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How do competitors affect business activity?

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Quick Answer

According to Business Case Studies, the presence of competitors helps to drive down the profit that a firm can make. Competition in business occurs when many firms sell identical products and act independently to supply their products to the same group of consumers.

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How do competitors affect business activity?
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Full Answer

All companies face competition, regardless of the market in which they operate. Some markets are highly competitive, while others have significantly less competition. In order to guarantee its longevity in the market, a business must continually develop strategies to counteract the activities of competitors.

Competition can be in the form of direct competition or indirect competition. Direct competition occurs when an organization produces similar products that appeal to the same group of consumers. Indirect competition exists when different firms make or sell items which, although not in head-to-head competition, still compete for the same share of the customers' pockets.

Performing a competitive analysis allows businesses to assess their position relative to local and international competitors. It also provides insights into the different strategies that can be used to create superior products and marketing strategies. According to the Board of Trade of Metropolitan Montreal, the best way for business owners to learn about competitors is to look for articles or ads in the trade press or mainstream publications, read their marketing literature, check their entries in directories and phone books, and ask for a trial of their service if they are an online business.

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