Page 152 - Encyclopedia of Business and Finance

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Competition

COMMUNISM ASPECTS OF COMPETITION
SEE Economic Systems To be successful in today’s very competitive business
world, it is important for businesses to be aware of what
their competitors are doing and to find a way to compete
by matching or improving on the competitors’ product or
COMPARISON service. For example, if Pepsi-Cola offers a new caffeine-
free soda, Coca-Cola may offer a new caffeine-free soda
SHOPPING with only one calorie. By offering an improvement on the
SEE Shopping competitor’s product, Coca-Cola is trying to convince
soft-drink consumers to buy the new Coke product
because it is an improvement on Pepsi’s product.
While being aware of the competition and making a
COMPETITION countermove is important, it is also very important to pay
Competition is the battle between businesses to win con- attention to changing consumer wants, needs, and values
sumer acceptance and loyalty. The free-enterprise system and to make the needed changes before the competition
ensures that businesses make decisions about what to pro- does. Doing research and development and being the first
duce, how to produce it, and what price to charge for the to provide a new product or service can give a company a
product or service. Competition is a basic premise of the competitive advantage in the marketplace. Once con-
free-enterprise system because it is believed that having sumers purchase a product or service and are satisfied with
more than one business competing for the same con- it, they will typically purchase the same product again.
sumers will cause the products and/or services to be pro- Having a competitive advantage means that a company
vided at a better quality and a lower cost than if there were does something better than the competition. Having a
no competitors. In other words, competition should pro- competitive advantage might mean inventing a new prod-
vide the consumers with the best value for their hard- uct; providing the best quality, the lowest prices, or the
earned dollar. best customer service; or having cutting-edge technology.

Neighboring gas stations compete for customers in Jersey City, New Jersey, May 20, 2004. CHRIS HONDROS/GETTY IMAFGES

ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 129