The book that defined competition, A Definition of Competition, comes in at number eleven. It was written by two economists, Frank Dobson and Charles Steele. While the book discusses various forms of competition, it primarily focuses on economic competition. The main body of the book examines four different forms of competition.
The most common form of competition is price competition. Another important form of competition is market competition. The concept of market competition is related to the definition of business as a process rather than an end result. The pricing system of any market is a process by which prices are set to reflect current supply and demand. The other three major types of competition come from internal processes within a firm.
Internal competition is the most dangerous form of competition because it can lead to the firm going out of business. In an internal competitive environment, there is no longer a clear distinction between what the firm produces and what it consumes. Thus, if a firm consumes more than it produces or if it consumes a portion of the total market, then it has become internally unprofitable. The idea of competition here is to obtain the best value for money rather than the best volume. Sometimes this results in a firm that is no longer profitable at all.
External competition refers to other firms trying to obtain a share of the market. Sometimes this can be a very scary thought for the firms involved. There are many instances where companies try to monopolize a certain segment of the market, only to be stopped by larger competitors. Monopolizing, however, is often the preferred method of increasing a firm's profits because it does not require the firm to invest additional resources to gain the advantage.
The final major type of competition comes from external factors such as government regulation. The law is one major force that drives competition. For instance, when a firm wishes to purchase a certain piece of property, it must abide by the local law because that law may prohibit the firm from meeting its competitors.
Competition in the business world is a key part of modern economics. Each type of competition deals with different aspects of the firm's operations. This definition of competition will vary depending on the business being discussed. In general, a good description of competition includes all of these aspects.
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