Various types of competition are economic processes of interconnection, interaction, as well as the struggle between several companies acting on the market, in order to provide the most optimal sales opportunities for their own products, as well as to satisfy the various needs of their customers.
Why is it needed?
There are several basic functions that competition carries:
- determination of the market value of a product;
- alignment of individual prices as well profit distribution depending on labor costs;
- control over the overflow of funds between several industries or sectors.
As mentioned above, the types of competition can be very different, and they are classified according to a number of separate characteristics.
By scale of development
The scale of development is divided into several types.
- Individual. In this case, a certain market participant is trying to take his own place, that is, to form the most optimal conditions for the sale of certain services and goods.
- Local. Several product owners working in a certain territory are fighting for the market among themselves.
- Industry. Different companies working in the same industry are fighting for the best income.
- Intersectoral. Representatives of several different market sectors compete among themselves to attract the maximum number of consumers in order to extract the maximum income.
- National Domestic manufacturers are fighting for a market within their own country.
- Global Business associations, companies or states compete with each other in the current world market.
By the nature of development
There are also types of competition, which are determined by the nature of development - it is controlled and free, as well as price and non-price.
In the overwhelming majority of cases, price competition appears through absolutely artificial knocking down the price of these products, and can be used quite widely price discrimination which may also be present when a particular product is sold at different prices, and such price differences have no basis in costs.
Most often, these types of competition are found in the service sector, as well as in the sale of goods that do not provide for the possibility of redistribution from one market to another (for example, transportation of perishable products).
At the same time, non-price competition is carried out directly by modernizing product quality, introducing all kinds of innovations, improving production technology, as well as branding or patenting sales. This type of competition is based on the fact that companies strive to capture the maximum possible part of the industry market through the additional release of new products that either have fundamental differences with their predecessors, or represent an updated version of the old model.
Non-price types market competition received the name "competition on terms of sales." This type is based primarily on the modernization of customer service, and in particular, this applies to the use of advertising, PR, STIS, merchandising, as well as customer service.
Main directions
There are several main areas of competition for a particular company:
- competition in the field of raw materials markets for high positions in the resource market;
- competition in the marketing of certain products or services;
- competition between consumers in sales markets.
Since in marketing, competition is considered directly in relation to the consumer, the different types of competition in the market are fully consistent with certain stages of choice on the part of consumers.
By stages of decision making by the buyer
In accordance with the stages of consumer decision-making on a purchase, several types of competition can be distinguished.
- Desires. This type of competition is connected with the fact that there are a lot of ways to invest own funds from buyers.
- Functional. The main types of competition in this case are related to the fact that one need of consumers can be satisfied in different ways. It is worth noting that this is the main level of study of competition in modern marketing.
- Intercompany Competition of dominant alternatives, as well as the most effective options to meet consumer needs.
- Intermarket. In this case, competition between the goods of a particular company is considered. In fact, this cannot be called competition, but rather, a special case of the product range, the main purpose of which is to create an imitation of choice among consumers.
Depending on the fulfillment of the preconditions for market equilibrium
In this case, there are types of imperfect and types of perfect competition.
Perfect competition based on the fulfillment of certain prerequisites for competitive equilibrium, including:
- the presence of a large number of consumers and independent manufacturers;
- the possibility of absolutely free trade in various production factors;
- complete independence of all business entities;
- comparability and uniformity of products;
- the presence of accessible information in the market.
Imperfect competition is based, on the contrary, on the violation of such premises. In particular, this type of competition has several basic characteristics:
- the market is divided between several large companies or there is a separate type of competition - monopoly;
- enterprises have limited independence;
- there is a differentiation of products, as well as ultimate control over all market segments.
Depending on supply and demand
In this case, there are different types of competition:
- clean
- monopolistic;
- oligopolistic.
Clean
This is the ultimate case of competition, which belongs to the category of perfect. The key characteristics of the market are:
- a large number of sellers and consumers who do not have sufficient strength to influence the cost;
- the presence of undifferentiated goods that can be completely replaced;
- the sale of these goods at prices that are determined in accordance with the ratio of supply and demand;
- lack of any market power.
The formation of such a market is characteristic of those industries in which there is a fairly low degree of monopolization and concentration of production. In particular, this group includes various industries that are engaged in the production of mass products.
Monopolistic
This is an imperfect type of competition, which differs from the rest in the following characteristics:
- there are a large number of competitors, between which there is a balance of power;
- there is a differentiation of goods, that is, from the point of view of the consumer, all goods have different distinctive qualities.
Differentiation in this case can take many different forms, including taste, some special technical characteristics, original combinations of parameters and much more.If market power is increased through the differentiation of their own goods, this provides effective protection for the company, and also helps to make a profit above the average market level. The formation of a monopoly market is characteristic of those industries in which competition is complicated due to various technological features.
Oligopolistic
This type of competition is also imperfect. The key characteristics of this market are:
- a small number of competitors that interact quite strongly with each other;
- the presence of large market power;
- the strength of the reactive position, which can be measured by the elasticity of the reaction of each company to the actions of competitors;
- a fairly large similarity of goods, as well as the limited number of available sizes.
The formation of this market format is relevant for several industries: metal processing, engineering, as well as the chemical industry.
Perfect competition is not the norm
Not everyone understands that perfect competition in itself does not represent the natural state of the market, since in some areas of activity competition is impossible or complicated due to several reasons:
- technological features of the industry, as well as fixed costs, are so high that the presence of economies of scale is possible only if the producers are large not only in absolute size, but also in terms of the market share;
- there are extremely high sunk costs, that is, the various assets that were embodied in the main production are specific and do not have the ability to reorient to any other types of products or types of markets;
- there are excess production capacities in order to satisfy peak demands for all kinds of services or marketable products.
It is these features that form the conditions for the existence of monopolies of various types, since competition cannot always exist, and the types of market structures are completely captured by certain companies.
