Increasing level of competition in the market. High competition: dangers or incentives? Brief structure of market relations in the economy

Each level of competition has its own typical features. Before talking about them, let us recall that each sphere in each settlement is individual. And competitive circumstances also have their individual characteristics.

High level of competition: this is a mature market with developed enterprises. The standard of living of the population in such a market is quite high, so the quality of the goods consumed must be the highest, the level of service is of great importance, the assortment must be rich, wide, from economy class to elite goods. The competitive struggle in such a market is high, fruitful, very diverse, with an integrated approach. The market with a level of competition above the average has the same indicators.

The average level of competition is characterized by an emerging market, enterprises in this area are starting to work and quite successfully. Buyers of such a market prefer high quality goods and services, they require a fairly wide range, the ability to choose prices and quality. The presence of both cheap and expensive goods of the same type is mandatory. In a market with an average level of competition, there are mainly price arguments, there is even outright dumping, which leads the market into even greater problems. Unfair competition in such a market is a phenomenon that occurs, but has not yet become the norm. As soon as a strong player appears in such a market in the form of a powerful federal network, the situation may begin to change for the better. If the market does not revive artificially, it will soon move into the “below average” stage.

The market with a level of competition "below average" also includes players who are only just forming their influence on general processes, that is, they are at the beginning of their journey. The population for whom trade in goods or services is carried out lives on small amounts of income and cannot afford any excesses. Such buyers really want to see goods that are inexpensive, but with an acceptable level of quality. Moreover, both manufacturers and consumers understand that such goods cannot be produced, but everyone is satisfied with items made from substitutes for the main parts or ingredients. Inexpensive fiberboard for furniture, meat substitutes and flavorings for sausages, synthetic cheap but durable fabrics for clothing and more are all great for a market with low competition. Buyers in this case buy everything, and are very happy with it. How to compete in such a market is not the subject of close reflection and scientific marketing reflections. Even stronger dumping, frank survival, discounts and promotions that cause losses to partners, unscrupulous methods of work and black PR - all this is accepted by the market with “below average” development, all these methods do not surprise anyone.

An even sadder situation characterizes a market with a low level of competition. The absence of it can “relax” players, that is, businessmen, so much that they start working the way they want, without taking into account economic laws, rules of integrity, without focusing on the interests of consumers. Such a market is completely undeveloped in terms of progress and macroeconomics. As a rule, a very poor population lives in the zone of such economic relations, which cannot make any demands on the quality of the product and its assortment. Everything that is on the counter is sold out in a short time, since there is no alternative, there is no choice. In such a situation, the consumer does not pay attention not only to quality, but also to the price. It is sad, but true - we lived in such conditions in Soviet times with a planned economy. A brown coat for a child with a black artificial collar, baking one kind of tea, the tea itself "Indian", "Armenian", "Azerbaijani" - the same taste with road dust ... All this was and allowed the manufacturers not to try to improve the product, and cover such inactivity was completely legal - GOST, from which it is impossible to deviate. Scarcity is the main sign of low competition, low prices are welcomed, quality is rarely paid attention to.

And this is not all the horrors of this type of market. Methods of competitive struggle are used not only dishonest, but often even criminal. The destruction of a competitor is considered as its physical elimination. With low competition, new players rarely enter the market, and if this happens, then the rules of conduct are dictated not by the law, but by the oldest enterprises in this segment. Today there are still some places in the world with this level of competition, but it should be noted that competition can change within market segments. Therefore, as soon as certain factors stop working, a low level may appear. Fortunately, the rule of law in many countries is quite stable, and when a business is found to be involved in criminal cases or in violation of consumer rights conventions, many governments take quite effective measures and correct the situation.

Territories of competition

In order to determine the level of competition, it is not necessary to immediately conduct research and measurement of product consumption and production volumes. The locality in which you are going to work can tell a lot about the competition and the possible struggle for a leading position in the market.
A high level of competition and above average, as a rule, is present in large developed cities and regions. In our country, these are Moscow, the Moscow region, St. Petersburg, the Leningrad region, some other major cities - Krasnoyarsk, Novosibirsk, Yekaterinburg, Vladivostok and many others. In such settlements, a large number of citizens, several million, always live, the infrastructure has a very high degree of development, there are all the facilities that a person may need in his life, meeting the highest requirements. Achievements of scientific and technological progress are available at such a level of competition, all new products come here in the first place, which is what consumers are very willing to use. Salaries and incomes are high here, the solvency of residents is excellent, the ground for business development at the most perfect and legal level is the most favorable.

The second type of territories with an average level of competition prevails, as a rule, in medium-sized cities. The number of inhabitants in such settlements ranges from 150 or 200 thousand to a million people. The main condition for such a city is the presence of a city-forming enterprise, which employs most of the population and has decent salaries. The amount of income in such cities is lower than in the central ones, but their amounts are sufficient to create a high demand for consumer goods at the level of their city and even region. Many new enterprises are opened in such cities, the number of individual entrepreneurs is constantly growing. The active actions of businessmen allow to conduct a civilized competitive struggle, improving the methods and methods of PR and promotion. Marketing research in such places is not carried out as often as in the center, but they are present and become the main foundation for competition.

