Fair competition is one of the key engines of the economy that can work both globally and locally. It is thanks to this phenomenon that the country's economic growth is taking place, as well as a constant improvement in the quality of products and services. In addition, competition helps to develop the latest forms of business and produce fundamentally new products with simplified functions. In our article, we consider examples of fair competition and its types.
Terminology and Benefits
From the school course of social studies, we know that competition is the type of interaction between participants in the economy, which is rivalry and a struggle for the attention of buyers. Competition is vital for the normal existence and development of any entrepreneurial activity. Without such a phenomenon, prices for goods will steadily rise, and their quality will fall. In addition, there can be no talk of any increase in technological progress.
Also, the following phenomena can be attributed to the positive aspects of competition:
- development of initiative in business entities, stimulation of improving product quality, development of new production technologies;
- distribution of services, jobs, goods in those places and regions where the local population most needs them;
- production of the most popular and modern products, which are in great demand in the modern world;
- protecting novice entrepreneurs from possible criminalization in the market, using unfair methods to fight for customers.
Based on the foregoing, we can conclude that competition is the main engine of the economy and technological progress. It is competition that allows us to improve ready-made technologies and look for ever new solutions in order to reduce production costs, and hence the final cost of the goods.
Does competition have any negative aspects?
So, fair competition - these are methods of struggle for the buyer, which do not contradict the law and moral and ethical principles formed by modern society. However, one cannot but note the fact that a similar phenomenon has a number of negative sides, the most relevant of which are described in the list below:
- Competition violates a stable situation that has been held on the market for several years. Even very large and well-known companies can suffer if a brand or service appears that appeals to customers more than what the corporation has to offer.
- Most participants in entrepreneurial relations seek to monopolize precisely their segment. Such a trend leads to limited opportunities for start-up entrepreneurs to break into the market, even if their products are really very good.
- The desire to earn more money pushes most entrepreneurs not to develop the economy, but to slow it down. For example, companies can significantly reduce the cost of services offered to make money on the number of customers.
Thus, fair and unfair competition has both positive and negative sides. However, one can speak with particular confidence about one thing - without such a phenomenon, the economy simply will not develop, and scientific and technological progress will stop. Even people will stop improving their skills, as is the case in competition.
Principles of Fair Competition
To better understand what this phenomenon is and how it differs from unfair competition, we recommend that you familiarize yourself with its basic principles. Here are just the main methods that entrepreneurs and companies can resort to in order to attract the attention of potential buyers:
- the use of fundamentally new production elements that provide the best quality product;
- development of marketing strategies and moves aimed at attracting attention from customers;
- providing consumers with a guarantee of quality for the goods, as well as various additional services;
- manipulation of product prices in order to popularize a product or service in a given region.
It is on these principles that we can distinguish fair competition, examples of which will be given in the next section. All of them have no contradictions with the law and the rule of law. The key principle is to maintain the quality of goods at the highest level by improving production technologies, using high-quality raw materials and so on.
Examples of fair fight for the buyer
Now you are familiar with the concept of fair competition, as well as its basic principles. It is time to give specific examples that will consolidate the knowledge gained and distinguish between a bona fide struggle for a buyer from an unfair one. Here are just a few of the methods that are actively used by large companies and individual entrepreneurs:
- improving the quality of the services and goods offered;
- additional services (free delivery, connection, assembly);
- warranty service for purchased products;
- conducting various advertising campaigns and events;
- service improvement and gifts for regular customers;
- conducting sales, promotions and various kinds of discounts.
All these are just the basic methods that are used most often. To attract the attention of potential buyers, some manufacturers use a variety of methods, some of which are contrary to the law. Such actions are called unfair competition and are contrary to generally accepted standards of doing business.
Examples of unfair competition
Fair and unfair price competition plays an important role in the development of the state economy, but the latter is strictly punishable. But in order for our readers to have a clear idea of how the unfair involvement of customers in their product differs from fair, we recommend that you familiarize yourself with examples of prohibited competition:
- industrial espionage - obtaining trade secrets from competing companies dishonestly;
- fake products under well-known brands and create names that are consonant with well-known brands (Abibas, Lokoste, Naike and the like);
- blackmail of competitors and their employees in all possible ways - threats to relatives and friends, violent acts;
- knowingly disseminating false and negative information about competing companies, as well as the quality of their products;
- consumer fraud by providing false data about their own products in advertising or in life.
