Explanation of competition in business by Ron Kurtus - Succeed in Understanding Competition. Key words: performance, Total Quality Management, TQM, ISO 9000, customers, product, service, marketplace, head-to-head, supplies, advertising, marketing, distribution, predatory, control, squeeze, number one, School for Champions. Copyright © Restrictions
Types of Business Competition
by Ron Kurtus (revised 27 May 2007)
The goal in business is to make a profit by selling a product or service. In most situations several companies will be competing for sales and the market share. This competition can range from performance competition, where each company does its best to win the hearts and minds of the customers, to a head-to-head competition, where a company will not only seek to do better than its opponents but will also try to prevent the competition from performing well. Large companies may use predatory competition to assure their top position.
Questions you may have include:
- How do companies use performance competition to win?
- When is head-to-head competition used?
- Who uses predatory competition?
This lesson will answer those questions.
Many companies are aware of their competition but are mainly concerned in their immediate business, getting customers and satisfying those customers.
By providing good products and services, these companies hope to be successful and even lead the pack. Marketing and making the customers aware of their products and company is also done to improve their business performance.
By using Total Quality Management (TQM) or Six-Sigma methods and conforming to the ISO 9000 Standards, a company can enhance their ability to make quality products and have a well-run company.
Many companies are aware of their competition and their position in the marketplace, so they simply try to do their best to meet their customers' needs. In this case, "the cream rises to the top."
In some cases, companies will compete directly with their top competitors. They will not only try to perform well, but they will also try to make it difficult for their opponents to do well. Since the opponents may be also using such tactics, they will need to use good defensive measures to deflect the attacks.
One way in which a company can deter their opponents from doing well is to try to control the supplies. By outbidding in vital supplies or controlling suppliers can be done to hinder the opponents.
Marketing and advertising sometimes employ negative ads about the competitors. The best ads indicate lack of quality of the competition through the use of implication.
For a long while Miller Lite and Bud Lite beers had their own advertising campaigns, each touting the advantage of their individual brand. But then in 2004, Miller went head-to-head against Budweiser in their marketing. Miller commercials showed Bud Lite being replaced by Miller Lite. This brought about a battle with each attacking the other's brand.
Controlling the distribution of products is another method of deterring the competition. Beer and beverage companies will gain contracts to be the sole distributor at ballparks.
Competition in Russia
Since the fall of Communism, head-to-head business competition in Russia has been fierce and often negative. Not only will companies provide extreme negative advertisements about their competitors, but also they may even resort to violence and sabotage to gain an upper hand.
Large companies have been known to buy out smaller competitors. Or they may simply make it difficult for the company to stay in business. Microsoft was known to squeeze out small competitors by forcing computer stores not to carry those products.
Lawsuit is another way a large company can stifle smaller competition—real or imaginary. Some small companies have been put out of business simply because their was an inkling of competition.
Wal-Mart has been criticized for squeezing out small stores in the area, as well as for bullying suppliers into cooperation with their needs. Although the public frowns on such tactics, they still flock to Wal-Mart, because of their low prices.
Often several companies will be competing for sales and the market share. A common type is performance competition, where each company does its best to win customers. Head-to-head competition is where a company will not only seek to do better than its opponents but will also try to prevent the competition from performing well. Large companies may use predatory competition to assure their top position.
Be aware of your business competitors
Resources and references
Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter; Free Press (1998) $37.50 - Concepts of business and corporate strategy
Competition Demystified: A Radically Simplified Approach to Business Strategy by Bruce Greenwald, Judd Kahn; Portfolio Hardcover (2005) $26.95 - Business Strategy for executives to show how their markets work, where there competitive opportunities lie, and how to develop and protect them
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Types of Business Competition