Topic:
“The presence of a competitor is always beneficial to a company. Competition forces a company to change itself in
ways that improve its practices.”
Response:
Competition in the market motivates companies to innovate and outperform. One might be drawn into the idea that a monopoly in the market is the most favorable scenrio for a company. However history is strewn with examples of companies which enjoyed unpredented monopoly in their respective markets. But most of these companies gradually declined in terms of innovation, quality and efficieny leading to a general degradation of the market itself. Competion, on the other hand, keeps a company on its toes and forces it to innovate and improve its operational practices.
When companies enjoy a strong monopoly in the market, there is a tendency for them to become complacent. This could lead to stagnation in terms of innovation and decline in the quality of products. On the other hand a vibrant market with intense competion, would force the companies to invest in research and development. Companies will strive to improve quality, design better products and outperform the competition. Unless they do so, they stand to lose their market share to their competitors. For example, Google and Intel have the biggest market shares in their respective markets of internet search and computer chips. Inspite of that, they are forced to invest in new projects and contnuously innovate to fend off competitors like Ask.com and AMD. Thus competition helps prevent complacency and stagnation in a company.
Competition would also force a company to acquire and retain the best human talent. This would in turn result in brighter ideas and better products which would help the company beat its competition. Furthermore due to price wars with competitors, companies will be forced to improve the efficiency of their operations to increase profitability and improve productivity. Big companies would strive to be lean and efficient in order to stay competitive in the market. On the other hand small companies would try to attract the best talent. For instance, McDonalds which is the biggest fast food chain in the United States enjoyed a very good monopoly. However when, competitors like Burger King and Wendys entered the market, McDonalds had to make quite a few changes such has improving the quality of their food and hygeine at their stores. Thus competition could lead to a wide range of improvements in operations and practices at companies.
Competition would also force the companies to constantly innovate and improve their products. For instance, Dell Computers came into the market in late 1990s and quickly grabbed a lot of market share in the home and business computer markets. However as it became more and more successful, its design cycles started to be infrequent. Their designs were mundane and not well received. As a result, competitors such as HP and Apple gained market share with their stylish and innovative products. This has forced Dell to innovate and introduce more stylish product lines. Once again this shows that competition helps keep a company on its toes.
In final analysis, competition is extremely beneficial to a company. It prevents big companies from becoming complacent and forces them to constantly innovate. On the other hand it motivates small companies to come up with the next big ideas. It also forces companies to operate more efficiently. Thus competition is good for companies, consumers and the market as a whole.
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