If there is no city-forming enterprise in a small city, then the level of competition will be lower than average. A small city, an average city, an urban-type settlement or a suburban area - these territories are not always interesting for business representatives, since it is very problematic to conduct trade here. The number of people living in such an area is less than 100 thousand people, but more than 20-25 thousand. Here, not everyone can make large purchases, the solvency of the population is quite low. But in such settlements, there is often a high activity of entrepreneurs from among the local residents. There is no city-forming enterprise, there is no decent work, so people start working for themselves. The more IP opens, the more actively you need to work to promote your own product. The most talented businessmen quickly understand that they need to enter new territories with their offer, for a more solvent buyer. And those who remain in the local market work in the old fashioned way, without frills in the methods of competition. As a rule, entrepreneurs in small towns are engaged in retail trade and the provision of essential services.

The area with the lowest level of competition is the countryside. The incomes of residents here are critically low, less than 5-6% of the total population receive medium and high incomes. Farmers and owners of large farms receive very low incomes, as investments are constantly required for the next harvest or livestock breeding season. It is impossible to sell expensive quality goods here due to low incomes of consumers and also because it so happened historically that the population of villages goes to make large purchases in central cities. It would seem that business has already penetrated into all corners of various territories, but practice says otherwise. If we are talking about daily consumption goods and products, then in the village they prefer to engage in subsistence farming. Food, household items, even clothes and shoes - all this is made by the poor population with their own hands. Rural residents also work in the service sector, and most often without establishing an enterprise and without paying taxes. It is very difficult for any producers to enter such territory, and not only because of the low level of consumption. The costs of such a business will be simply huge compared to the profits. The cost of transporting goods to the consumer, the salary of employees who will trade your goods for a certain period of time - all this will add up to a decent amount, and it is far from certain that the villagers will bring their small savings to you. The competition in such a market is very small, it is extremely easy to enter here, but not because the rest "didn't guess" to come here. Nobody goes to the rural market because of its low return.

The level of competition and its strength

The level of competition is the percentage of influence of enterprises in one area on the development of the entire business through the desire for their own leadership. The strength of competition is the activity of entrepreneurial influence on market processes. The level of competition is a practically constant value, with rare exceptions when global events occur in politics, economics, under the influence of natural factors at the level of a catastrophe. The strength of competition can change regularly, up or down.

Competition will always be present as long as entrepreneurs want not only to earn, but also to receive an increase in their profits. Leadership in the market can become a desirable phenomenon for many, both because of the desire for money, and for purely psychological reasons, if you want to become the best, which is completely normal for a healthy person. If there are more such people within a particular locality, then the strength of competition will increase, and the level will remain unchanged. As soon as some entrepreneurs leave for other territories, wider ones, while others close their business, the balance of activity will be restored, without affecting the level that characterizes this territory at all.

A novice entrepreneur will have a huge start-up advantage if he analyzes the level and strength of competition in his locality. He can be prepared for various unforeseen circumstances, therefore - the first and important stage of work in the market will have a greater chance of success.

E.Shchugoreva

Myths of competition. Internal programs - personal executioners

The Russian market can be called the middle market in terms of the level of competition. However, if in 2015 the prefix "strong" was true, then in 2018, rather, "moderate". The share of businesses that feel little or no competition has grown from 21 to 27 percent over four years, and 46 percent of business representatives called high competition in their areas compared to 53 in 2015.

This conclusion was reached by the Analytical Center under the Government of the Russian Federation, which conducted an online survey of more than 1.3 thousand entrepreneurs (mainly small and micro businesses, over five years old). The report "On assessing the state of the competitive environment in Russia" was sent to the government apparatus in early May (the document is at the disposal of Rossiyskaya Gazeta).

"Some decrease in respondents' assessment of the level of competition rather indicates a change in the self-perceptions of the business. Indirect factors indicate that the level of competition has not changed significantly over four years, and some of them indicate its gradual increase," the report says. Thus, one of the most significant factors in the competitiveness of Russian goods and services remains the low price, and if the manufacturer raises it by more than 15 percent, then it is highly likely that he will lose a significant part of the turnover due to the loss of the client. This was confirmed by 60 percent of the entrepreneurs surveyed (last year there were 53 percent).

In the domestic market, there are fewer and fewer players who are seeing a reduction in the number of competitors: in 2016, almost a quarter of respondents spoke about this, now it is 22.5 percent. Among the reasons for the reduction in the number of competitors, business names the anti-competitive actions of the authorities, changes in the regulatory framework and the actual withdrawal of players from the market.

More than half of entrepreneurs admitted that their business is from time to time under pressure from dominant market participants. Most often, producers of electricity, gas and water pay attention to this - this was stated by 3/4 of the industry representatives. In the building materials market and in the financial sector, there is less infringement of rights by large businesses (63-64 percent), a similar situation in the wholesale and retail trade, as well as in the chemical industry.

Representatives of natural monopolies are often caught in violations, but almost everyone is interested in the development of competition. Only four percent of entrepreneurs do not resort to methods to increase the competitiveness of their products, which, however, has not changed for four years.

