In economics, the definition of competition refers to when several private companies go to a market to offer their products or services to a group of consumers who act independently and who integrate the demand. It also refers to the rivalry between firms that take part in a certain market developing their best strategies with the aim of increasing profits, minimizing costes and thus be able to compete in the best possible conditions with the rest of the companies in the sector.
The concept of competition is a logical derivative of free markets, where the decision-making power of exchange rests with consumers and the valuations that they make of the products that interest them.
One of the essential aspects of economic competition lies in the freedom of people to produce and market the products they want and in the way they want. This ends up generating a number of competitors based on the preferences of the buyers. Without a doubt, what ends up being influential in a competitive market is prices. Those businesses that place less value on their items and are willing to make a lower percentage of profit from sales tend to be the most successful. However, they sometimes face a certain business risk that can jeopardize the future of the company.
To better understand the definition of competence, just read the following example of competence. Some supermarkets offer a series of offers and cheaper prices compared to other stores and hypermarkets in order to attract the attention of potential customers.
However, competition can also be determined by other aspects such as the quality of the articles, innovation, customer service or the exclusivity of products. The greater the competition, the greater the advantages for the consumer, since the companies participating in the market will have to offer a greater number of attractions to convince the end customer.
To know which are the competitors that a company or product has, it is necessary to carry out a competition analysis that allows you to know what each of them are doing to reach the public. Find out what a competition analysis consists of and how to do one step by step.