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The competitive environment surrounds all firms that exist in the market, because only in isolated situations there are no competitors, for example, this happens when a company introduces a certain innovative product to the market. Nevertheless, in most cases, each new product is a kind of modification of what is already on the market, therefore, we can say that it enters into a relationship of indirect competition. To properly plan the marketing component of the business, it is necessary to conduct a detailed analysis of the competitive environment.

Why do you need a competitive analysis?

Competition in the economic sphere can be defined as follows - "the rivalry of subjects of market relations for best conditions commercial activities." If we take into account more global meanings, we can formulate the concept of competition as a struggle for a buyer. Therefore, all aspects of the competitive environment and competitive advantages are fundamental indicators that distinguish one firm from others and allow you to attract the attention of customers.

When a company does not take into account the analysis of the competitive environment of the enterprise (and there are a lot of them), questions arise in making marketing decisions. For example, such a mistake is typical for startups. There are two most important axioms in the analysis of the competitive environment that apply to all types of business:

Knowledge of the potential consumer and his values ​​and analysis of this information;

Knowledge of competitors, their strengths and weaknesses and analysis of this information.

It is no coincidence that marketers introduced the concept of “competitive wars” in a competitive environment, since competition is close to military operations: there is intelligence, analytics, development of strategies and tactics to win back and consolidate their positions in a certain market segment. You can also talk about attacking or defensive actions, global observation of the enemy, and sometimes about sabotage. Rivals in the market environment are not always in a state of confrontation with each other, but you should always have an accurate idea of ​​\u200b\u200bwhether there is someone in the market who is engaged in activities close to yours. Assessment and analysis of the competitive environment will allow you to model a business growth scheme, determine goals and benchmarks.

Make up the maximum accurate forecast and the analysis of potential actions of competitors is quite problematic. And this is even more complicated when it comes to small enterprises. At the same time, the actions of large firms are somewhat easier to predict. This is market flexibility - the ability to quickly respond to changes in the competitive environment and take adequate actions. However, market analysis of the competitive environment must be carried out all the time and very carefully.

In the course of all changes in the activities of any company, whether it be pricing policy, advertising campaigns, the introduction of new directions, goods or services, innovative activities, one should analyze the external competitive environment, as well as predict what changes in the market will follow these innovations.

It is not enough just to follow the activities of competitors, a full-fledged comparative analysis of the competitive environment is needed, which allows you to create a scheme for attracting consumers and predict the development of the situation on the market and in the company.

An analysis of the competitive environment in a particular industry can be as detailed as possible (you can make a forecast of the activities of competing companies even for several years in advance), and capacious in the context of short-term tasks. Potential Situations where competitive analysis is required:

Creation of a marketing policy for product positioning;

Sales plan prediction;

Preparation of assortment and product policy scheme;

Determining the price of goods in the context of a competitive environment;

Product development: selection of properties and key indicators product in the context of a competitive environment;

Development of a product promotion scheme in the context of a competitive environment.

Experts advise considering such regulations competitive market analysis:

Be aware of the goals of analyzing the competitive environment in the market (it can take a long time to research and extract data, but the point is in the purposefulness of the process);

Set the boundaries of competition in advance and identify the most important competitors for analysis;

Conduct a marketing analysis of competitors.

What are the features of the analysis of the competitive environment in the industry

The analysis of the competitive environment in the industry is characterized by the designation of the competitive struggle that exists in it, the identification of its causes, and the assessment of the level of influence of competitive forces.

Exist types of competition:

• Intensive;

  Normal slow;

  Attractively weak.

Analysis of intense competition shows that the actions of competing companies lower the average profit in the industry. An analysis of moderate competition shows that most companies receive average profits in the industry. Weak competition is characterized by the fact that most of the firms in the industry are able to earn above average profits by investing only in production.

Certain strategies built by managers help to successfully exist in the market and integrate into a competitive environment, preventing the negative effects of competitors. These include strategies that:

Separate the firm from competitive influence as much as possible;

would affect competition laws in the industry in aspects convenient for the company;

We would create conditions for the formation and retention of a strong and stable position that guarantees advantages in the competitive struggle.

