How Competition Affects Business

In anything, there is always competition, even in business. In fact, it is one of the factors that has lots of effects on how a certain business flows or functions.

In this article, you will discover how it can impact your business both in a positive and negative way.

One of the processes that make the business keep going is pricing. Determining how to price your goods and services is the key for you to earn big. But this is also the aspect where the competition arises. Of course, if you want to gain lots of income, you will price your goods a little bit higher. But if you have a nearby competitor, your pricing strategy will be changed just to capture the attention of the potential customers. This is now where the competition arises thus, affecting your business.

Discover How Competition Affects Business

One of the results of the competition is fluctuation. In this event, the supply and demand relationship is compared to a seesaw because as the one increases, the other one lowers in value. This is also the same with the pricing strategy development. So, if your business has several competitors offering the same goods or services, the lower the price will be. Now, if you don’t have competitors in the area, the price of your goods will increase.

This is the common thing that happens if there is competition. That is why you are advised to check first if you have competitors in the area if you are planning to build your business. If you will sell your goods for lower prices, this is a negative one because you will only earn a small income.

Another thing that results in the competition is the added value. In the midst of heavy competition, lower prices are being developed by incorporating added value to services or products. This is also used as a pricing strategy. In accordance with, this approach is also used when external factors happen such as a recession.

Since products and services have different qualities, their prices also range from one another. This is already evident in the grade of fuel that we are using right now. With this, the companies can position the goods and services at various price ranges based on what the competitors’ price ranges are.

To sum it up, the following are the positive effects that competition has on a certain business: better money value, better economy due to efficiency, product variations, better remuneration of employees, more production, and better customer satisfaction as well.

Now, if you think that the competition is not favoring your business, there are three solutions to it. First is product distinction which makes the product you offer different from your competitor. The second is through industry or market access which is done through selecting a market that is not yet saturated. Third, is the production of cheaper products temporarily.


  • Wilfred Asizaibi said on July 22, 2017
    I need answers on how the competitive environment affects business.
  • Priscilla Konney said on March 21, 2022
    Please, I need answers to how the business affects competitors.
  • Bob said on September 21, 2022
    Please call help there is something stuck in my butt. I don't wanna tell my parents but id rather tell strangers on the Internet. :)
  • Mary said on November 9, 2022
    How do businesses build their competitive advantages in a dynamic market?


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