4 types of Competitions an Entrepreneur faces when stepping into Markets!

Mayank Thanvi

Dec 24th, 2016

Aspiring and young Entrepreneurs who are young hardly have knowledge about the behavior of the markets and the types of competition , they think of someone as their competitor but actually is not.

So it becomes important firstly to identify who is the competitor and of which type so that the strategic formulations on the ground level are made on the same basis.

1. Pure Competition:

A purely competitive state is theoretical concept in which no single buyer or seller has influence over the other . We know any seller sells the product and buyers are free to choose , a large number of producers and sellers operate in this pure competitive market , and products sold by one producer are easily replaced by another producer. Hence it all depends on the quality of service and price tag which makes the replacement.

2. Imperfect Competition:

This is usually what we observe , Imperfect Competition is nothing but a market where multiple firms offer variations of the same product or multiple products are offered , each with variation. A variation may be in :

  • Quality
  • Durability
  • Price
  • Utility

Here an important thing to notice is there is no prevention in number of firms entering but the one not fulfilling the consumers demand and who lacks to make consumer purchase has to exit the market . An example here is of Restaurant industry where a single cuisine may be served by more then a dozen restaurants but consumers are restricted by personal references and affordability only.

3. Oligopoly:

Depending on the product , many industries tend towards oligopoly , where a limited number of companies compete for consumer purchases . The quality might be different but products are usually identical. Industries that persist with oligopolistic competition tend to be those that have significant barriers to entry , such as commercial and military air crafts manufacturers. The barrier here are regulatory and financial , here the cost of manufacturer increases so steeply that even limited competition might take it on a closing note.

4. Monopoly:

A Monopoly lacks any competition either within the market or within a specific industry . Monopolies are defined by a single business , operating without competition in the market . The main barrier to entry into monopolistic market is that one firm holds all of the market share and no market share is available for the other business to succeed. A monopoly may be formed if a company owns all of one single resource , holds the patent for making a specific type of product or if the government has disallowed any other business from competing .

This study will definitely help while understanding the factors and barriers which are in real and virtual to be manipulated while entering into the markets.