Analysis of the competitive environment in the industry can be carried out using strategic group cards. This card provides an opportunity to analyze and compare the competitive positions of companies operating in the selected industry.

A strategic group of competitors is a certain number of companies that occupy close positions in the market and compete on the basis of the same advantages using the same schemes. Companies will belong to a common strategic group if they have similar characteristics (size, degree of integration, choice of products, geographical field of activity, pricing policy, percentage of market segments, etc.), they use similar competitive strategies, operate in the same range "price-quality" criteria, serve the same customers and build identical benchmarks.

The strategic decisions of the firm are always guided by the strategies of competitors and their possible actions further. It is the competitive environment that dictates whether it is worth waiting a little now or, on the contrary, starting active actions while competitors give such a chance.

The creation of a competent and efficient scheme of the company's activities in the context of a competitive environment, as well as the preliminary alignment of countermeasures, is facilitated by a working scheme for collecting data on competitors, as they say, who is warned is armed!

What information is needed to analyze the state of the competitive environment

Analysis of the competitive environment is productive if you have the most detailed data on the most important competitors in the market. This data for the analysis of the competitive environment can be obtained from marketing research activities of competitors.

Such research is exactly the same as consumer research. We list the most productive methods for obtaining detailed and capacious information about competitors and their products needed for analysis:

Consumer Surveys - quantitative or qualitative collection and analysis of opinions and perceptions about competitors among different target groups to determine their strengths and weaknesses;

POS monitoring demonstrates the quality and conditions of the display of goods, strategies in the field of promotions and assortment;

Web search– reviews, competitor websites, reviews, etc.;

Interviewing market experts will give an understanding of the quality of the product of competitors, its image in the market;

Interviewing sales managers: insider data (sales staff can provide presentations, special programs of competitors);

Studying industry reviews. Publication of financial indicators, open ratings, and sometimes the fundamental characteristics of the business;

Thematic exhibitions, conferences and seminars. Data on market participants, contacts and communication strategy.

Main methods of analysis of the competitive environment

Porter method

Porter's (American economist) analysis of the competitive environment is based on the idea that the competitive environment is one of competing firms that use all available methods to achieve their goals. Moreover, all this happens in conditions that are distinguished by the presence of a large number of external factors.

The competitive position of the company, according to Porter, is determined by five factors of the external environment:

Rivalry in the segment (industry competitors)

A market segment in the context of a competitive environment will be perceived as unattractive if:

There are a large number of strong competitors on the market;

The level of sales in the market is stable or declining;

Income growth requires investment (on a large scale) and fixed costs are quite high;

Exit barriers are very high, for example, there are obligations to suppliers and consumers.

In such a market, there will always be competitive (information and price) wars, new products will need to be created, and this, in turn, leads to a sudden increase in the costs of the struggle.

Competitive analysis helps the firm to calculate the number of competitors in the market (there are many of them or the market is monopolized), identify the most serious of them and form competitive strategies for interacting with them, taking into account the data of the analysis of the competitive environment.

Bargaining power of suppliers

The extent to which a particular supplier influences the state of affairs in the market depends on many conditions: whether there are other suppliers or substitute goods on the market. In a monopolized market, the supplier has impunity to inflate prices, which will reduce flexibility and encourage low quality product offerings. Low bargaining power of suppliers - when there are a lot of supplying firms and substitute products in the market. A segment of the market will not develop well when it is the suppliers of firms who increase prices or reduce supply volumes. You can counter this by building mutually beneficial contacts with suppliers and using other sources of supply.

Bargaining power of buyers

A segment of the market loses its appeal when buyers have greater or increasing power to effectively advocate for their interests. More often than not, an industry with large volumes of standard products that can also be purchased through other sources will have a high bargaining power of buyers. It will increase when the number of buyers is not so large or they are organized; when the susceptibility of buyers to prices is high, if the level of quality of imported products does not particularly affect the quality of products of buyers (companies). A sales strategy can be based on working with regular customers or with those who have a low potential for influence. The firm may also offer products and services that will be of particular value to customers.

