Competitiveness takes place in an environment where two or more companies compete for the best volumes of sales or services among consumers.
This scenario is known to provide more innovation and growth for the economy, unlike markets where there are few companies, or only one, in the case of a monopoly.
The companies that stand out have the so-called competitive advantage, which occurs when a company manages to differentiate itself and obtain more demand from consumers.
Competitiveness in the economy
In economics, the concept of competitiveness is linked to studies in markets where there are different levels of competition, based on the idea of perfect competition, where the market is completely free and competitive.
Perfect or pure competition and monopoly form the two extreme scenarios in which a good or service can exist in the market. Among these, there is also the oligopoly, when few companies offer the same product.
Due to the idea of high competitiveness, companies are known as ” price takers “, that is, they accept the price that the market sells for a certain product. Price changes can occur due to a number of factors, including increasing or decreasing demand.
This concept is the one developed by the Law of Supply and Demand, where the price is formed when the quantity demanded by consumers and the supply of all producers is formed.
You can learn more about how the Law of Supply and Demand works .
How to improve the competitiveness of a company
No matter how competitive a market is, there is always the possibility of implementing improvements, with the aim of obtaining a competitive advantage among competitors.
The first factor is differentiation, that is, it is necessary to analyze in what aspects the product can present an advantage for the consumer that differs from others.
At this stage, the company must do market research and gain in-depth knowledge of competitors’ work and understand the competitive forces that make the business stand out. This process is known as “Porter’s 5 forces.”
Another factor is to improve the capabilities offered by the product through the Value Proposition, so that the product can create and deliver value to its users.
The Value Proposition is one of the components of the “ Business Model Canvas” , which can be used to reshape the main characteristics of a business.
In addition to differentiating or adding more value to a product, it is possible to evaluate the possibility of expanding the business through new activities, such as:
- Launch new products, diversifying the company’s operations in different markets;
- Adapt the product to the needs of other customer segments;
- Operate in other places with existing products, either in other regions or on the Internet;
- Invest in new types of advertising.