Every third entrepreneur in Russia is sure that competition is good for business development

Every third entrepreneur is true to the postulates of economic theory, according to which competition is good for business development. This applies to the textile and food industries, the production of building materials and the IT sector. A slightly smaller share - 28 percent - falls on entrepreneurs who do not note the positive impact of competition, which was recognized as fair by representatives of the production chain in the field of non-metal products and the fuel and energy complex. Despite this, both the fuel and energy complex and the food industry, along with the light industry and metallurgists, began to feel more confident in selling products.

The high tax burden does not allow businesses to develop further at a more serious pace, according to 40 percent of respondents. "At the same time, representatives of the textile and clothing industry, as well as manufacturers of building materials, showed a high interest in state participation in market regulation," the center's report says.

It is noteworthy that such words, as a rule, hide different opinions of companies about how exactly the state should regulate the market. For example, in the field of motor fuel trade, there is control by the Federal Antimonopoly Service (FAS) both in the wholesale (over sales volumes on the exchange) and in the retail (over the growth rates of prices at filling stations), but those who are not dependent on a major business market participants.

In an attempt to maintain the current sales, the business is less and less actively expanding the scope of its activities, experts of the Analytical Center note. In 2017, one in four did not want to conquer new countries or expand the product line on the horizon of the next three years. This year, the number of enthusiasts decreased by another four percent. The state of affairs suits the financiers quite well, and among them the share of those who oppose the expansion of the sphere of activity almost doubled over the year - from 35 to 67 percent. Entrepreneurs whose business is related to transport engineering, metallurgy, construction and IT, on the contrary, intend to expand their presence and product line.

Entrepreneurial lack of initiative is most often explained by a lack of money for development, high costs and saturation of sales markets: for example, competition abroad is sometimes so high that it makes no sense or need to fit into a new geographical framework. This is partly true for the Russian jewelry market, which, at the level of associations, campaigns for the entry of domestic brands into new markets, but at the business level, in theory, capable of investing in the development of this direction, no one is doing this. As a result, in a passive struggle for their piece of the domestic market, companies adjust to today's consumer, not thinking about tomorrow.

Expert opinion

Daria Nosova, Head of FinTech practice at O2 Consulting:

We are observing and will continue to observe a radical strengthening of the role of the state in the IT market: the Digital Economy Program has been approved, the Ministry of Digital Development is being created, IT and fintech areas are expanding at the level of powerful state corporations.

What does this mean in terms of the state of competition? It seems that there will be serious challenges to face here. The main problems may be monopolization in certain IT areas, discrimination of access and squeezing out medium and small, albeit promising, players from the market. Here, unfortunately, the consequence may be their rapid redirection to foreign markets, worsening competition, which will eventually affect end consumers. In this sense, the FAS will have a rather difficult time in the coming years in balancing the proper competitive state of the IT market.

Another interesting new aspect is the transformation of the financial services market. Over the past year, everyone has been watching the ups and downs of cryptocurrency rates with bated breath, and offers to invest in ICOs or trade on crypto exchanges no longer surprise anyone. In fact, a rather large - and still wild - market is being formed, where they work without rules and where the state has not developed a position, which means that there is actually no control.

So far, the most acute, in our opinion, is the issue of advertising and, in general, various forms of unfair competition. This is another major challenge for the regulator, as it requires an urgent expansion of competence in this new high-tech industry so that adequate solutions can be developed.

Elena Kovaleva, Head of the Competition Policy Department of the Analytical Center under the Government of the Russian Federation:

The state of competition is influenced by the high share of state property in certain markets. The National Plan for the Development of Competition for 2018-2020 provides for a reduction in the share of the public sector in the economy, including limiting the creation of unitary enterprises in competitive markets, which should contribute to the development of competition.

At the same time, the practice of implementing the Competition Development Standard in the constituent entities of the Russian Federation shows that the privatization of unitary enterprises is often replaced by their transformation into other organizational forms while maintaining state property. The formal reduction in the number of SUEs and MUPs in this case does not affect the state of competition in the markets.

- the economic process of interaction, interconnection and struggle between enterprises operating on the market in order to provide better opportunities for marketing their products, satisfying the diverse needs of buyers.

There are the following functions of competition:

• identification or establishment of the market value of the goods;
• equalization of individual values ​​and distribution of profits depending on the various costs of labor;
• regulation of the flow of funds between industries and industries.

There are several types of competition. Consider the classification of types of market competition on a number of grounds.

Types of competition by scale of development

According to the scale of development, the following types are distinguished:

• individual (one market participant seeks to take his place under the sun - to choose the best conditions for the sale of goods and services);
• local (among the commodity owners of some territory);
• sectoral (in one of the market sectors there is a struggle for the greatest income);

• intersectoral (rivalry between representatives of different market sectors for attracting buyers to their side in order to extract more income);
• national (competition of domestic commodity owners within a given country);
• global (the struggle of enterprises, economic associations and states of different countries in the world market).

Types of competition by the nature of development

According to the nature of development competition is divided into free and regulated. Also, competition is divided into price and non-price.