The risk of substitute goods or services

An industry is unattractive when it is filled with substitute products or the risk of their entry into a market segment is higher than average. A large number of substitute products in an industry usually entails a loss of price control by competing firms, limiting the ability to grow and profit in long term. New technologies or increased competition in competing industries present firms with the problem of overcapacity: the renewal of audio media has contributed to the almost complete replacement of vinyl records.

The threat of new competitors

The attractiveness of a segment is determined by the height of entry and exit barriers. Income and market share of existing competitors are limited with the arrival of new market participants, pulling the market capacity. The impact of newly arrived rivals is determined, among other things, by entry barriers. Typical barriers are the presence of brand name competitors (because it will cost a lot to promote the product), economies of scale, distribution control, and high capital investment. Markets with high barriers allow few new competitors to enter.

Therefore, the market (and segment) with high entry barriers and no interference at the exit is the most attractive. That is, only a limited number of companies can enter the industry, and firms that encounter problems have the opportunity to leave and retrain for other activities. High entry and exit barriers speak not only of the profitable potential of the segment, but also of a significant degree of risk: even when the performance of companies is falling, they cannot leave the market, they need to fight on.

Low barriers indicate that the company can, without much financial investment, both enter and exit the segment: their profit will remain constant, but low.

Less productive case: entry barriers are low, exit barriers are high. In this case, the industry will be characterized by excess production capacity and low incomes of all participants.

SWOT analysis

SWOT analysis of the competitive environment involves determining the strengths and weaknesses of the enterprise, opportunities, risks and building relationships between them. SWOT is an abbreviation that consists of definitions: Strengts (strengths), Weaknesses (weaknesses), Opportunities (opportunities) and Threats (threats). The purpose of a SWOT analysis of the competitive environment is to identify the fundamental factors that should be taken into account when developing a strategy. SWOT analysis of the competitive environment has 6 primary areas: product, processes, customers, distribution, finance and administration. The data obtained during the analysis directly influences strategic decisions.

SWOT analysis of the competitive environment provides answers to the questions:

Does the enterprise use its internal strengths or distinctive advantages in strategy? Which of the company's potential strengths could become differentiating advantages if none exist?

What profitable opportunities can give the company a real chance of success in exploiting them?

What threats should concern the company more than all the others?

It is most typical to summarize the data of the analysis in the form of a table, where the strengths in the company's activities (S), weaknesses (W), potential favorable opportunities (O) and external threats (T) will be registered and evaluated. The point of intersection of these analysis parameters will be an expert assessment in points. The resulting number of points in rows and columns demonstrates the primacy of taking into account any factor when building a strategy.

The SWOT analysis of the competitive environment, upon completion, forms a matrix of strategic activities, where SO are the activities necessary to use the strengths in order to increase the potential of the company; WO - activities needed to overcome weaknesses and make the most of available opportunities; ST - activities that use the strengths of the company to reduce the number of risks and threats; WT - activities that reduce the impact of weaknesses in order to reduce the number of risks and threats.

A SWOT analysis of the competitive environment suggests some rules to follow in order to avoid potential mistakes and maximize value:

Specify the scope of the SWOT analysis of the competitive environment. The greater the coverage of information for analysis, the more inaccurate for practice the results will be;

Be correct when allocating factors to different groups during the analysis. Strengths and weaknesses are internal features of the company. Opportunities and threats demonstrate the state of affairs in the market, they cannot be influenced directly;

SWOT analysis of the competitive environment should demonstrate the current state and prospects of the company in the market;

SWOT analysis of the competitive environment should be carried out by a group of people to avoid subjectivity in the assessment;

Formulate the results of a SWOT analysis of the competitive environment in order to more clearly interpret the impact of factors on the firm's business on this moment and in perspective. Then the data obtained during the SWOT analysis of the competitive environment will be most useful in reality.

SWOT analysis of the competitive environment has a number of limitations: it is only a tool for giving structure to existing data. SWOT analysis of the competitive environment does not provide precise and formalized recommendations or specific answers.

SWOT analysis of the competitive environment provides an opportunity to see and evaluate key factors and various events. At the same time, it is not as simple as it seems, since the volume and quality of the source data directly affect the results. A SWOT analysis of the competitive environment must be carried out by professionals with adequate knowledge of the current state of the market and its development prospects, or it takes a tremendous amount of work to collect and research the initial data in order to come to this understanding.

