Business brief Competition

Business brief Competition

Competition between companies can be tough, aggressive, even ferocious or cut-throat. Firms may accuse each other of using unfair methods such as dumping, where a competitor (usually foreign) sells products for less than what they cost to produce, or at less than the price charged in the home market. Firms dump in order to build market share and recoup their losses later when, having established themselves to benefit from economies of scale (producing in larger quantities so that the cost of each unit goes down), they are able to charge market prices with a healthy profit margin on each unit sold.

Competition can also be gentlemanly or even cosy, so cosy that companies may be accused of forming a cartel to agree on prices in a price fixing arrangement. They may then be investigated by a government department that looks into unfair trading practices.

Competitors may also enter into other perfectly legitimate forms of cooperation, such as joint ventures for specific projects. They may even talk about strategic alliances. But like mergers, these can go awry and lead to recrimination between the erstwhile partners.

There are some market strategies available - market leaders, market challengers, market followers, and market nichers. (Nichers can also be referred to as nichists.) We can also look at Michael Porter's model containing:

«cost-leaders, who are low-cost producers with a broad scope and cost advantage, appealing to many industry segments (many groups of buyers with different needs)

• differentiators, who appeal to buyers who are looking for particular product attributes (characteristics) and position themselves as the most able to meet those needs

• focussers, who concentrate on one particular segment and try to find competitive advantage by satisfying the needs of buyers in that segment better than anyone else. Focussers are, in effect, nichers.

These are the available choices, according to Porter, that a commercial organisation has if it wants to compete effectively, and not get 'stuck in the middle'.

Дата добавления: 2015-11-04