The world of business is finite, and so are its resources and customers. Given this, competition is inevitable, as firms try to dominate their respective markets. Companies that fail to recognize this basic fact are in danger of being outpaced by everyone else in their respective industries. Accordingly, it becomes natural for firms to treat competition as a negative object that must be avoided at all costs.
However, competition is a two-edged sword. While competition introduces difficulty in achieving or maintaining sufficient revenues, astute businesspeople that are adept at navigating fast-paced and competitive industries reap high rewards.
Competition can even be harnessed to your advantage, enabling your business to gain valuable experience and preventing you from resting on your laurels. However, before you can use the power of competition, you must first understand what competition can do for your business.
Benefits Of Competition
Perhaps one of the strongest benefits of competition is its ability to shake companies out of mediocrity. Businesses operating in comparatively less competitive environments tend to take fewer risks and are less aggressive when it comes to market expansion and brand building.
Companies that are monopolies tend to lose interest in innovation and fail to deliver superior products and services, especially if there is very high price inelasticity. As these firms have few, if any, competitors to deal with, they start to become complacent, ultimately resulting in inferior performance. Healthy levels of competition can serve as catalysts, continuously pushing companies to perform at their very best.
The presence of competition is also a sign that a particular industry is faring well economically. Assuming that firms act rationally, it is common sense for firms to gravitate towards fields with high earning potential.
Do note that the absence of competition is not necessarily a sign that a particular industry is not worth entering. That said, at least you can rest assured that operating in a specific sector is potentially feasible and profitable if you encounter some competition.
Finally, competition can force businesses to reassess their target market. Almost any industry, no matter how crowded, is amenable to entry as long as people in business are creative enough to find niche markets which others would have overlooked. If you are finding it hard to compete with other players, perhaps you may have to target a slightly different audience and to adjust your branding correspondingly.
Hazards Of Competition
As a fair warning though, competition is still harmful to businesses that are unprepared and unable to craft countermeasures. As the number of industry players increases, it becomes harder for any single firm to stand out. Customers, if given a wider variety of companies to choose from, will be less likely to select your firm. As market share dwindles, your ability to influence the market to your advantage also decreases.
Also, your company faces a significant disadvantage if it has only recently entered an industry. The other industry players will likely have greater assets and a deeper understanding of the nuances in operating in that specific field. Without proper safeguards, your company will easily be outmatched.
Since competition is usually something you cannot control, it is better to stick to strategies that emphasize adaptation. The essential action to take is to know your competition well. Understand what makes them tick, scrutinize their successes, and learn from their mistakes. Using your competitors as a learning tool is an efficient way to catch up with them and perhaps even outpace them quickly.
Your company should also identify what your competition has missed. Find underutilized niche markets that you can target, then invest a lot of effort into building a corporate brand that addresses that unfulfilled need.
Optimize operations and perform well so that you can set yourself apart from your peers and elevate your company to prominence. By following these methods, you allow your company to thrive, even in very competitive environments.