Business Unit 12
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The type of competition
Businesses compete with each other in different ways. direct competition involves providing an almost identical or similar service in the same market. For example, now wall-mart have started selling household furniture goods they are in direct competition with Ikea has they may sell the same or similar products. Involving wall-mart and Ikea the competition can be both in direct and direct. It is direct in what I have said above but is also indirect as Wal-mart main products are food based and Ikea specialise in furnishings, in this way they arent indirect competition. This may clash as Asda and Wal-mart will offer household items at a cheaper price than Ikea so some people might be tempted to purchase Asdas product as they are cheaper and have a better customer service reputation if there is a fault with the product.
There are several types of competition which occur with both Wal-mart and Ikea. Below I will say the types of competition and how It effects the business in their day to day running and over seas markets.
Perfect competition – this would exist in an ideal world. This is a situation were there are lots of buyers and sellers of a product that is identical in every respect. All buyers and sellers of the product have detailed knowledge of the prices being charged by all the firms in the market. In this situation no seller would be able to charge a higher price than competitors because nobody would want to buy from them.
The internet is bringing customers nearer to perfect competition for some products. For example, Tesco, Asda and Morrisons, all offer a budget range of food for a lower end of the market. Although the products are slightly different, they all have cheaper and standard packaging and all are about the same price. Consumers can now go online and find the cheapest price for the product, Asda offer a delivery service and so do Tesco and it is likely that one will be able to deliver the products more quickly but the competition in the superstore sector has become more competitive in recent years. This applies to Ikea, but MFI offer delivery and installation where as all Ikeas products are delivered flat packed so this could be a area that they could improve on to raise the awareness of their customer service.
Imperfect competition – imperfect competition exists when there is a lot of buyers and sellers. However, in contrast with perfect competition the sellers are able to differentiate their products. Relating this to Wal-mart is difficult as they sell mostly similar products to other superstore chains. The only real way they are differentiated is by the clothes and household range that they sell. They also sold the cheapest portable DVD player known on the market