1. The Concept of Competition
Ready, Set, Compete!
The Concept of Competition
Project #2 :: Snapshot
Principles of Business

2. Competition Defined
The rivalry between two or more businesses to attract scarce, or limited, customer dollars
It is several businesses trying to attract the same market, or group, of customers
One coffee shop in town has no competition. Other coffee shops enter the market and there is competition because customers have a choice

3. Direct or Indirect Competition
Direct competition – occurs between or among businesses that offer similar types of goods or services
Burger King, McDonald’s, Wendy’s; Shell, Texaco, BP
They offer goods or services that will satisfy the same customer needs or wants

4. Direct or Indirect Competition
Indirect competition – occurs between or among businesses that offer dissimilar goods or services
Customers have only so much money to spend
Movie theater – restaurant – bowling
Businesses can be in competition with almost all other businesses

5. Types of Competition
Price Competition – the use of prices to attract scarce customer dollars
Examples of price competition
Discount coupons: used by quick-serve restaurants (buy one pizza get one free)
Special Sales: many businesses run sales throughout the year to attract customers looking for good prices (back to school, after Christmas, spring clearance, President’s Day, etc.)

6. Price Competition
Price Matching: trend among discount businesses; assures customers that they are getting the lowest possible prices (‘we’ll never be undersold’; ‘we’ll beat any competitor’s price’)
Rebates: offer to return part of the purchase price a customer pays for a good or service; this type of price competition has become popular for all types of products, ranging from automobiles to computers

7. Non-Price Competition
Non-price Competition – the use of factors other than price to attract scarce customer dollars
Businesses use a variety of factors other than price to compete:
High quality (Customer needing laser eye surgery is more concerned that the doctor is well qualified)
New features
Additional customer services
Updated facilities
Large assortments
Well-trained staff

8. Nonprice Competition Service and convenience often make the difference
Banks have fairly uniform prices; customers may choose one bank over another because of special services from a teller or because a web site allows online account access at any time
Most businesses use a combination of price and nonprice competition to attract customers

9. Market Structures Four main types of market structures:
Pure competition
Monopolistic competition
Oligopoly
Monopoly
A lot of businesses sell identical products to many buyers

10. Pure Competition There is a plentiful supply of the product
All business compete equally and charge about the same price
Small farms in one area growing corn and tomatoes and selling them directly to customers for comparable prices
Pure competition rarely exists on a large scale

11. Monopolistic Competition
Structure most commonly found in a private enterprise system
Businesses often change the prices of their products to be competitive
A lot of businesses sell similar products that have only a few difference
Shampoo, athletic shoes, laundry detergent

12. Oligopoly Only a few businesses sell all of the products
These businesses control the market as well as the price of the products
It is difficult for new businesses to enter the market and compete
Automobile industry in the U.S. is an example

13. Monopoly
The market is controlled by one business, and there are no substitute goods or services readily available
Competition does not exist
Usually is not allowed to exist in a private enterprise system because it:
Prevents competition
May raise prices
Limits the availability of goods and services

14. Legislation
Put video here (Jess) MBA site