WHAT IS COMPETITION ?FUNCTION IN MARKET ECONOMY.

Competition – What is a competition?

Generally, competition is the pursuit of two or more individuals, groups, organizations or companies for a particular purpose. Competition in the economic sense means that several companies compete for the favor of customers, customers or their suppliers on the other side of the market. In the market economy, competition is characterized by characteristic features:

There must be at least two suppliers or buyers
The competition takes place on freely accessible markets
Competitors are antagonistic, not cooperative

 

Function of competition in the market economy

The competition between several companies assumes an incentive and regulatory function that is completely lacking in the socialist market economy, a planned economy. In the free market economy, it is easily possible due to a variety of similar products and services for customers or suppliers to change the provider, without having to fear losses. The pressure exerted by the customers creates incentives for companies

>Price reductions
>Quality improvements and
>Innovations

make. In this respect, market competition serves as a control instrument in an autonomous system regulated by supply and demand. The mechanism of competition rewards companies with innovative, high-quality products and / or low prices and may, on the other hand, lead to the market exclusion of companies that can not compete with other companies in competing for market share. Successful companies are usually those who succeed in the best possible way to meet the ever-changing consumer needs through a progressive adaptation of their products and services.

The competition: politics and restrictions

Restrictions of competition arise whenever a company has a dominant position or a monopoly on certain products or services. An example of this is currently the dominant position of Google with a market share of over 90 percent among the Internet search engines are Germany. In addition to the dominant position of a company, competition restrictions can also arise through the formation of cartels, for example for the purpose of price-fixing (price cartels) or through the formation of an oligopoly with only a few equally stored companies, products and services.

Competition policy is part of economic policy and includes state interventions and regulations in and for the market economy order designed to prevent negative economic or socially harmful effects of restrictions on competition. In this context, competition law is also a generic term for the right to combat unfair competitive acts and to restrict competition, the so-called antitrust law. A state authority that acts against competition restrictions under antitrust law is the Bundeskartellamt. The Bundeskartellamt is always active when the merger of two companies threatens to create a dominant position for the new company.

Marketing Strategy – What is the Marketing Strategy?

The marketing strategy is a long-term, planning activity that lays the foundation for a company’s product range or service offering. Due to the constantly changing market conditions, the strategy is subject to constant adjustments. It is also part of the founding concept of the company and usually found in the original business plan, which is presented in the start-up financing.

 

Starting point of extensive calculations

The result of the marketing strategy is a very concrete planning of the quantity and time frames of the goods or services to be created as well as an idea about the customers for whom the services of the company will be interesting. The target group definition also specifies many specific details of the distribution, such as whether to serve the markets directly or via resellers.

It is also the starting point for further economic calculations, starting with resource requirements (machines, personnel hours, raw materials and supplies), capital requirements for production and storage facilities, advertising and sales strategies and expenses for national or international market development ,

Significant part of competitiveness

In addition, the strategy can be used to assess the performance and competitiveness of the company. Each strategy has different success factors and influencing factors and different implementation times. The mass market strategy will require a relatively short start-up period, but conquering luxury or premium markets requires substantial upfront investment. Here, payback times are longer, but higher margins (-> sh. There) can be achieved.

 

Effect of the marketing strategy on the customers and resellers

In most cases, a brand or umbrella brand will be developed over time, offering the reseller or end customer both a specific quality promise and recognition value. This is to ensure that the purchase decision is customary and the customer does not migrate with each price reduction of a competitor. Strong customer loyalty or a high brand value are therefore the stated goals of the market cultivation strategy.

 

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