Price competition arises, as a rule, by artificially knocking down prices for these products. At the same time, price discrimination is widely used, which also occurs when a given product is sold at different prices and these price differences are not justified by differences in costs.

Price competition is most often used in the service sector, in the provision of services for the transportation of products; when selling goods that cannot be redistributed from one market to another (transportation of perishable products from one market to another).

Non-price competition is carried out mainly through the improvement of product quality, production technology, innovation and nanotechnology, patenting and branding and the conditions for its sale, "serving" sales. This type of competition is based on the desire to capture a part of the industry market by releasing new products that are either fundamentally different from their predecessors or represent a modernized version of the old model.

Non-price competition through the sale of products is called competition on terms of sale. This type of competition is based on improving customer service. This includes exposure to the consumer through advertising, STIS, PR, merchandising, customer service.

The following main areas of competitive activity of the company can be distinguished:

• competition in the field of raw materials markets for gaining positions in the resource markets;
• competition in the sale of goods and/or services on the market;
• competition between buyers in the sales markets.

Since competition in marketing is usually considered in relation to the consumer, then different types of competition correspond to certain stages of consumer choice.

In accordance with the stages of the consumer's decision to purchase, the following types of competition can be distinguished:

• desires-competitors. This type of competition is due to the fact that there are many ways for the consumer to invest money;
• functional competition. This type of competition is due to the fact that the same need can be satisfied in different ways. This is the basic level of studying competition in marketing;
• interfirm competition. This is a competition of alternatives to the dominant and most effective ways to satisfy a need:
• intercommodity competition. This is the competition between the firm's products. It is essentially not a competition, but is a special case of an assortment range, the purpose of which is to create an imitation of consumer choice.

Types of competition depending on the fulfillment of the prerequisites for competitive market equilibrium

There are perfect and imperfect competition.

- competition based on the fulfillment of the prerequisites for competitive equilibrium, which include the following: the presence of many independent producers and consumers: the possibility of free trade in factors of production; independence of business entities; homogeneity, comparability of products; Availability of market information.

Imperfect competition - competition based on the violation of the prerequisites of competitive equilibrium. Imperfect competition has the following characteristics: division of the market between several large firms or complete domination: limited independence of enterprises; product differentiation and market segment control.

Types of competition depending on the ratio of supply and demand (goods, services)

The following types of competition can be distinguished (varieties of perfect and imperfect competition):

• clean;
• oligopolistic:
• monopoly.

Pure competition represents the limiting case of competition and refers to the type of perfect competition. The key characteristics of a market of pure competition are: a large number of buyers and sellers who do not have sufficient power to influence prices; undifferentiated, completely interchangeable goods that are sold at prices determined by the relationship between supply and demand (the goods are similar, there are many substitutes); complete lack of market power.

The formation of a market of pure competition is typical for industries with a low degree of monopolization and concentration of production. This group includes industries that produce products of mass demand (food products, light industry products and household appliances, etc.).

Factors affecting the level and degree of pure competition: quality requirements, the degree of processing of raw materials, the transport factor. At the same time, these factors are closely interconnected: the lower the requirements for the level and degree of processing of raw materials, the level of quality, the more the influence of the transport factor increases: the higher the requirements for the level and degree of processing of raw materials, the level of quality, the less the influence of the transport factor. The ratio of these factors has a significant impact on the level of competitiveness of market entities and the choice of strategies in domestic and international markets. For example, in the building materials industry: consumers of industrial wood (low degree of processing of raw materials and quality requirements) are oriented towards local producers, increasing their level of competitiveness, regardless of the quality parameters of products, since the factor of the transport component in the selling price is very important: consumers of construction and finishing luxury materials are oriented towards imported manufacturers, reducing the level of competitiveness of local producers, since high requirements for product quality make the factor of the transport component less important.

Oligopolistic competition It is an imperfect type of competition. The key characteristics of the market of oligopolistic competition are: a small number of competitors that create a strong relationship; greater market power: the strength of a reactive position, measured by the elasticity of the firm's responses to the actions of competitors; the similarity of goods and the limited number of their standard sizes. The formation of an oligopoly market (the entire volume of supplies is provided by only a few firms) is typical for the following industries: chemical industry (production of polyethylene, rubber, industrial oils, ethyl liquid, some types of resins); machine-building and metal-working industry (production of machinery and equipment, steel, rails, pipes, etc.).

This is competition, of an imperfect kind. The main characteristics of the market of monopolistic competition: the multiplicity of competitors and the balance of their forces; differentiation of goods (from the point of view of the buyer, goods have distinctive qualities that are perceived as such by the entire market). Differentiation can take many forms: the taste of a drink, a special technical characteristic, an original combination of characteristics, quality and range of services, brand strength; an increase in market power due to differentiated products, which protects the company and allows you to make profits above the average market. The formation of a monopoly market is typical for industries where competition is difficult due to their technological features (infrastructure industries: transport, communications, energy).

