18 BUSINESS COMPETITION
Competition; it is the rivalry that exists between firms when trying to sell goods and services in a
particular market.
Competitive Markets
A competitive market is one in which a large no. of producers compete with each other to satisfy the
needs and wants of large number of customers
Features of a competitive market
A large number of buyers and sellers
Close substitutes
Low barriers to entry
Price takers
Complete information
There is a free flow of information about all the products for both supplier and buyers(features f
the product, discounts, price, outlets)
Competition and firms
Advantages of competition to firms
High productivity
Self improvement through innovations and product diversification
Problems of the market can be solved as a team (diversification of risk due to more businesses)
Opportunity to access new customers (international market)
Disadvantages of competition to firms
Low revenue due to low prices
Less finance to invest on research and development
High cost on advertising and promotions
Workers productivity is low as the workers are paid low due to low revenue
Competition and consumers
Advantages of competition to customers
Lower price
More choice and new features
Better quality products
More discounts
Disadvantages of competition to customers
Market uncertainty; firms might leave due to unprofitability leads to limited choice
Lack of innovations; bez firms have low profits .’. unable to spend on R and D
Fall in living standards; due to low profits firms will redundant workers to be price competitive
Competition; it is the rivalry that exists between firms when trying to sell goods and services in a
particular market.
Competitive Markets
A competitive market is one in which a large no. of producers compete with each other to satisfy the
needs and wants of large number of customers
Features of a competitive market
A large number of buyers and sellers
Close substitutes
Low barriers to entry
Price takers
Complete information
There is a free flow of information about all the products for both supplier and buyers(features f
the product, discounts, price, outlets)
Competition and firms
Advantages of competition to firms
High productivity
Self improvement through innovations and product diversification
Problems of the market can be solved as a team (diversification of risk due to more businesses)
Opportunity to access new customers (international market)
Disadvantages of competition to firms
Low revenue due to low prices
Less finance to invest on research and development
High cost on advertising and promotions
Workers productivity is low as the workers are paid low due to low revenue
Competition and consumers
Advantages of competition to customers
Lower price
More choice and new features
Better quality products
More discounts
Disadvantages of competition to customers
Market uncertainty; firms might leave due to unprofitability leads to limited choice
Lack of innovations; bez firms have low profits .’. unable to spend on R and D
Fall in living standards; due to low profits firms will redundant workers to be price competitive
