Competition is usally good for the customer because it means that prices will go down as firms compete with each other and make better quality products or features. However, competition can also affect a firm negatively, causing it to lose profits or to have to close down because it can no longer be sustained. There are usually many companies that make up the "market share" for a particular good or service. This is the percentage of your profits over the total profits of all the firms in the market competing against you. Firms will also compete for many different reasons:
To increase their customer base
Firms are constantly competing to obtain the highest amount of customers than their rival firms. This is because, profits and customers come hand in hand. This means that the more customers you have purchasing your goods and services, the more revenue or profit you will be able to get.
To increase sales
The firms will not only be competing for customers, but they will also be competing for more active customers. Firms want their customers to buy more of their products and therefore compete with advertisements or sales to increase sales.
To expand their market share
As I explained before, this is one of the key aspects that evalutates the performance of a firm in its market. The higher your market share is, it means that you are receiving a large percentage of the profits in the market you are participating in.
To achieve product superiority
This means product better quality products than your competitors so that customers will prefer to buy yours. Product superiority also means that your product sold more than other products made by rival firms.To enhance the image
The image of a firm is how consumers see the company when talking, or thinking about it. A good image therefore means that it will attract more customers and expand sales and market share. However, a bad imagine of a company results in it losing customers and reducing sales.
To maximize profits
When a firm competes, it also aims to maximize its profits. This happens with more customers, higher sales, and almost all of the previously mentioned topics.
Types of competition
There are many ways in which firms can compete with each other:Price competition
This involves the changing of prices to match other rival firms in an effort that customers will choose the cheaper option or will discard their product as an expensive one. This is one of the most imporant types of competition as it is the number one priority for the customers, who are usually looking for the best prices in the market. However, the ability of a firm to cut down its prices can affect their profits and can sometimes not be a good option if costs are too high. Therefore, because firms rarely operate without profit, it is easy to run them out of business by lowering prices. If both companies respond and try to keep their prices lower than the other, it can result in a price war, which I will cover later.Non-price competition
There are other ways in which firms can compete that do not involve changing the prices of their products. This includes producing new products, selling in the different stores or marketplaces, advertising campaigns, competitions, promotions, loyalty cards, and any other action which a firm can do to stay ahead of their competitors. This technique is also important because customers will not only value the price but also product features, ease of purchase, customer service or overall quality.
Advertisement billboard
Comments
Post a Comment