the proposal of new, improved products, various services, and the use of advertising with a broader focus. Also, scientific and technological progress has a great impact on competitiveness, which contributes to the invention of new economically viable means of production, which further exacerbates the situation in the market of goods and services.