Competitive and changing markets
In order to attract and satisfy customers, businesses need to be competitive and make products that are superior to their rivals.
This is not easy because businesses operate in a dynamic and challenging market place. Business rivals are likely to be at work creating new products or improving operations to reduce costs and drive down prices. Businesses may need to adapt their products because ever-changing fashion trends mean that customer requirements evolve over time. Success today is no guarantee of future profits.
A competitive market will have many businesses trying to win the same customers. A monopoly is either the only supplier in a market, or a large business with more than 25% of the market.
Competition can make markets work better by improving these factors:
- Price: if there is only one retailer, products may not be competitively priced. If there are several retailers, each retailer will lower their prices in an attempt to win customers. It is illegal for retailers to agree between themselves to fix a price – they must compete for business.
- Product range: in order to attract customers away from rivals, businesses launch new varieties of products they believe to be superior to their competitors.
- Customer service: retailers that provide a helpful and friendly service will win customer loyalty.