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Competitiveness and confrontation between companies

Merriam-Webster defines competition in business as "the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms". Competition, , causes commercial firms to develop new products, services and technologies, which would give consumers greater selection and better products.The greater selection typically causes lower prices for the products, compared to what the price would be if there was no competition (monopoly) or little competition (oligopoly). However, competition may also lead to wasted (duplicated) effort and to increased costs (and prices) in some circumstances. For example, the intense competition for the small number of top jobs in music and movie actingleads many aspiring musicians and actors to make substantial investments in training which are not recouped, because only a fraction become successful

Three levels of economic competition have been classified:

The most narrow form is direct competition (also called category competition or brand competition), where products which perform the same function compete against each other. Forexample, one brand of pick-up trucks competes with several other brands of pick-up trucks. Sometimes, two companies are rivals and one adds new products to their line, which leads to the other company distributing the same new things, and in this manner they compete.

The next form is substitute or indirect competition, where products which are close substitutes for one another compete. For example,butter competes with margarine, mayonnaise and other various sauces and spreads.

The broadest form of competition is typically called budget competition. Included in this category is anything on which the consumer might want to spend their available money

In addition, companies also compete for financing on the capital markets (equity or debt) in order to generate the necessary cash for theiroperations. An investor typically will consider alternative investment opportunities given his risk profile and not only look at companies just competing on product (direct competitors). Enlarging the investment universe to include indirect competitors leads to a broader peer universe of comparable, indirectly competing companies.

Finally, most businesses also encourage competition betweenindividual employees. An example of this is a contest between sales representatives.

The sales representative with the highest sales (or the best improvement in sales) over a period of time would gain benefits from the employer.

It should also be noted that business and economic competition in most countries is often limited or restricted. Competition often is subject to legal restrictions. Forexample, competition may be legally prohibited, as in the case with a government monopoly or a government-granted monopoly. Tariffs, subsidies or other protectionist measures may also be instituted by government in order to prevent or reduce competition. Depending on the respective economic policy, pure competition is to a greater or lesser extent regulated by competition policy and competitionlaw.

Globalization has sharpened competiton. The main challenge facing firm is how to take advantage of new resources and markets while dealing with intense and growing globeal competition. The challenge facing governments is how to design and implement supportive.policies and strategies .business and government both need to intensify their partnership to build and strengthen competitiveness.Powerful factors are driving globalization: falling trade barriers; fast-paced technological advances; declining communication and transport costs; international migration; and highly mobile investment

Close and active partnership

A coherent competitiveness strategy, tailor-made to national circumstances, has a major influence on the creation of business competitiveness. A close and active...