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.

Commodities

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

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.

Universities

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…

Business Objectives Jonathan Poland

Business Objectives

Business objectives are specific targets or goals that an organization, team, or…

Data Science Jonathan Poland

Data Science

Data science is the use of mathematical and statistical methods, machine learning…

Impact Evaluation Jonathan Poland

Impact Evaluation

An impact evaluation is a study that measures the actual outcomes and…

Organizational Structure Jonathan Poland

Organizational Structure

Organizational structure refers to the formal systems that define how an organization…

Risk Impact Jonathan Poland

Risk Impact

Risk impact refers to the potential consequences or losses that an organization…

Business Process Improvement Jonathan Poland

Business Process Improvement

Business process improvement involves identifying and implementing changes to processes in order…

Business Development Skills Jonathan Poland

Business Development Skills

Business development is a term that is often used to refer to…

Customer Service Techniques Jonathan Poland

Customer Service Techniques

Customer service is any person-to-person exchange between a business and a customer.…

Advertising Objectives Jonathan Poland

Advertising Objectives

Advertising objectives are the specific goals that an advertising message or campaign…

Jonathan Poland © 2023

Search the Database

Over 1,000 posts on topics ranging from strategy to operations, innovation to finance, technology to risk and much more…

Technology Ethics Jonathan Poland

Technology Ethics

Technology ethics refers to the principles that guide the development, use, and…

Serviceable Market Jonathan Poland

Serviceable Market

Serviceable market is the part of the total addressable market that can actually be reached.

Environmental Issues Jonathan Poland

Environmental Issues

Human activities have caused many environmental problems that are harmful to ecosystems,…

Economic Advantage Jonathan Poland

Economic Advantage

A competitive advantage is a feature or characteristic that allows a company…

Economic Moat Jonathan Poland

Economic Moat

An economic moat is a concept in business strategy that refers to…

What is Moral Hazard? Jonathan Poland

What is Moral Hazard?

Moral hazard is a term used in economics to describe a situation…

Workload Automation Jonathan Poland

Workload Automation

Workload automation is the process of automating the execution of routine tasks…

Fair Competition Jonathan Poland

Fair Competition

Fair competition refers to competition between businesses that is open and equitable,…

Blockchain Jonathan Poland

Blockchain

Blockchain is a type of distributed database that allows multiple parties to…