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Who is the Competition?
Competition refers to a situation where there are rivals which allow the customer a choice. The more competition there is in an industry, the more choice a consumer has, which can affect the way a business behaves.
If there is lots of competition, firms may keep prices as low as possible to try to encourage consumers to buy their products from them. If prices are all very similar, the business might have to think of other ways in which they can tempt customers to buy their products and services as opposed to those of their rivals.
Most supermarkets these days offer a great deal of choice for consumers. Businesses know this and will be trying to find ways in which their products stand out amongst the competition. They have to scream at you 'buy me!' - but what is the best way of doing that?
There are several things we need to understand about competition before we can look at who the competition might be.
- Competition exists where other firms are offering the same product or service as you are.
- Competition may exist where businesses in other industries are offering a product that consumers could use instead of yours. For example, a gas cooker could be used instead of an electric cooker. (Can you think of other examples?)
- The extent of the competition will depend on how similar the products are to yours and how easy it is for them to be able to use other businesses products instead of yours.
- Competition will be affected by the extent to which consumers have habits in buying, the quality of the product or service as well as the price they have to pay.
- Competition may also be affected by factors other than the product itself: for example, the way people in the business respond to customers, how they deal with complaints and queries, after-sales service and so on.
Task
- Select one product or service - this could be a product produced by one of the five businesses you may have chosen if you have been following all the resources we have produced in this series (see Biz/ed's Introduction to Business Activity for more information). Alternatively, it could be any other product that you find interesting.
- Classify the product - state what industry or market you think the product is in. For example, is it a type of food product>? Is it an electrical good? Is it a mobile phone? Is it a service?
- Having classified it as much as you can, do some investigation to think of as many different competitors that exist for the product as possible. You will need to be careful because some firms produce different brands of similar goods. For example, the company Proctor & Gamble produce Bold, Daz, Ariel, Dreft, Fairy, Lenor, and Ace (see their laundry product web page) - all laundry products but produced by the same firm. Are these all in competition with each other? If so, why might a firm produce a product that competes with itself?
Lots of choice? Possibly, but many of these brands are made by the same company - why?
You can use the Internet to help gather this information - often the name and the web site address of the manufacturer is on the side of the packaging
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