If at the stage of creating a table you make mistakes (extra factors or loss of important ones, incorrect assessment of weight coefficients and mutual influence), then at the next stages they will no longer be detected (except for very obvious ones). This will cause inferences that are inadequate to reality and incorrect strategic decisions during the analysis process and at its completion. Also, the explanation of the model obtained, the quality of the conclusions and recommendations directly depend on the level of professionalism of the experts who conduct the SWOT analysis of the competitive environment.

FAS method

To track the current state of competition in the market, the Federal Antimonopoly Service has developed a methodology for analyzing and assessing the competitive environment.

This methodology for analyzing and assessing the competitive environment in the market consists of the following steps:

Identification of the time interval for the study of the commodity market;

Detection of product and geographical boundaries of the commodity market;

Disclosure of the number of companies operating in the commodity market;

Establishing the volume of the commodity market and the shares of companies in the market;

Determining the degree of concentration of the commodity market;

Identification of entry barriers to the commodity market;

Assessment of the state of the competitive environment in the commodity market;

Drawing up an analytical report.

Initial information for analysis can be represented as:

State statistical reporting data characterizing the work of enterprises;

Information received from tax, customs and other state bodies, as well as local authorities;

Messages received from individuals and legal entities;

The results of commodity examinations, conclusions and analysis of specialized organizations;

Materials of departmental and independent information centers and services;

Data from consumer associations and producer associations;

Media reports;

Indicators of own research and analysis of the antimonopoly authority and data from antimonopoly authorities of other states;

Testimony of marketing, sociological research, analysis, sample surveys and questioning of business entities, citizens, public organizations;

Technical conditions and other standards;

Appeals of individuals and legal entities to the antimonopoly body;

Reviews of other sources.

This information contributes to the analysis and evaluation of the state of the competitive environment and the preparation of an analytical report.

How to analyze the state of the competitive environment in commodity markets: 5 steps

Stage 1. Analysis of the factors that form the competitive environment of the industry

Analysis of the competitive environment suggests that in order to identify key indicators, evaluate their manifestation time (duration of impact) and importance in terms of the industry market, it is necessary to analyze inter-sectoral and specific factors that affect the position and growth of the industry's competitive environment. Intersectoral factors in the analysis of the competitive environment include economic, administrative, organizational.

Economic factors for analyzing the competitive environment that determine the level of competition in the industry: imperfection of the tax and credit systems, government pricing policy, restrictions on demand from the population, high payback periods, non-payment, high inflation and financial instability.

Organizational factors are influenced by the level of development of the infrastructure of the market sector (primarily its material and technical complex - warehouse and container facilities, transport systems, service facilities, repair and construction organizations) and the information and communication complex (it is he who is the key in the formation of a single information industry market fields).

Administrative factors in the analysis of the competitive environment: the formation of economic entities and the accompanying procedures for registering firms.

All industries have factors characteristic only for them.

Stage 2. Determination of the composition of sellers and buyers

Determining the composition of sellers and buyers is important for analyzing the competitive environment, since in market conditions they limit each other in the ability to establish control over the creation of conditions for the sale of goods. To see the full picture of the competitive environment, you need to take into account each seller who operates in a given product market in the region. Then groups of buyers are determined who purchase the product from each particular seller. The composition of the group of buyers needed for the analysis of the competitive environment is specified according to the following parameters: the ability of each of the buyers of the selected group to buy goods from any of the sellers selling their products in a particular product market.

Stage 3. Assessment of the intensity of competition in the industry based on existing coefficients

To assess the intensity of competition in the context of the competitive environment, it is necessary to rely on a database of information on the market share of manufacturers and taking into account data on suppliers. It is also necessary to take into account the adjustment for empirical data. In the calculation, it is more logical to take for the analysis of the competitive environment both the volume of output, and the amount of supplies and sales of products in the relevant industry markets. But for statistical agencies, this information is not tracked and cannot be tracked. The reason for this can be called the imperfection of the system of statistical reporting. Typically, researchers work with data on sales volumes, which are taken into account in general terms and in monetary terms, data on imports and exports, which are also given by type of goods and in value terms, but not by manufacturers - this is fundamental for the analysis of the competitive environment.

