MARKET

COMPETITORS

MS S. LANGA
Define competition

MS S. LANGA
 Competition
Competitors are other businesses that sell the same or similar product, or offer a

similar service. Most countries have an economic system of free enterprise, which

allows competition in the market environment. This means that any business that

tries to sell a product or service will have competitors. Consumers benefi t from

competition because it keeps prices at a reasonable level, stimulates productivity

and encourages the discovery of new technology.

Businesses continuously try to fi nd ways to gain an advantage over their

competitors. Understanding competitors is a basic challenge to management.

Analysing competitors helps management to understand the strengths, weaknesses

and capabilities of competitors and act accordingly.

Depending on whether the business is part of the food industry, the textile industry

or the motor industry, management should remember that competition will be

affected by the following fi ve factors (known as forces):

• new entrants – often new entrepreneurs enter an industry where demand is still

greater than supply. For example, in South Africa, one chain of take-away chicken

MS S. LANGA
 Competition powers
bargaining power of customers – customers tend to shop around for the best price
• bargaining power of suppliers – some banks offer cheaper fi nance charges, while
others offer free travel insurance. Some businesses, for example Pick n Pay, use
a brand name to bargain
• threats of substitute products or services – substitution reduces the demand for
a particular class of products or services as customers switch to the alternative.
This depends on whether the substitute has more value for the customer. For
example, e-mail is a substitute for the postal service
• competitive rivalry – this includes organisations with similar products and
services aimed at the same customer group. If competing businesses are the
same size, competition could lead to a price war

MS S. LANGA
CLASSWORK ACTIVITY
Refer to slide 6

MS S. LANGA
 Activity
Competition

MS S. LANGA
 CLASSWORK ACTIVITY
Divide the class into two groups and instruct them to debate the topic below. One group will
argue FOR the topic and the other group will argue AGAINST the topic.
 
“Competition is bad for business as all it brings is a loss in sales”.
 
Do you agree with the sentiments in the cartoon below? Should a business fear competition?
Explain your response

MS S. LANGA
 Moodle
1.competitors sell similar products.
2.competition keeps your business afloat
3.some business use a brand name to bargain
4.managers must be risk takers of competition
5.subtistution reduces the demand for a particular class.

MS S. LANGA