The Positive Effects of Competition in Business

This essay discusses the positive effects of competition in business, including innovation, improved customer service, and growth. It provides examples and arguments to support the benefits of competition.

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Essay Writing

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In today’s competitive business world, organizations are facing fierce competition in
different industries. The corporations continuously focus on generating a competitive
advantage over their competitors to ensure that they are able to effectively deal with
competition (Barney, 2012). Although companies focus on avoiding competition since it
adversely affects their profitability and reduce their customer base, however, there are
various benefits of competition as well. The thesis will argue that competition in business is
positive which provides various advantages to corporations. This essay will evaluate
different ways through which competition benefits companies. Various arguments will be
given in order to understand how competition can help a company grow its operations and
profitability.
One of the key advantages of competition is that it leads to innovation. Incumbents
in industries avoid relying on innovation in order to improve the current operations in their
respective industry (Correa, 2012). They avoid experimenting and changing current
processes in order to improve them; instead, they focus on expanding their market share
and increase their customers. In those situations, challengers rely on innovation in order to
establish their operations in the market and defect incumbent. A good example is the case
of Blockbuster and Netflix. Blockbuster was an incumbent that had established more than
9,000 stores across the United States and the company had established a monopoly in the
video renting industry. However, the company had failed to rely on innovation to improve
its operations. Netflix was a challenger and the corporation relied on innovation due to
intense competition in the industry (Satell, 2014). The corporation started offering its
services through post and later it started offering online streaming content which resulted in
beating the monopoly of Blockbuster and the company become insolvent. This example
shows how competition assists companies’ growth in the market.
Another benefit of competition is that when several companies offer similar products to
customers, then they are forced to compete for customers. They are enforced to improve
their customer services in order to garner loyal followers. It grows their positive brand
image in the market which is crucial for establishing brand loyalty (Chen, 2015). Competition
between companies shakes off complacency which enforces them to push their employees
to improve their performance. Lack of competition between organizations lead to
complacency, therefore, they avoid differentiating their products and services. They are less

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likely to implement an innovative approach in the business. Competition between
enterprises also forces companies to focus on their core market. In a competitive
environment, organizations have to target a specific geographical location or demographic
to ensure that they offer them effective products and services which cater to their demands
(Aghion et al., 2015). Effective understanding of requirements of core customers leads to
the growth of the company since it expands their loyal customer base.
In conclusion, companies run away from competition since it reduces their profits,
however, there are many positive benefits of competition as well which assist in the growth
of the company. Competition promotes innovation among corporations and it eliminates
complacency. It encourages companies to learn about their core customer base and
improve their products and services to increase brand loyalty. These factors resulted in
increased growth of companies which shows why competition is positive.

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References
Aghion, P., Cai, J., Dewatripont, M., Du, L., Harrison, A., & Legros, P. (2015). Industrial policy
and competition. American Economic Journal: Macroeconomics, 7(4), 1-32.
Barney, J. B. (2012). Purchasing, supply chain management and sustained competitive
advantage: The relevance of resource‐based theory. Journal of supply chain
management, 48(2), 3-6.
Chen, S. C. (2015). Customer value and customer loyalty: Is competition a missing
link?. Journal of Retailing and Consumer Services, 22, 107-116.
Correa, J. A. (2012). Innovation and competition: An unstable relationship. Journal of
Applied Econometrics, 27(1), 160-166.
Satell, G. (2014). A Look Back At Why Blockbuster Really Failed And Why It Didn't Have To.
Retrieved from https://www.forbes.com/sites/gregsatell/2014/09/05/a-look-back-
at-why-blockbuster-really-failed-and-why-it-didnt-have-to/#135ee8951d64