Perfect competition is not the natural state of the market. In some industries and areas of activity, competition is impossible (difficult) due to:

• technological features of industries whose fixed costs are so high that economies of scale (reducing unit costs as production volumes increase) are possible only when producers are extremely large both in absolute size and in market share (infrastructure industries: transport , communications, energy);
• exceptionally high sunk costs, i.e. the assets embodied in the main production are specific and cannot be reoriented to other types of products and types of markets;
• the presence of excess production capacity to meet the "peak" needs for products (services).

These features create the conditions for the existence of monopolies. Term "monopoly" can be used relatively:

• business entity, those. some economic structure that has some advantages in the production of goods, services or work;
• market conditions, in which either one or a very narrow circle of commodity producers predominates;
• type of economic relations, the essence of which is expressed in the possibility of one or several groups of commodity producers to impose their will on everyone else.

Types of monopolies:

1. natural (sustainable), which are possessed by economic entities and owners who have at their disposal rare and freely non-reproducible resources. Natural monopolies, unlike other market structure enterprises, occupy a special place in the system of economic relations, which determines their unique properties and the specific role they play in the economy. A natural monopoly in economic theory usually refers to an industry in which the total cost of production is lower if all output is produced by a single firm than if the same output were divided between two or more firms. A natural monopoly is also recognized as an industry in which there is only one firm left as a result of unlimited competition, or an industry in which competitive forces form a non-competitive structure.

2. artificial, which means the concentration of objects of economic relations in someone's hands.

3. innovative- a special case of competition, when in the market one manufacturer opposes a large number of buyers due to the unique product or the uniqueness of its properties. The innovator's monopoly has time limits determined by the rate of spread of technological innovations (copying) and the emergence of competitors.

Signs of monopolization:

• opposition to a large number of buyers - due to natural, artificial monopoly or the monopoly of the innovator;
• the presence of increased market power and high "barriers to entry" for new competitors;
• novelty and originality of goods, lack of substitutes;
• a high share of the largest enterprises in the total volume of production of the industry or country, the number of employed workers;
• the ability to dictate prices to the market within certain limits;
• the possibility of appropriating monopoly high profits;
• imposing the terms of contracts that determine the unequal position of competitors:
• division of markets on a territorial basis, volume of sales or purchases.

The presence of a monopoly can have both positive and negative effects on enterprises:

• positive— reduction of unit costs due to economies of scale in production; technological progress due to a high degree of concentration of resources, effective implementation of the interests of society in industries where it is inappropriate to stimulate competition, etc.;
• negative— violation of the fundamental rights of end consumers, as they are forced to purchase goods at inflated prices with artificially low supply: excessive concentration of production inhibits the development of entrepreneurship, as a result of which the mechanism of pure competition operates with less efficiency; there are structural disproportions in the development of the market.

Types of competition depending on the ratio of the number of business entities regarding the investment of capital in the field of production or marketing

There are intra-industry and inter-industry types of competition.

Intra-industry competition- this is competition between the subjects of the industry for more favorable conditions for the production and marketing of products, obtaining excess profits. Intra-industry competition is the starting point in the mechanism of competition. The main functions of intra-industry competition:

• the possibility of establishing the social, market value of the goods and the market equilibrium price;
• stimulation of scientific and technological progress;
• economic coercion to improve production efficiency;
• identification of weak, less organized producers;
• limiting the economic power of leaders.

Interindustry competition- this is competition between entrepreneurs of various industries for a more profitable investment of capital based on the redistribution of profits. The emergence of intersectoral competition is based on unequal conditions of production (different structure of capital and the rate of its turnover, fluctuations in market prices), leading to different rates of profit.

Main functions of intersectoral competition:

• the possibility of modernizing industries, as new enterprises are created on a progressive scientific and technical basis:
• strengthening of intensification, growth of production efficiency;
• optimization of sectoral proportions, restructuring of the economy.

In conditions of imperfect competition, changes occur in the manifestations of intersectoral competition: the influence of factors that slow down the overflow of capital (the level of development of transport, means of communication, economic information, credit relations) increases; pricing for the products of small enterprises occurs mainly according to the laws of perfect competition, and for the products of large enterprises - in the form of price control on their part, which pursue the goal of stabilizing the economy. The market is dominated by a fixed price, which can no longer make the previous movement around the value. The correspondence of prices to values ​​is established not by fluctuations of prices around value, but by fluctuations of value around the fixed price of products: the persistence of differences in labor productivity, barriers inherent in the modern structure of the economy, leads to the fact that profit is not distributed equally with invested capital, but remains there. where it was made.

Types of competition in accordance with the need underlying the product

There are horizontal and vertical types of competition.

Horizontal competition is competition between producers of the same product. It is a kind of intra-industry competition, i.e. competition for the best production of functional properties and product parameters (TV manufacturers compete with each other in terms of diagonal size, sound brightness, additional services: after-sales service, delivery terms, etc.). Those become leaders. who apply innovations in the field of technology, product, packaging, know-how, etc.

Vertical competition- this is competition between manufacturers of different goods that can satisfy the same need of the buyer. For example, with the help of a TV, you can satisfy the need for information, leisure, education, etc. The need for information, except for TV, can be satisfied with the help of telephone, newspapers, magazines, radio and other sources that belong to other branches of production of goods, which and is a kind of intersectoral competition.

