Since the companies in almost every industry are increasing along with their diversification in the businesses, so it would be quite rare to find out any single firm operating alone in the whole market. Of course, the competition lies everywhere and is rising by the time; nevertheless, it all depends on the nature or structure of the market in which the firms operate. There are three main types of markets that shape the competition among the companies; monopoly, oligopoly, and perfect competition.
Monopolistic firms do not face any competition since they are the only single company who produce or sell the products and services in a given market. A slight difference comes in Oligopolistic competition, where there are few firms who operate in the market to make up the industry; for instance, three pharmaceutical firms – Merck, GSK, and Pfizer – producing and selling their products to the customers in a same market. Whereas, markets with perfect competition have many buyers and sellers that work around the same industry or business such as, brokerage firms, investment banks, or consumer banking.
These were the competitions based on the market structure. Now let’s have a look at three competitions that firms might face when
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The second competition that firms might face is indirect competition, where there are alternatives available with the customers in terms of ‘substitute’ products. Those products that one company is offering, might be ignored by the customers since they can purchase its substitute from other firm such as, CNG used as an alternative to petrol. And finally, potential competitors, who might arise as a direct or indirect competitor in near future; these may include environmental changes or shifts in trends (Something We Like, 2010).
Answer – 2 When a company starts its business, it’s up to it how it wants to position itself in the market. It can position itself as a market leader, challenger, follower, or a nicher; but before it decides this, it would have to do its homework first. First of all, the firms must identify the potential in the market in light of the Porter’s five forces model that are threat of new entrants, bargaining power of suppliers, bargaining power of customers, market rivalry, and threat of substitute products (Kotler & Armstrong, 2008).
After that, the primary competitors should be identified in light of the industry and competitor structures, answered in question one. Once a firm has identified its competitors – either direct or indirect – it should conduct a comprehensive competitor analysis where the aims, objectives, strategies, market position, and reaction patterns to certain market problems are scrutinized. After doing all that, a firm may decide whether it would be acting a follower or a nicher. If it goes to follow the market, then it would deal with the competition by imitation instead of innovation.
In imitation, it would prefer four extensive approaches that are, counterfeiting, cloner, imitator, and adapter. While if it acts as a nicher it would target those end-users who are in small size and are not usually catered by market leaders. Moreover, it would target specific customers by adopting the vertical-level strategy; offering such products or prices that competitors don’t; features of products; and creating a differentiation effect by acing service, delivery, quality, or channeling. Answer – 3
Firms when producing and launching their products often make use of certain strategies that are either related to supply chain, manufacturing, or marketing. Although there are many of them such as, Just-in-time method that allows a firm to bring in and produce fresh products or services; Total Quality Management; and Differentiation Strategy, but we would focus on the latter two. The most well-known and most implemented product strategy is of Total Quality Management (TQM). Companies try offering their products to their customers with optimum quality and standards.
In this case, the focus is on the ‘process’ of the manufacturing the products instead on the ‘volume’ of those products. Products are minutely scrutinized for any flaws that might be present in there, and hence are removed before offered to the end-users. Moreover, the firms keep a close eye on the dynamic trends of the market in order to add on new and latest features, and remove the old ones. Another product strategy is Differentiation, where the products are modified or built in such ways that are different from that of customers.
Those products often possess unique and better product specifications and features and are directed towards achieving customer delight and loyalty. Furthermore, companies often introduce certain pricing strategies in which attractive offers are made in order to increase the sales and market share as much as possible. References Kotler. P. & Armstrong. G. (2008). Principles of Marketing. Edition: 12th. India. Pearson Education. Inc. Somethingwelike. (2010). Different types of Competitors. Retrieved on July 31, 2010. From http://www. somethingwelike. com/branding-and-design/different-types-of-competitors