Effects of Competition on Demand

• Competition refers to a situation in a market in which firms or sellers independently strive for the patronage of buyers in order to achieve a particular business objectives
• The level and strength of competition has a significant effect on demand for a business
• Determinants of competitiveness

  • investment in new equipment and technology
  • strong organisational procedures
  • effectiveness of the marketing mix / marketing campaigns / branding
  • innovation through investment in research and development
  • financial planning and control
  • ability to lower prices
  • quality / quality procedures
  • staff skills, education and training
• If a business is good in marketing areas it will then enable them to be more effective, lower costs and therefore lower prices - increasing demand
• If competition is better their demand will increase
• A firm's ability to compete depends upon its own strengths and weaknesses as well as those of other businesses operating within the same industry.
• SWOT analysis helps identify these internal factors so they can be used to gain a competitive edge