Types of competition depending on the ratio of supply and demand for a particular product

There are the following types of competition, which are varieties of intra-industry competition: the competition of sellers of goods and the competition of buyers of goods.

The higher the degree of seller competition, the lower the degree of buyer competition and vice versa. The vectors of action of these two tendencies are opposite, and their impact on society is the same, so there is a certain balance between them. When the supply and demand curves interact, a period of relative equilibrium arises, which has three phases: short-term. medium and long. In a short-term equilibrium, price is determined by demand. As the time period lengthens, the price is already determined by the value, i.e. costs.

Only these three types of competitors matter. This model of competition is applicable to all industries and for all business entities.

Three types of competition

Direct competitors

This type of competition occurs whenever there are other businesses within the same market sector that offer the same products and services as your company. You directly compete with each other in terms of location, reach of the target audience and for your products. In the case of direct competition, your customer relationship management plays an important role, allowing you to take market share. If a customer receives excellent service from a company, they are unlikely to move to a competitor.

Indirect competitors

This type of competition occurs when someone from another company takes a customer away from you by offering products or services that are not in your range. For example, for cinemas, the Internet and cable television become an indirect competitor. A certain part of the target audience is given the opportunity to watch movies in good quality exclusively at home. Thus, this type of competition makes it necessary to build barriers to lure customers.

In the case of indirect competition, your marketing strategy should include a broader selling proposition, and you should run strong promotions so that the customer cannot ignore you.

Competitors are phantoms

This phenomenon occurs when, instead of buying your service or your product, the customer is going to buy something completely different. This type of competition includes offerings from companies that don't exist in the typical mindset of customers. For example, in the example above, instead of going to the cinema, the customer can easily change their plans when they go to the mall. He can get carried away shopping or, having met friends, spend time with them in a cafe for a friendly conversation. At this point, the client changed his plans and did not spend his money in your company.

The selection of such competitors is very difficult to conduct, because it is completely in the minds of customers. Marketers are aware of direct and indirect competitors, but if a product has too many phantom competitors and eventually your offer is ignored by a potential customer, then the product or service will have a very short life cycle. Against phantom competitors, more engaging promotional activities are needed.

The nature of competition in business

In a market economy country, there are a number of different market systems that depend on the industry and the company within that industry. It is also important for entrepreneurs and small business owners to understand what type of market system they operate in when making decisions about the price and production of products. The behavior of your company in the market is predetermined by 5 types of competition and their corresponding market relations.

Perfect Competition

This is a system characterized by the presence of a large number of different sellers and buyers. With such a large number of participants in the local market, it is almost impossible to drastically change the prevailing price in the market and get a strategic victory. If someone tries to set a dumping price, then the sellers will have an infinite number of alternative options to repel the attack and lead the initiator to negative economic results.

Monopoly

The exact opposite of perfect competition. In a pure monopoly, there is only one producer of a particular good or service, and there is no reasonable substitute at all. In such a system of market relations, the monopolist is able to charge any price. The one he wants because of the lack of competition. But its total income will be limited by the ability or willingness of consumers to pay the price of the monopolist.

Oligopoly

Similar in many ways to a monopoly. The main difference is that instead of one producer of a good or service, there are several companies that make up the dominant majority of production in the market. While oligopolies do not have as high price power as a monopoly, it is likely that, without government regulation, oligopolists will collude with each other to set prices in the same way as a monopolist.

Monopolistic (imperfect) competition

P is a type of market relations that combines elements of monopoly and perfect competition. The difference is that each participant is sufficiently differentiated from the others. Therefore, some of them may charge higher prices than under perfect competition. Accordingly, this type of relationship allows you to extract additional profit due to visible differences.

Monopsony

Market systems can be differentiated by more than just the number of suppliers in the market. They can also be differentiated depending on the number of buyers. Whereas in a perfectly competitive market there is theoretically an infinite number of buyers and sellers, in a monopsony there is only one buyer for a particular good or service. This gives considerable power to the buyer in lowering the price of the producers' goods and services. An example of such relations is the modern form of public procurement, in which a state enterprise, forming unique requirements for a government contract, becomes a monopsony in a very narrow local market.

Brief structure of market relations in the economy

Fundamental and structural differences in the nature of competitors

Variety of goods and services

• In perfect (pure) competition, products are standardized because they are either identical to each other or homogeneous. The buyer does not see any differences in the products offered on the market, as they are absolute substitutes for each other. For example, food at different retail outlets, automotive fuel at different gas stations.
• Monopoly, by definition, means that there is only one producer of a product in the market. The buyer has no choice of any other option. An important factor is state regulation and restrictions on natural monopolies in order to maintain a balance of interests of the state, producers and consumers.
• Oligopoly implies the production of homogeneous products, as in pure competition, and differentiated products (as in monopolistic competition). The main problem for entrepreneurs is the barrier to entry to the market.
• In monopolistic competition, products are differentiated in terms of product brand, shape, color, style, trademark, quality, and durability. Buyers can easily distinguish a product offered on the market from those available on the market by more than one criterion. However, under monopolistic competition, the products on the market are close substitutes for each other. For example, cars of the same class, but different manufacturers.
• With monopsony, conditions are created under which product differentiation is influenced by the production needs of the buyer. At the same time, state-approved standards and regulatory procedures become important factors.