Stage 4. Identification of indicators and barriers

Determining the qualitative indicators of the structure of the industry, fixing the presence of entry barriers in the industry market for possible rivals, the degree of their surmountability and the openness of the market for interregional and international trade significant for the full result of the analysis of the competitive environment.

Barriers to entry into an industry market by potential competitors often make it very difficult for them to enter and therefore limit competition in the industry.

Stage 5. Evaluation of market potential and building a competitive market map

To determine the conditions that contribute to the formation of a monopoly in the commodity market, it is necessary to analyze the behavior of economic entities that occupy the largest market share in relation to their existing and potential competitors. An analysis of the competitive environment will provide an opportunity to assess the market potential, more precisely, its presence or absence. Market potential is the ability of an economic entity, not necessarily directly related to its market share, to have a decisive influence on the general conditions for the circulation of goods in the relevant market and (or) hinder access to it for other economic entities.

How to analyze the competitive environment when launching Internet projects

The World Wide Web is characterized by fierce competition. There are no obstacles in the form of distances to outlet or a downpour bad weather, shop closing time. Competing projects on the network are separated by only a couple of clicks. Therefore, the fight for customers is won by those who have more knowledge and apply all possible information to their own advantage. It is for this reason that Internet projects must know competitors in person, and this somewhat complicates the analysis of the competitive environment.

The method of analysis of the competitive environment makes it possible to achieve this goal. Analysis of the competitive environment of the product market in terms of Internet projects is the consideration and study of sites in terms of those criteria that are more or less related to your business. The analysis of the competitive environment involves the study of the external and internal environment of a competitor that affects the strategy and potential of the company built for market activity. If you correctly analyze the activities of rivals, you will most likely bypass most of the miscalculations at the start of an Internet project, and will be able to contribute to its development and adequate functioning with greater productivity. In addition, the analysis of competitive factors helps to increase the competitiveness of the business in the course of active work, quickly respond to changes in the market and rebuild strategies based on these changes.

An analysis of the competitive environment of a company can be carried out before the launch of an Internet project or already when the project is launched, when the business reaches a certain maturity (because it is important to understand who the people with whom you will have to contact after the start of the site, but it is equally important to predict the potential actions of these companies in the future). Often it is the course of your rivals that influences the way your online business develops.

Exists three types of analysis competitive environment on the Internet:

Analysis of the competitive environment before launching the project

Analysis of the competitive environment at the initial stage makes it possible to determine the strategy for launching the project and, if necessary, current and operational adjustments. This analysis makes it possible to assess the load on the market with competing products of your product and the qualitative characteristics of your potential rivals. Here the question arises: how to identify from the very beginning those with whom it will be necessary to “fight” for consumers?

First of all, formulate the basic characteristics of the project: product, target audience, price category, etc. (to simplify the analysis itself and improve its quality, it is better to dwell on the key parameters) - and then connect search engines to the analysis of the competitive environment. Let's say you have an online laptop store in Moscow. Considering that a competitor is a site characterized by qualities, services / products and prices close to yours, for a correctly specified search query, for example, “online laptop store, Moscow”, the search engine will provide a list of companies that are most likely to and will be your competitors.

In order to calculate the exact wording of user requests, it is enough to refer to the database of the wordstat.yandex.ru service. An analysis of the most common queries will show you your competitors. After that, you need to weed out companies that differ from you in at least one of the key parameters - for example, you sell inexpensive laptops, and your competitor sells premium laptops in a higher price category. You will not compete because you have a different target audience.

Post-analysis of competitors

Post-analysis is the addition of fresh data from the initial analysis of competitors. They turn to him if, for example, you decide to fundamentally upgrade something on the site or postpone the start of the project for a while.

Regular monitoring

Regular monitoring and analysis of the competitive environment using software - research of competitors' activity during the operation of the site. Monitoring is the study and analysis of publications about competitors in the press and the media, on forums, social networks, the study of updates on their websites. It provides you with the latest information about all the changes that are taking place, which makes your business decisions more productive.

