Competition has many dimensions. There are legal considerations, political aspects, ethical perspectives, psychological and social dimensions. Essentially competition can be defined only in terms of the culture and nature of the people that surround it. Competition has its fullest meaning in the marketing environment of a consumeristic economy rather than in the cartelized, planned, or cooperative environments existing in many countries.
From a marketing perspective what does competition connote? It emphasizes changing profit opportunities that are available for perceptive firms because of the existence of a dynamic marketing environment. It stresses the necessity of striving for the creation of differential advantage in the market place. It underscores the primacy of planning and programming innovation on a continuing basis to adjust company offerings to a changing competitive scene.
Competition, in marketing terms, refers to the effective management of innovation to meet changing marketing opportunities. Innovation is an instrument by means of which companies compete vigorously in the market place. Programmed innovation is the corporate method of achieving continuous market adjustment; competition is its stimulus. Keenly competitive situations manifest themselves in new products, new processes, new services, new ideas, and new techniques as well as in price adjustments. We should be aware, however, not only of the degree of competition suggested by quantitative measures of newness, and number of competitors, but also the kind of competition suggested by qualitative considerations.
In thinking about competition we tend to be retrospectively oriented. We often have past or previous models of competition and competitive situations in mind. We often conceptualize competition in terms of an emerging industrial society rather than a maturing industrial society, in terms of price competition rather than convenience and service competition, in terms of an economy of scarcity with relatively low consumer purchasing power rather than an abundant economy with widespread discretionary purchasing power, in terms of manufacturers and sellers completely controlling and dominating the market place rather than an economy governed to a considerable extent by consumer sovereignty, and in terms of intra-industry competition rather than interindustry competition. Sometimes we even conceive of competition in terms of an agrarian economy where only imperfectly competitive situations exist.
In particular the emphasis on price, that stems from past economic situations, is today often misplaced. This does not mean that price competition is no longer important. It does mean, however, that ours is often a competitive situation in which price obscurity and not price clarity is the rule. The general situation where consumers face competitive price offerings in the market place, and must exercise rational economic judgment by becoming human calculators is not the norm. In its stead we find the use of fictitious list prices, trade-ins, coupons, allowances, special discount prices, service variations, packaging differences and a multitude of brands. They tend to obliterate price information, to reduce the emphasis on rational price behavior, and to alter our concepts of competition.
Competitors must be viewed as both instigators and receptors of competition. As instigators, they must perceive of their environments accurately, assemble marketing intelligence, and draw inferences about competitive reality. As receptors, they must be prepared to launch counter strategies.
The normal competitive cycle becomes one of programmed innovation and counter-innovation. The stimulus for innovation at any time, however, may be curtailed because of two types of resistance: external and internal. Internal resistance may stem from inertia, lack of capital, fear of counter-competitive consequences, or a host of real or imagined obstacles on the part of a company. External resistance, which raises the most substantial barriers, includes consumers' resistance in the market place.
To an extent, a company may have some effect in altering consumer resistance by communicating with markets, developing products so they better meet consumers wants and needs, and by helping consumers overcome resistance to change. Limits exist, however, beyond which corporate action will have relatively little impact. Quite often, for example, when a product is totally new, consumer resistance will be great and extensive marketing effort is required to overcome resistance to change.
Other external factors which place a limit on competition and innovation include various types of governmental regulation, accepted industry practices and agreements, and the social and cultural environment. As factors limit or restrict innovative opportunity, they affect competition directly.
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