Factors considered in analysis competition

• Description of competitors. This involves identifying and characterizing those businesses which will be competing with you
• Size of competition. Large number of competitors implies stiff competition as compared to small number of competitors.
• Profitability of competitors. High profits by competitors imply high level of competition while their low profits imply low competition.
• Operating methods. Improved forms of selling like advertising and promotions indicate higher competition than poor methods of selling.
• Price charged on similar products. Very low prices of similar products implies stiff competition as compared to high prices of similar products.
• Quality of substitute products. Good quality of substitute products implies high competition while low quality of substitute products implies low competition.
• Hours of business operation. Long hours of operation in business imply high competition while short hours of operation in business imply low competition.
• Quality of customer care. Good customer care implies high competition in the business while poor customer care implies low competition.
• Product added advantage e.g Where competitors offer more added services it shows more competition than offering limited services.
• Nature of after sales services offered e.g free loading and off- loading, free repairs etc show higher competition than where these services are not provided.
• Methods of product selling and distribution. Improved methods of selling mean higher competition compared to ordinary methods of selling.
• Nature of labour force or personnel used e.g use of skilled personnel signal high competition and unskilled personnel signal low competition.

Factors affecting competition factors affecting /enhancing competition

• Mobility and accessibility overlap. A business that is near to the customers has a better or competitive advantage or rival firms or businesses that are far or are not easily accessed
• Product overlap. Product overlap is the selling of products by different kinds of businesses that are similar or identical to each other. A business that provides a variety of similar product has a competitive advantage over a rival business that sells only one type of product.
• Product priority. A business that influences customers to spend on its products first has a competitive advantage over the rival firms or businesses that do not adequately influence customers to give their products priority.
• Level of substitution. A business that conveniently competes with the rival firms and has the capacity to attract a bigger percentage of the public /customers has better competitive advantage over rival businesses that cannot easily compete for the market share.

Terms to note.

1. Competitive cost advantage. It refers to ability of a firm or business to provide the same service to the customer at a lower cost than its competitor.
2. Competitive advantage. It refers to ability of a business or firm to provide the same service to a customer in a better way than its competitor’s e.g the ability to bring new product in the market than competitor e.g like MTN with mobile money.
3. Sustainable competitive advantage. It refers to advantage that enables business to survive against its competitors over a long period of time. Or it refers to advantage that allows the maintenance and improvement of the enterprise’s competitive to position in the market.

Sustainable competitive advantage

Competitive advantage is an advantage that a firm has over its competitors, allowing it to generate greater sales or retain more customers that its competitors. It is an advantage that enables a business to survive against competition over a long period of time

ways of maintaining a competitive position in business

• The stronger and more efficient operations are, the better your chances are of surviving competition in all its forms. The following areas are important to competing successfully
• Charging cheaper or affordable prices for the goods or services than those charged by rival firms  Producing or providing high or better quality goods or services so as to attract more customers.
• Ensuring good presentation or appearance of different aspects related to business that attracts customer’s e.g. attractive packaging of product, dressing workers with nice good quality uniforms.
• Ensuring added convenience to the customers like opening the business premises early in the morning and closing a bit late than the rival firms.
• Treating the customers with respect or receiving of customers pleasantly.
• Rewarding loyal and regular customers by giving them gifts, inviting them to get together parties etc.
• Offering credit to the loyal, trusted, and credit worthy customers to create confidence in them so as to continue buying from the business.
• Communicating regularly with customers like by communicating to them major changes in the business availability of new products etc.
• Maintaining up to date records of regular, loyal and big customers and recognizing them when they call or come to the business.
• Providing appropriate after sale services like offering delivery service, proper packaging of products etc
• Advertising the product or products especially persuasive advertisement to influence the customers to buy and continue buying from the business
• Motivating the business employees e.g. providing fringe benefits, ensuring job security, regular and timely payments, ensuring favourable working conditions etc. to inspire them to perform better rival jobs to overcome the rival firm

Merits/positive impacts of competition

• Leads to better customer satisfaction. Through competition, producers/sellers ensure that they produce/provide high quality products/services and do any other activity that ensures maximum customers satisfaction to attract more customers
• Promotes increased efficiency. Competition makes firms or producers develop or discover more efficient production methods hence ensuring efficient resource use.
• Leads to better employee payments/ remuneration. Competition in business forces employers or businesses to pay their highly skilled workers better salaries in order to induce them to stay within the business and make them work better to produce high quality goods or provide high quality services.
• Leads to production of a variety of products. Competition makes producers to vary their products or services in order to make them different from those of rival firms hence widening consumer choices and increasing their satisfaction.
• Consumers enjoy cheaper goods and services. Competition makes producer/sellers to lower the prices of their goods or services in order to overcome the rival of firms or businesses hence making consumer enjoy lower prices.
• Promotes hard work. Business competition forces entrepreneurs or businesses to put in more initiations in order to overcome the rival businesses and this leads to increased production.
• More profits for some businesses. Competition makes businesses that enjoy better competitive advantage to sell more than the rival hence realizing more profits.
• Leads to the production of better quality product. Due to competition, firms or businesses adopt improved methods of production through market research which improves the standards of living of the customers.

Demerits/ negative effects/impacts/costs of business competition

• Makes resources to become more expensive. Competition makes businesses to compete or struggle to acquire the limited resources e.g. high quality raw materials, skilled workers hence making such resources costly to acquire.
• Reduces the number of customers. Competition from many businesses leads to the division of customers which eventually reduces the market share for each business.
• Leads to collapse/unemployment. Stiff competition leads to collapse of small or inefficient businesses hence resulting into unemployment.
• Lowers the profit of businesses. Competition makes business to duplicate activities or services as a way of attracting more customers leading to wastage of limited or source of resources.
• Misleads customers; persuasive advertising due to stiff competition urgently need or which may be of low benefit to them.
• Business competition increases labour turn over or employee which limits productivity of businesses and promote bad image to the public.

Indicators or manifestation of an increase in the level of competition

• Decrease in the level of sales. A fall in the volume of goods sold is an indication of increase in the level of completion.
• Increased advertising and sales promotional activities of businesses in order to retain the old customers or attract the new ones.
• Increased complaints by business customers especially about the quality, quantity and price of the products
• Increased labour turn over i.e. many employees especially leaving the enterprise to join the rival firms or businesses.
• Improved quality of the product is an indication of increase in the level of competition so as to sustain competition
• Reduction in prices of the products by competitors selling similar products in order to sustain the competitive advantage
• Reduction in the profit margin I.e. reduction in the investment returns realized by the business.
• Increased hours of operation by the competitors in order to attract customers’ acceptance and loyalty.
• Improved customer care i.e. improved ways of handling the customers to make them satisfied reflects an increase in the level of competition.
• Demand for wage increase by employees or workers for the service they provide

Sample questions

• a) Explain the ways / methods / techniques which competition in business can be over come b) Describe the factors considered in analyzing competition in business
• a) State any four types of competition

1. b) Discuss various effects of competition