Market Barriers

• In pure competition, the number of producers is large, so that any single change in the entry or exit of any of the participants in the market does not significantly affect the total volume of goods or services offered. Market barriers are minimal and are determined by the availability of funds for the entrepreneur. In this situation, we can talk about the infinite elasticity of demand. The level of profit within the local market will be distributed evenly.
• The main reason for the existence of monopolies is the high barriers to entry into the market. These barriers include exclusive ownership of resources, copyrights, high initial investment, and other restrictions on the part of the government in order to maintain proper welfare in the state.
• Oligopolies seek to prevent new competitors from entering the market, as this affects sales and profits. New companies cannot easily enter the market due to various legal, social and technological barriers. In this case, existing enterprises have full control over the sales market.
• It is understood that under monopolistic competition there are no restrictions placed on organizations to enter and exit the market. A large number of small sellers can be on the market at the same time, selling differentiated, but not close to substitution, products.
• Monopsony implies a large number of suppliers of goods and services and low barriers to entry. Thus, conditions are formed for reducing the cost of purchased products and increasing their own profits.

Business mobility

• Under pure competition, there is perfect mobility of production. This helps companies in adjusting their own supplies according to demand. It also means that resources can move freely from one industry to another.
• For monopolies, there is no mobility as such. Such structures have the exclusive right to certain resources, which by their nature are limited. These may be raw materials, or monopolies may arise due to specific knowledge of production techniques (patent law).
• For oligopolies, mobility is limited or absent. In monopoly and perfect competition, businesses do not take into account the decisions and reactions of other companies. Oligopolies are influenced by each other's decisions. These decisions include pricing issues and decisions on the volume and production of own products, taking into account the situation in the market.
• Monopsony does not imply mobility due to its own characteristics. Technological advances and economies of scale from innovation are important factors in this situation.

Efficiency and business size

• It is assumed that under perfect competition, buyers and sellers have perfect knowledge of the prices of products prevailing in the market. In such a case, when sellers and buyers are fully aware of the current market price of a product, neither of them will sell or buy at a higher rate. As a result, the market price will dominate the market. The efficiency and size of the business is primarily affected by the demand and organizational and economic indicators of the company itself.
• The effectiveness of the monopoly is achieved through many years of experience, innovative potential, financial strength, but is reduced due to managerial competence and the availability of financial markets with a lower cost of borrowed capital.
• Oligopolies are not uniform in size. Some businesses become very large in size, while some remain very small. Market capacity determines the size, therefore, business efficiency is determined by the monopoly model. Oligopolies tend to avoid rash changes in the price of their products for fear of losing market share.
• In monopolistic competition, each seller's product is unique, which is a sign of a monopoly market. Therefore, it can be said that monopolistic competition is the integration of perfect competition and monopoly. Therefore, the same factors affect the efficiency and size of a business as in pure competition as in a monopoly.
• In a monopsony, the efficiency and size of a business do not depend on the market for goods and services.

Conclusion

The somewhat abstract issues described above tend to define the major, but not all, details of a particular market environment where buyers and sellers actually meet and transact. Competition is useful because it shows the real demand of buyers, and encourages sellers to provide a sufficient level of quality of service and a level of competitive prices. In other words, competition can combine the interests of the seller with the interests of the buyer. In the absence of perfect competition, three main approaches can be taken to address the problems associated with the control of market power.

Operating in a market where the level of competition in various industries largely depends on the legislation of the country, the company is faced with a large number of competitors, one way or another affecting its activities and profits. Therefore, in the process of strategic and tactical planning, it is extremely important to conduct a comprehensive analysis of competition, which implies a study of the work of competing companies and the competitiveness of the goods sold.

Competition, analysis, strategy and practice

In fact, competition, analysis, strategy and market research practices accompany the marketing activities of every firm. When compiling a marketing program, specialists determine whether the industries under study operate in conditions of perfect or imperfect competition, whether they have signs of an absolute monopoly. Most often, competition in an industry is imperfect in one of the following types:

• pure monopoly;
• monopolistic competition;
• oligopoly.

Competition in business - meaning and consequences

In general, effective competition in modern business implies the dynamic sale of exactly the product that buyers need at a given time, and for which they are willing to pay. Active competition in business and its consequences are quite positive for consumers - the range and quality of services and goods is growing, while prices are falling. For the firms themselves, intense competition in small businesses is an incentive to enter new markets and introduce innovations. Thus, manufacturing industries in conditions of monopoly, imperfect or perfect competition are forced to monitor the competitive environment as the most striking distinguishing feature of a business.

Business competition

The preparation of each business plan implies the obligatory presence of a section on competitors. The competition in the business plan is analyzed

• by grouping competitors according to the competitive positions they use (for a better understanding of their motivation);
• through the presentation of the market in the form of a rating of firms, starting with those using the most aggressive methods of fighting “for the buyer's money”.

