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1.f Levels of Competition

Meaning of Level of Competition

The level of competition refers to the degree of rivalry among businesses offering similar products or services to the same customers. It is a measure of the intensity of competition in a particular market or industry. The level of competition can vary depending on the market structure and the number of competitors.

There are four main levels of competition:

  1. Pure Competition: This is characterized by many sellers producing similar products or services to many customers. The price is determined by the forces of supply and demand rather than decided by the seller. Examples include agricultural products such as wheat and corn.

  2. Monopolistic Competition: This is characterized by many manufacturers producing different products that can be substituted for each other. Companies in this environment often use aggressive advertising to attempt to influence the price of their products. Examples include Coke and Pepsi, which offer different products but compete in the same market.

  3. Oligopoly: This is characterized by few sellers, with each seller supplying a significant margin of all the products sold. The number of entrants in this market is minimal because of the high initial investment cost. Examples include airlines such as United Airlines and Continental.

  4. Monopoly: This is characterized by one company producing a unique product or service with no close substitutes. The company in this environment has complete market power and can influence the price of its product. Examples include public utilities such as gas, electric, and water.

The level of competition can have a significant impact on a business's operations, strategies, and performance. High levels of competition can result in fewer sales, reduced profits, and a smaller market share. On the other hand, low levels of competition can lead to higher profits and a larger market share. Understanding the level of competition in a business environment is crucial for businesses to make informed decisions and develop effective strategies to improve their competitive advantage.

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