Competition is a battle...

Competition is the battle between businesses to win consumer acceptance and loyalty.

The free-enterprise system ensures that businesses make decisions about what to produce, how to produce it, and what price to charge for the product or service. Competition is a basic premise of the free-enterprise system because it is believed that having more than one business competing for the same consumers will cause the products and/or services to be provided at a better quality and a lower cost than if there were no competitors. In other words, competition should provide the consumers with the best value for their hard-earned dollar.



To be successful in today's very competitive business world, it is important for businesses to be aware of what their competitors are doing and to find a way to compete by matching or improving on the competitors' product or service.

For example, if Pepsi-Cola offers a new affeine-free soda, Coca-Cola may offer a new affeine-free soda with only one calorie. By offering an improvement on the competitor's product, Coca-Cola is trying to convince soft-drink consumers to buy the new coke product because it is an improvement on Pepsi's product.

While being aware of the competition and making a countermove is important, it is also very important to pay attention to changing consumer wants, needs, and values and to make the needed changes before the competition does. Doing research and development and being the first to provide a new product or service can give a company a competitive advantage in the marketplace. Once consumers purchase a product or service and are satisfied with it, they will typically purchase the same product again. Having a competitive advantage means that a company does something better than the competition. Having a competitive advantage might mean inventing a new product; providing the best quality, the lowest prices, or the best customer service; or having cutting-edge technology.



To determine an area where a company might have a competitive advantage, a SWOT analysis is often done to identify the company's internal Strengths and Weaknesses and the external Opportunities and Threats. A SWOT analysis lets the company know in which area(s) it has a competitive advantage so it can concentrate on those areas in the production and marketing of its product(s) or service(s).

In addition to staying on top of changing consumer preferences, companies must constantly be looking for ways to cut costs and increase productivity. Companies must provide consumers with the best-quality product at the lowest cost while still making a profit if they are to be successful competitors in the long run. One way to remain competitive is through the use of technology. Technology can help speed up production processes through the use of robots or production lines, move information more accurately and more quickly through the use of computer systems, and assist in research and development proceedings.

Global competition has made gaining consumer acceptance an even tougher challenge for most businesses. In order to compete, businesses (management) must find other ways to win consumers. One way for businesses to accomplish this is through competitive differentiation. Competitive differentiation occurs when a firm somehow differentiates its product or service from that of competitors.



Competitive differentiation may be an actual difference, such as a longer warranty or a lower price, but often the difference is only perceived.

Difference in perception is usually accomplished through advertising, the purpose of which is to convince consumers that one company's product is different from another company's product. Common ways to differentiate a product or service include advertising a better-quality product, better service, better taste, or just a better image.