Businesses encounter competition in the form of price, location, quality, and almost every business process. Many businesses try to avoid it, complain about it and many learn from it.
What Is Business Competition?
Competition in business is the contest or rivalry among the companies selling similar products and/or targeting the same target audience to get more sales, increase revenue, and gain more market share compared to others.
Types Of Competition
Business competition can be categorized into three types:
Direct Competition
Direct competitors are businesses that sell the same products to the same target audience and compete for the same potential market.
An excellent example of direct competitors is KFC Dominos business rivalry. Both companies –
- Operate in the same industry (fast food),
- Offer similar products (burgers ),
- Satisfy the same need,
- Use the same distribution channels
- Target the same audience.
Indirect Competition
Indirect competitors are vendors that sell products or services that are not necessarily the same but satisfy the same consumer need.
An example of indirect competitors would be Dominos and Sweet sensation.
Even though these two businesses sell products that are different, they are competitors as they –
- Operate in the same industry
- Target the same audience
- Satisfy the same need
Replacement Competition
Replacement competitors are businesses who have the ability to replace the business’ offering altogether by providing a new solution.
Smartphones became a replacement competitor of digital cameras. Even though these two products had different uses, smartphones had the ability to provide a totally new solution to the existing photography need of the customers.
Importance Of Business Competition
- Makes the business think deeply into the actual needs, wants, and demands of the customers and makes the business put more effort into serving the customers better.
- Makes the business realize its actual strengths and weaknesses.
- Makes the business focus on more than just what it has to offer, in marketing, branding, customer service, and customer retention.
- Keeps the companies on their toes and induces a habit of constantly innovating and improving the product.
- Educates the business about how the usual market works, how to position the brand, produce efficiently, and market sell effectively.
- Provides customers with options to choose from while shopping.
Advantages Of Business Competition
The business, the consumers and the market all benefit from competition.
- Increases the demand: A healthy competition often leads to investment in more marketing activities by different players, which eventually increases the overall demand for the product in the market.
- Boosts innovation: Competition keeps the business on its toes and makes it imperative for it to innovate and improve.
- Helps business find itscompetitive edge: Businesses often analyze and study what their business rivals provide and how they provide it, to improve their services and cater better to their customers.
- Makes businesses serve customers better:Rivalry among the companies is often won by the company that stands out and serves the customers better than others. This makes the market players put customers on the top of their priority lists.
- Makes employees more efficient: Competition increases the pressure on the employees considerably and makes them give their best to the organization.
- Boosts constant business development: Constant holistic business development is what usually makes the business tackle competition in the long run.
Disadvantages Of Business Competition
Business competition isn’t always beneficial too. High competition has the following disadvantages –
- Reduces the business’s market share: A rise in competition makes the business share its market with other players. This is often unwelcomed by the existing businesses.
- Puts pressure on business: Competitions puts much pressure on businesses to improve and results in many of them failing because of their inability to compete with the big market players.
- Employees feel pressurized: Increased competition puts much pressure on employees to perform well and think outside the box.
- Makes business incur unnecessary expenses: Competition often makes a business overspend on marketing and other promotional strategies to woo the customers, business partners, and employees. This adds to the expense and is often unnecessary.
- Customers get confused: Customers are often confused by many similar products available in the market.
