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Competition always exists in a healthy business marketplace. It is the rivalry between firms who are trying to secure the attention and sales of their goods and services from the same customers who are being pursued by another firm. Competitors, often many more than two parties, seek to increase their revenue by growing sales and market share.

Business leaders sometimes tire of dealing with competitors. Wouldn’t business be easier without them? As American newspaper columnist George Matthew Adams stated, “There is a tendency among some businesses to criticize and belittle their competitors. This is a bad procedure. Praise them. Learn from them. There are times that you can cooperate with them to their advantage and to yours. Speak well of them and they will speak well of you. You can’t destroy good ideas. Take advantage of them.”

Types of Competition

There are three types of competitors:

  1. Direct competitors, where the businesses are in the same line of business offering very similar types of products or services and selling to the same audience. For example, Dominos versus Pizza Hut.
  2. Indirect competitors, where the business may be selling different products or services but selling to the same customers. For example, Harley Davidson Motorcycles, versus Chevrolet.
  3. Replacement competitors, where the customer target faces the choice between different product types. For example, books versus audio CDs.

Is Competition Good for Business?

Yes. As the ancient Roman poet Ovid said, “A horse never runs so fast as when he has other horses to catch up and outpace.” Competition is good for every business because it:

  1. Helps to identify and study the strengths and weaknesses of your business. It helps to sharpen your focus and concentrate on being better and better in ways different from all competitors.
  2. Helps focus on the key customers of the business, and by focusing on them, find ways to serve them better.
  3. Helps identify potential threats to your business. Looking at competitors will show what works and what doesn’t and what challenges you may face.
  4. Fosters creative thinking and innovation, thus finding ways to improve products and services, and add customer value.
  5. Pushes businesses to not become complacent. Essentially, if a business is not growing and not improving it is stagnant and stagnant businesses lose to competitors. Strong competitors push you to improve your strategies and to look for fresh insights.
  6. Provides ideas that your business can adapt to your own products or services. It also helps every business work smarter, knowing that as the market around you changes, so must your business.
  7. Helps improve all employees because they have such a great learning environment facing them. They can become more motivated knowing that their efforts to stand out from the competition will lead to business success.

As competition increases, general niche awareness and understanding increases, and consumption increases. It is a case that can be described as “the tide lifts all boats.”

For customers, there are many benefits of increased competition including:

  • The availability of more products and services and higher quality products and services.
  • More choices.
  • Better prices.

Get Expert Accounting and Financial Assistance

Contact Doerhoff & Associates, CPA, based in Jefferson City, MO for professional accounting and financial assistance that you can count on. Doerhoff & Associates has one goal in mind, to provide comprehensive business accounting services designed specifically for your success.