In most civilized countries, such actions are prohibited and punishable by criminal or administrative penalties. As a rule, the legislative wording is as follows: "Illegal actions carried out with the aim of gaining an advantage in the business or causing damage to competing companies." Penalties for such misconduct may look like fines or imprisonment.
Competition Methods and Strategies
Any novice entrepreneur should have a strategy that will allow him to gain a place in the market among competing companies. You can develop a similar strategy using various methods, the main of which are listed in the list below:
- Fair price competition. The main tool to attract attention from potential buyers. Try to attract customers with various promotions, seasonal sales, bonus offers and so on. Develop a strategy in such a way as to profit from the number of customers, and not from the difference between cost and price tag.
- Conducting effective advertising. In order for the client to not only learn about your product, but also to become interested in it, it is necessary to elaborate an advertising policy based on the study of the values of the target audience. You can advertise your product on various platforms: the Internet, television, radio and so on.
- Improving the quality of a product or service through the use of the latest technical developments. For example, an increasing number of hotels began to use washing vacuum cleaners for cleaning, which allow you to simultaneously get rid of dust and carry out wet room cleaning. Well, clean and fresh rooms are the key to the success of such a business.
Also, if you want to market a new product or service that is not in great demand so far, you can offer your customers various options. For example, to sell a new phone model, arrange a promotion in your city: "Take the smartphone back if you don’t like its functions." Of course, such a service should take into account a number of nuances, however, an advertising wording of this type will force many customers to test your products.
Formation of strategies from common methods
For a start-up enterprise to successfully develop in the market, it is necessary to formulate a strategy based on the methods of fair competition that were described in the previous section. Use them if you are a company owner or sole proprietor.
If we talk about the types of fair competition, then the type of competition can be divided into two main:
- perfect - following the principle of information secrecy, as well as the absence of obstacles for the appearance of new participants on the market;
- imperfect - it includes oligopoly and monopoly, and the characteristic features are the high differentiation of products.
Every aspiring entrepreneur should understand that the formation of a control strategy is inextricably linked with the types of competition. For example, in an imperfect market it will be quite difficult to get ahead through advertising, because competing companies will all the time attract customers with special offers. However, the three main types of strategies can be implemented in any case.
- Optimization. Try to arrange the production process in such a way as to reduce the cost of goods, as well as achieve high quality.
- Differentiation. You can give the product special characteristics and properties that will be useful for the target audience.
- Concentration. Try to capture only those areas and regions in which the sale of goods or services will be most profitable.
And most importantly - do not forget that you are criminally or administratively liable for using unfair competition methods.
Is production monopoly so bad?
In our article, we have repeatedly mentioned this concept in a negative context, as a result of which readers might have the opinion that monopoly only harms the development of the state economy, but this is not entirely true, especially if it is not about the whole, but only about most of the market . The following features are characteristic of such a phenomenon:
- the monopolist has the right to regulate prices for its products, as well as to control the quantity of goods on the market;
- the consumer does not have the right to choose, so he is forced to purchase the service and goods from a particular company or do without it at all;
- the entire industry is represented by one manufacturer, which prevents other companies from squeezing into the market.
However, one should not forget that in the conditions of a monopoly competition can still be, but not in the form in which we are accustomed to seeing it. For example, many companies can produce a similar service or product, which will be an alternative to the consumer.
The negative sides of a monopoly for the economy
Of course, any monopoly negatively affects the development of the economy of any state, since competition moves scientific and technological progress forward. Experts identify the following disadvantages characteristic of a monopoly:
- All the leading positions are held by one structure, which has the right to dictate its conditions to the consumer, based on their own preferences.
- The market completely loses its free status, and all manifestations of independence on the part of other companies become almost impossible.
- The lack of competition negatively affects the development of innovative scientific developments that could significantly improve the production process.
- Very often, monopolists "play" with the quality of products sold, changing them for the sake of their own interests only. For example, a manufacturer can use cheap and low-quality raw materials.
- The monopoly is accompanied by a dictatorship of prices, which very often exceed the real cost of goods several times. However, the population has no choice and it acquires goods at high prices.
Summing up the above, it can be confidently stated that the monopoly negatively affects the development of the state economy, however, if the responsible person acts as a monopolist, then very often this phenomenon brings benefits to the population.
Conclusion
We hope that now you better understand what is related to fair competition and how to conduct business in order to keep up with competing companies. Remember that dishonest methods of struggle can lead to serious consequences. Therefore, create your own innovative programs and strategies and capture the market honestly.