Competitive Markets

Competitive Markets

Competitive Markets Jonathan Poland

In a competitive market, multiple participants exchange value without any single entity having control over the market. This type of market is significant because it provides incentives for participants to be efficient and improve their offerings. The following are some common examples.


A commodity is a product or service that is perceived as identical by consumers, regardless of the producer. In these markets, brands and quality differences have little impact on consumer behavior, so all producers must accept a market price. Commodity markets are highly efficient, requiring producers to maintain a reasonable level of cost and quality in order to participate.

Fast Moving Consumer Goods

Fast moving consumer goods are products that are quickly used and repurchased. In this market, consumers need to make many decisions quickly such that they will strongly rely on brand recognition and brand awareness to make purchases. As such, large firms with dominant brands and big advertising spends dominate in this market. For example, the market for soft drinks, packaged food and toiletries.

Luxury Goods

Luxury goods are superior goods that build up significant customer motivation with elements such as high quality, social status, style and image. This is difficult to do and requires things like advertising spend, association with high status individuals and product designers who know what a market desires. For example, a luxury brand of chocolates that is associated with a well known chocolatier and status such as posh locations. High prices, small portions, luxurious packaging and quality may also drive a sense of luxury status and customer experience.


Labor is a competitive market whereby people gain valuable knowledge, talent, skills, experience, relationships and reputation in order to compete for desirable positions. Likewise, firms offer salaries, office locations, social status and an interesting mission to compete for talent. If labor weren’t a competitive market, people would have little or no incentive to learn, improve and deliver results. Likewise, firms would have no incentive to provide good working conditions and salaries.

Financial Markets

Financial markets such as a stock market whereby a large number of buyers compete to buy and sell capital such as shares in the future earnings of firms. This ends up funding firms that have done well to produce value while restricting funding to firms that are destroying value. In other words, competitive financial markets efficiently allocate capital to its most productive or highest potential uses. For example, a high performing firm with a high stock price can easily raise money by issuing more stock.

Foreign Direct Investment

Countries compete for investment on a global basis. This is known as foreign direct investment. For example, a nation may offer poor environmental and labor protection to attract global manufacturing investments. This situation is known as a race to the bottom. Competition for foreign direct investment also gives nations positive incentives in areas such as education, infrastructure and quality of life whereby they may be able to attract the headquarters of firms and other high value facilities such as research & development sites.

Economic Bads

An economic bad is a negative result of the production and use of economic goods. These can be capped at some sustainable level and then the right to produce this economic bad can be traded on a market. For example, the harvest of a non-renewable resource such as a species of fish can be capped and the licenses to do so traded on an open market. This could help prevent damage to people and planet.


Many non-financial human activities also resemble markets. For example, universities compete to attract talented students that will provide the institution with research prowess and status. This all translates to money for the institution such as grants and donations.

Learn More
IT Governance Jonathan Poland

IT Governance

IT Governance refers to the way in which an organization’s executive leadership manages and directs information technology. It is a…

Settlement Risk Jonathan Poland

Settlement Risk

Settlement risk is the risk that a trading counterparty will not deliver a security or asset as agreed upon in…

Data Breach Jonathan Poland

Data Breach

A data breach is a security incident in which sensitive, protected, or confidential data is accessed, disclosed, or stolen. Data…

Business Risk Jonathan Poland

Business Risk

A business risk is a potential event or situation that could negatively impact an organization’s ability to achieve its objectives.…

Gap Analysis Jonathan Poland

Gap Analysis

A gap analysis is a method used to determine the distance between an organization’s current state and its desired future…

Persistence Jonathan Poland


Persistence is the ability to maintain motivation and effort over a prolonged period of time. It is a behavior or…

Buying Behavior Jonathan Poland

Buying Behavior

Buying behavior refers to the actions and decisions made by consumers when purchasing goods or services. These are relevant to…

Experience Economy Jonathan Poland

Experience Economy

The concept of the experience economy suggests that companies can differentiate themselves and gain a competitive advantage by creating memorable…

Top-down vs Bottom-up Jonathan Poland

Top-down vs Bottom-up

Top-down and bottom-up are opposing approaches to thinking, analysis, design, decision-making, strategy, management, and communication. The top-down approach begins with…

Search →
content database

Search my thinking on business, finance,
and the capital markets or start below

Persistence Jonathan Poland


Persistence is the ability to maintain motivation and effort over a prolonged period of time. It is a behavior or…

Technology Factors Jonathan Poland

Technology Factors

Technology factors are any external changes related to technology that may affect an organization’s strategy. Identifying and analyzing technology factors…

Active Silence Jonathan Poland

Active Silence

Active silence is the intentional and strategic use of silence in communication. It involves the ability to listen attentively and…

Fourth Industrial Revolution Jonathan Poland

Fourth Industrial Revolution

The fourth industrial revolution, also known as Industry 4.0, refers to the current transformation of the economy towards the widespread…

Credit Risk Jonathan Poland

Credit Risk

Credit risk refers to the likelihood that a borrower will default on their debt obligations. When an entity has a…

Performance Objectives Jonathan Poland

Performance Objectives

Performance objectives are goals that individuals set for themselves on a regular basis, such as quarterly, semi-annually, or annually. These…

Life Skills Jonathan Poland

Life Skills

Life skills are essential abilities that enable individuals to navigate the complexities of daily life and achieve their goals. These…

Cyber Security Jonathan Poland

Cyber Security

Cybersecurity is the practice of protecting computing resources from unauthorized access, use, modification, misdirection, or disruption. It is a critical…

What is Achievement? Jonathan Poland

What is Achievement?

Achievements are the results of efforts that have produced positive outcomes. These outcomes can range from resounding successes to partial…