How Does Competition Affect A Business?
Competition in business is everywhere. Businesses come and go. But consider competition as a challenge for you to improve your products or services. This article will talk us through everything about competition in business and how you can use it to your advantage.
What is competition in business?
At its simplest level, competition in business is when two or more companies compete for the same thing. Traditionally, that means competing for customers - with the end goal being profit. When thinking broadly about your competitors, there are two main categories to put them into:
Direct competition
Direct competition is when you and another business sell the same products to the same customers. When it comes to direct competition it’s really important to emphasise why the customer should pick you over your competitor - especially if the price is similar.
Indirect competition
Indirect competitors provide the same service or products and have the same end goal, but the means of getting there are different.
With indirect competition your messaging should focus on why your way of doing things is better. Is it quicker? Easier? A better experience? Honing in on that messaging could help you to stand out from the crowd.
What is the impact of competition on businesses?
For businesses, an ideal world may involve them having 100% market share within their respective markets and not having to worry about competition at all. That certainly isn’t the case for customers, though, who benefit from businesses competing against each other to offer the best quality products for reasonable prices.
Let’s dive into the specific advantages and disadvantages of competition for businesses, though.
The advantages of competition for businesses
Firstly, if you see a rival business launching a new product range or service modification which is performing well, then you could learn something about the needs of your consumers that you didn’t already know. When your competitors innovate and perform well, it can inspire you to try new strategies to beat them, and the process of competing can be fun, exciting, or sometimes even a little stressful. We compete all the time in our personal lives, whether that’s in sports, video games or pub quizzes - and the thrill of competition might prove enjoyable by fulfilling a primal need for some.
The exact same is true for many business owners. Competing requires a process; identifying your competitors’ activity, analysing their strategies, judging how effective you think they’ll be and comparing their processes to your own. So, it can be highly rewarding to run through this process and implement changes within your business that make you more competitive.
The disadvantages of competition in business
That said, there are some disadvantages to competing with rival businesses. An overly saturated market, whereby there are too many competitors selling similar products, may be difficult to thrive in.
That’s because the volume of parties competing for the same ad space results in the cost of advertising going up for each individual business, and the overall level of attention you have to pay to keep up-to-date with competitor strategies and innovations is higher - meaning you may need to allocate more resources to this type of activity.
What’s more, the reality of competition is that sometimes you lose. If a rival runs a slightly better seasonal marketing campaign that resonates deeply with your target audience and steals away more sales from yourself, it can be upsetting and a cause of stress.
Want to know more? Head on over to the full article here for more ideas and perspective. Afterwards, why not drop me an email to share your thoughts at [email protected]; or call me on 0467 749 378.
Thanks,
Robert