In the analysis process in each business plan, competition is considered in terms of the uniqueness, strengths and weaknesses of the product / service. It is also taken into account that competition in large and small businesses is conducted by completely different methods.

Levels of competition and their evaluation

Marketing analysis of competition on the example of any of the firms begins with a list of competitors. It is important for analysts to highlight the main and secondary companies, their advantages and disadvantages. Also, competition analysis should be performed on the example of a market niche occupied by competitors, exploring the methods of selling competitive products, its main consumers and customers. Grouping for the analysis of data of organizations helps to fulfill the levels of competition when all firms are included in the list of competitors:

• offering similar products;
• offering similar products in the same price range;
• solving the same consumer problem with their product;
• selling similar products.

Legal and advertising analysis of competition in the market

From a legal point of view, the analysis of competition in the market and the competitiveness of any product is carried out by assessing whether the product meets the GOSTs, TUs and other standards of the country to which it is supplied. Advertising analysis of information competition in the market includes the assessment of the image of the product, the "hype" of the brand and the reputation of the company. They also analyze ways of informing consumers - the text on the packaging, information from the data sheet, etc.

Economic and commercial level of competition in the market

For the studied product, the quality level, its cost and operating costs are determined. Also, performing an analysis of technological competition, they find out the amount of production costs, required investments, technical features of production and its organization. They analyze the level of competition in the market depending on the level of supply-demand, the geographical nuances of the market, the social significance of the product, the degree of reliability of delivery and the settlement system. Examples of levels of competition in developed dealer and service networks are also taken into account.

How to assess the level of competition?

To assess the level of competition, you can use the parameters from Table 1.

Table 1

Analysis of the level of market competition

Levels of commercial competition	Degree of market development	Quality of life of people	What influences consumer preferences?	Used methods of competition
			excellent quality of goods and service, a significant range	complex, multifactorial models are applied
above moderate		above average
moderate	formed		excellent quality of goods, a significant range, cost	price method, dumping method, unfair competition
below moderate		below the average	optimal proportion "price-quality"
	not developed		shortage of goods, as absolutely everything is bought.	price method, dumping method, unfair competition. The market is heavily criminalized.

Analysis of the level of competition

When performing a qualitative analysis of the level of competition between firms, as a rule, they consider the identity of their sizes and the technologies and resources used. In addition, the level of market competition depends on the number of firms competing with each other and the barriers to exit of firms from this market.

Examples of levels of competition

Considering examples of the levels of competition of various products, marketers evaluate whether a manufacturing company has the ability to make its products more attractive than competitors. After all, competition in the manufacturing industry is about striving for sustainable growth and consumer acceptance.

Porter's Competition Analysis Model

Evaluating the industry position of the company in a strategic perspective allows you to perform the Porter competition analysis model, which includes five levels:

• assessing the threats of the emergence of new participating firms;
• evaluation of market power of consumers;
• assessment of the market power of supplier firms;
• analysis of the level of intra-industry competition;
• assessment of the danger of the appearance of substitute goods.

Porter's current 5-factor model of strategic competition analysis ensures long-term profitability of manufactured products. Thanks to it, the competition of the company in the selected industry for a long period of time is maintained with high profitability and competitiveness.

Porter's Competition Analysis: Factors Influencing Entry Barriers

The analysis of competition according to Porter begins with the definition of entry barriers to the industry. It has been proven that by saving on scale, that is, by increasing production volumes, the firm minimizes production costs per unit of output. This prevents newcomers from achieving high profitability when entering the market. Also, the analysis of industry competition according to Michael Porter provides an assessment of how difficult it is for new players to occupy a niche in which there is already a fairly wide range.

Equally important factors influencing the level of competition in the industry are also the amount of start-up capital and fixed costs required to enter production and occupy the corresponding market niche. In addition, the high level of distribution competition in any industry does not allow new players to easily and quickly reach the target audience and makes the entire industry unattractive.

Analysis of competition in the industry: political and additional threats

When analyzing competition in the industry, it is important not to forget that the growth of government restrictions, the introduction of additional quality standards and product regulations reduces the attractiveness of the entire industry for new competitors. Also, a detailed analysis of the level of competition in the industry under study includes the solution of a number of additional tasks:

• Are existing competitors ready to lower prices to keep their market niche?
• Do competitors have additional backup sources of funding and means of production to actively compete?
• To what extent are the strategies and practices chosen by competitors consistent with their analysis of competition in the industry?
• Are there opportunities for competitors to intensify their advertising confrontation or quickly establish other distribution channels?
• How likely is it for the industry to slow down or stop growing?

The industry of perfect competition

In the short term, it is convenient to analyze the industry and competition in terms of the perfect competition model. This assumes that many producers sell a large number of standard products to many consumers. Specialists who study the industry of perfect competition take into account that any decision made by the firm to increase / decrease the price level will not affect the market prices as a whole. In addition, the analysis of the industry and its perfect competition implies the absence of non-price competition. In microeconomics, a perfectly competitive industry is the standard for maximizing profits and evaluating the performance of the economy as a whole.