It should be remembered that the analysis of the competitive environment should be preceded by the compilation of a list of key categories, on the basis of which the competitor's site will be evaluated. Featured criteria for monitoring:

Ways to communicate with clients- what tools does a competitor use to inform potential customers, how do they go to his website;

Search Engine Optimization- "we see" whether the site of the opponent for search engines, how many links from other resources to it. Search engines Yandex and Google differ in the presence of their own indicators for evaluating the "significance" of the site. Yandex refers to the thematic citation index (TCI), which records the number and competence of links to the site from other resources; Google uses PageRank (PR), which ranks the "importance" of a site on a scale of 1 to 10. Another metric is the number of linking pages and the amount of content (pages) on the site. To get acquainted with these parameters, you can refer to the services pr-cy.ru, Yandex.Webmaster and Google Webmaster Tools;

Advertising- to analyze the contextual advertising of competitors, you can use the services spywords.ru and advse.ru, which allow you to identify the sites of potential competitors for queries in search engines and calculate what queries entail the appearance of their advertising;

Mentions about a competitor in the press, thematic catalogs (Yandex.Market, [email protected], etc.), notes about him in blogs, etc.;

Site rating- first of all, this is an analysis of the quality of design, navigation, intelligibility and openness of content, the absence of overload with texts, the convenience of performing targeted actions: filling out an order form, viewing a basket, etc.

Upon completion of the analysis, it is necessary to summarize: the list of competitor sites received, evaluation and analysis of their marketing strategy, understanding of their strengths and weaknesses in the field of communication, site design and other characteristics important for your project. There is no need to get all the information about a competitor, it will not make sense.

In order for the marketing analysis of the competitive environment to be productive, it is enough to fix the main characteristics. Based on their analysis, you can build the most effective promotion strategy so that it takes into account the weaknesses of competitors, but adequately assesses their potential. If you do it right, your company will be able to firmly establish itself in the market, increase revenue and reduce the shortcomings that would otherwise negatively affect your business.

Analysis of the competitive environment of an organization requires a large amount of information about the market, which the company often does not have. Therefore, it is worth turning to professionals. For example, the information and analytical company VVS is one of those that stood at the origins of the business of processing and adapting market statistics collected by federal agencies. The company has 19 years of experience in providing commodity market statistics as information for strategic decisions that reveal market demand. Main client categories: exporters, importers, manufacturers, participants in commodity markets and B2B business services.

Commercial vehicles and special equipment;

glass industry;

Chemical and petrochemical industry;

Construction Materials;

Medical equipment;

food industry;

Animal feed production;

Electrical engineering and others.

Quality in our business is, first of all, the accuracy and completeness of information. When you make a decision based on data that is, to put it mildly, wrong, how much will your loss be worth? When making important strategic decisions, it is necessary to rely only on reliable statistical information. But how can you be sure that this information is correct? It can be checked! And we will give you such an opportunity.

The main competitive advantages of our company are

Accuracy of data provision. The pre-selection of foreign trade deliveries, which are analyzed in the report, clearly coincides with the subject of the customer's request. Nothing extra and nothing missed. As a result, at the output we get accurate calculations of market indicators and market shares of participants.

Competition is understood as "rivalry" between individuals (competitors interested in achieving the same goal).

Competition - the process of interaction, interconnection and struggle between enterprises operating in the market in order to provide the best opportunities for their products and meet the diverse needs of buyers.

There are five competitive forces that determine the attractiveness of an industry and the position of a given organization in the competition:

• 1. Emergence of new competitors (Potential competitors)
• 2. Threat to replace this product with new products.
• 3. The strength of the supplier's position.
• 4. The strength of the buying position
• 5. Competition among manufacturers in the industry itself (current competitors)

Consider these competitive forces.

There is a concept of “barrier to entry into the industry”, the height of which should be taken into account both by organizations within the industry (for them, the higher it is, the better), and by organizations located outside.

The height of the barrier is determined by the following factors:

• 1. Economy of scale - the food and marketing costs of firms that develop the market or enter the market with a new product are higher, which, with equal prices, ensures that these organizations receive less profit or loss. And do we need it?
• 2. The familiarity of the brand of goods. Consumer stereotypes work regarding the brand of a particular product. (Leavis is a three-piece suit)
• 3. Fixed costs associated with entering a new industry. (requirements of standards)

e.g. ISO-900, req. design, security, etc.

