Competition in the economy is a process in which, as a result of interaction and struggle between enterprises, the provision of the best conditions for the sale of products of each specific company is achieved. Economic competition is an impetus for the development of an individual enterprise and the entire economy.
Economic role
Over the past two decades, competition has skyrocketed and continues to grow globally. But even at the beginning of the century, rivalry between organizations was not so fierce. This was because governments and large cartels held back competition. Today, there are practically no industries that are not affected by its influence. Competition can produce diametrically opposite results. For the winners - an increase in their own wealth, fame and secured, sometimes for several generations ahead, life. For the losers - ruin, poverty, inflation, instability, unemployment, and so on.
Adam Smith characterized competitive behavior as fair competition, the main instrument of which was price pressure. In the 21st century, this definition has changed. Often there is no opportunity to influence the price. Modern competition means the struggle between the old and the new. It is an appeal to new technologies, new types of organization, new products and ideas. Thanks to the new interpretation, competition has had a significant impact on the economy as a whole.
Types of competition
According to the methods of confrontation, there is a distinction between price and non-price competition. In the first case, economic victory is achieved through the sale of goods and services at lower prices than those of competing companies. Reducing prices can be accomplished by reducing production costs or by reducing income. Small companies can cut prices for a relatively short period of time, while large companies have the resources to give up profits altogether if this helps to squeeze competitors out of the market. The victory will allow them to significantly increase the price in the future, which will compensate for all losses.
Non-price competition does not affect price changes. In this case, such methods as advertising, the use of special technologies, and the provision of after-sales services come into play. It turns out that a product of a higher quality goes on sale than that of a competitor. Usually, the focus is on the environmental friendliness of the product, aesthetics and safety in use. In the struggle for a place in the economic sun, some companies resort to unfair competition. Its methods are false advertising, industrial espionage, sale of goods at a price below cost, separate agreements with some competitors.
