Competition refers to the rivalry among sellers trying to achieve such goals as increasing profits, market share, and sales volume by varying the elements of the marketing mix: price, product, distribution, and promotion. It is the process of vying for customers by the pursuit of differential advantage, i.e., changing to better meet consumer wants and needs.

Competitive environment refers to the number and strength of rival firms competing in the market for a product.

Market Situations

In economic theory, competitive situations such as perfect competition and imperfect competition are delineated based on the degree of control that sellers have over price.

Perfect competition is a competitive market situation in which buyers and sellers are so numerous and well informed that all elements of monopoly are absent and the market price of a commodity is beyond the control of individual buyers and sellers.

With imperfect competition, many sellers each have a relatively small market share, offering dissimilar goods. Firms have some control—but not necessarily absolute control—over price, by such techniques as differentiating products and limiting supply. Monopoly, oligopoly, monopsony and oligopsony are examples.

Market Models

Pure competition is a market model in which:

  1. a lower price is the only element that leads buyers to prefer one seller to another (i.e., all sellers are offering identical products).
  2. the amount that each individual seller can offer constitutes such a small proportion of the whole, that acting alone it is powerless to affect the price.

Workable competition is an economic model of a market in which competition is less than perfect, but adequate enough to give buyers genuine alternatives.

See Also

Competitive analysis
Competitive brands
Competitive position


  1. ^ American Marketing Association, AMA Dictionary.

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