• 4. The cost of new fixed assets, which in many cases must be created to release a new product.
• 5. Access to the distribution system. The need to create distribution channels.
• 6. Access to the industry's supply chain.
• 7. Lack of experience in the production of this type of product.
• 8. Possible responses of industry enterprises - refusal to sell patents, lobbying in the government, etc.

The threat of substitute goods refers to the production of new products that satisfy the same need, but created on the basis of fundamentally new ideas. When assessing the degree of threat of a substitute product, the characteristics, price and attitude of the consumer are taken into account.

The strength of the position of suppliers - depends on the type of market. The strength of the position of suppliers is determined by the following factors:

• 1. variety and high quality of the products and services provided;
• 2. the possibility of changing suppliers;
• 3. the cost of switching consumers to other suppliers;
• 4. the value of the volume of products purchased from suppliers

The strength of the buyers' position is determined by the following factors:

• 1. the ability to switch to the use of other products;
• 2. costs associated with this switch;
• 3. volume of purchased products.

In a market economy, it is necessary to carefully study and analyze the competitive environment in which the firm operates.

The following questions should be answered first:

Who are your firm's main competitors in terms of:

assortment, product groups;

geographic location;

market segments;

pricing policy;

distribution and marketing channels.

What is the market share of your company?

What is the competitor's strategy?

What methods are used by competitors in the struggle for the market?

What is financial condition competitors?

Organizational structure and management of competitors?

What is the effectiveness of competitors' marketing programs (product, price, sales and communication promotion)?

What is the likely reaction of competitors to your firm's marketing program?

At what stage of the invariable cycle is your product and the competitor's product?

Four possible competitive structures are identified and a marketing strategy is chosen accordingly.

Options	Perfect Competition	Monopolistic competition	Oligopoly	Monopoly
Number of firms producing products	Many independent firms; no market control	Many firms producing similar goods and services	Several large firms producing goods and services	One product, one company
Price control	No. Prices are determined by the market	Impact limited to replacement	There is a "price leader" influence	Almost complete control
Product differentiation	No. Products are inseparable by properties and qualities	Goods and services are differentiated for market segments	Significant for individual products (cars), small for standardized products (gasoline)
Ease of exit	Easy exit and entry	Relatively easy entry and exit	Difficult, often requires a large investment	Very difficult

It is advisable to analyze the characteristics of the main competitors in the following sections:

What is the largest market each competitor operates in?

Define market segments.

How do your competitors usually enter the market.

How competitors are prioritized in this market.

How quickly do competitors adapt to different market situations? How flexible is their market strategy.

How competitors react to the possibility of market diversification.

How effectively do your competitors respond to the needs and wishes of consumers.

How do they act when filling a "niche" in consumer demand.

How effective are your competitors in terms of renewal life cycle goods.

To what extent and by what means are your competitors trying to increase their market share.

How wide is the range of products and services offered by your competitors.

How flexible are competitors' manufacturing systems, their engineering departments.

How do your competitors behave with regard to new product development.

How flexible are your competitors in monitoring the compliance of their production facilities with market conditions.

How do your competitors behave in the field of pricing for new products.

What pricing policies do competitors follow for already manufacturing-based types of products and services.

Promotion of the product on the market.

What kind of sales divisions and services do competitors have.

How closely integrated among competitors is the activity of sales services with the strategy of the enterprise in the field of advertising its products, the strategy for developing sales potential.

Organization of sales and distribution.

What strategy did your competitors follow in the sales area to enter this market.

Indicate which forms of marketing competitors use and prefer to use.

How do your competitors control distribution channels?

The competitive environment of the enterprise and the factors of production impact on it

graduate work

1.2 Types of competitive markets

According to the degree of development of competition Kalyuzhnova N.Ya. and Yakobson A.Ya. There are four types of competitive markets. The ability to determine the type of market makes it possible to choose the right strategy of behavior on it.

1) Market of perfect competition.

