Unit 15- Competition.

There is competition wherever two or more companies supply the same product or service to the same group of customers. Weaker organizations are driven out of the market often as a result take-overs. This may lead to a situation when a few large organizations dominate the market and fix the market to their advantage. That is why the creation of cartels is illegal in most countries. However monopolies still exist. Traditionally a monopoly is an organization that has no immediate competitors and has a major national assets under the government control. There are other terms to describe competition: duopoly (the possession of delivery of a product or service by only two suppliers) and oligopoly (the possession of the delivery of a product or service by a limited number of suppliers). Governments usually restrain these companies from fixing prices. The greatest competition comes between the current players in a particular market. In the second case companies have to compete with players from different markets. Companies welcome different strategies which help them gain a competitive advantage. So some of them become cost-leaders. There a firm sets out to become the low-cost producer in its industry. The firm has a broad scope and serves many industry segments, and may even operate in related industries. The firms breadth is often important to its cost advantage. Cost advantage depends on the structure of the industry and on factors such as technology, access to raw materials. The others become differentiators whose main target is consumers looking for particular product attributes. The firm chooses a segment or a group of segments in the market and tailor their strategy to serving them to the exclusion of others. Differentiation can be based on some factors such as product itself, the delivery system, the marketing approach and others. The third kind of strategy is focus. This strategy is quite different from the others because it based on narrow competitive scope within an industry. The focusers concentrate on one particular segment and try to find competitive advantage by satisfying the needs of buyers in that segment better than anyone else. These are the available choices that a commercial organization has if it wants to compete effectively and not get “stuck in the middle”. Competition on costs is complicated by the need to maintain quality, but fortunately, there are strategies that can be adopted to cut costs without diminishing quality. They are the following: reduce waste, reduce staff costs, lower quality, reduce margins and make a deliberate loss. In the first case a company could locate manufacturing facilities closer to suppliers to reduce transportation costs. The second strategy may imply either downsizing or applying new technology. The third strategy may seem a bit of a joke, but it has come into vogue in the car industry. The last strategy may seem strange, but there can be short-term reasons for doing so. The first is to sell the core product at a loss and then sell supplementary products training at profit. The second is to offer the basic model at a loss but then use sales techniques to persuade the customer to upgrade to a more expensive, profit-generating models.