2) Market of imperfect competition:

a) Monopolistic competition;

b) Oligopoly;

c) Monopoly;

The perfectly competitive market model satisfies three basic conditions. One of these conditions is the homogeneity of products. Homogeneity of products means that the goods are completely interchangeable and only the price can affect the preferences of the buyer. The second condition is the awareness of sellers and buyers about what prices and offers are on the market at the moment. The third condition necessary for the existence of a perfectly competitive market is the absence of barriers and freedom to enter and leave the market. Such freedom lies in the mobility of resources. As buyers' preferences change, sellers can easily shift to other more profitable products.

The market of perfect competition never occurs in its pure form, but the model of perfect competition plays an important role.

This model can be used to judge the activity small companies trading in homogeneous goods;

it allows us to understand the logic of the firm's behavior as if it were operating in a perfectly competitive market;

One of the criteria for perfect competition can be considered the presence of absolute elastic demand for products, which determines the pattern of income.

Perfect competition also has some disadvantages:

small companies, typical of a perfectly competitive market, cannot use more efficient technologies, since only large companies can achieve economies of scale;

the market of perfect competition is not able to stimulate scientific and technological progress;

Real markets are markets of imperfect competition. The prerequisites for such competition are:

large market share of individual manufacturers;

the presence of barriers to entry into the market;

product heterogeneity;

inadequate market information;

One type of imperfect competition market is a monopolistic market.

In such a market, there is only one supplier of goods. A monopolist can set any price or supply any number of products to the market, but he cannot combine these two actions, since at a high price the demand for a product will decrease regardless of the presence of competitors. The monopolist also dictates the quality of the product, since the consumer deprived of the right choice.

There can be several reasons for creating a monopoly:

possession of limited resources;

takeover of competing companies;

the formation of monopolistic associations;

the official creation of a monopoly in the case when competition is undesirable;

Monopoly by its emergence creates very rigid entry barriers for other enterprises. Such barriers may include:

legislation providing for a monopoly;

economies of scale;

Many of these barriers cannot be called insurmountable; they can be overcome if there are competitive advantages. Small producers may not compete with a monopolist, but find a niche for which he does not even pretend.

A monopoly that is protected by the state is necessary. There are many important industries in society that need centralized management.

However, the monopolistic market also has disadvantages:

freedom in the formation of prices for goods under a monopoly infringes on the interests of consumers;

the absence of competitors can lead to a decrease in the quality of goods;

These facts are very important, therefore, in countries with a developed market economy, an antimonopoly policy is being formed, the implementation of which is regulated by special legislation.

Another market of imperfect competition is oligopolistic.

This market is divided large quantity large firms. Such a market has high entry barriers, and therefore is practically closed to small companies. However, oligopolistic firms cannot be free to set prices, since they are still competitors among themselves.

Each of the participants in the oligopolistic market is dependent on the behavior of competing firms. Large size and large capital make companies immobile in the market.

The important characteristics of an oligopoly are:

1) Economies of scale of production. Increasing the volume of production and sales of products leads to lower costs per unit of output. This volume may be able to satisfy most of the demand for these products.

2) Interdependence of firms - oligopolists. An oligopolistic company can independently set the price for its products, but the consequences of such a decision can be unpredictable, since the reaction of competitors may be different. Therefore, oligopolies try not to do this.

3) Price rigidity and non-price competition. Those companies that are not market leaders avoid price competition. Instead, they are trying to increase market share.

4) Mergers and acquisitions. With the help of such methods, you can increase your market share.

5) The desire for collusion. Collusion occurs between oligopolies regarding the level of prices and production. Through such collusion, companies increase their control over the market. This strategy is beneficial for all involved. However, this is not always possible to achieve. Direct collusion becomes possible when new companies cannot enter the market due to high entry barriers; a small number of companies operate; product homogeneity is very high; demand for products is constantly growing; entry into the market is hindered by peculiarities of legislation.

There is also implicit collusion. One such collusion is price leadership, where a large company changes its price and others follow suit.

6) Barriers for enterprises to enter the market. As a result of high entry barriers, the level of market concentration and the preservation of oligopolies are maintained.

The third type of imperfect competition is the market of monopolistic competition.

The concept of monopolistic competition was developed by E. Chamberlin. He was the first to notice that the differentiation of a product contributes to the emergence of several separate markets instead of one. In these markets, there is a wide variety of prices, costs, output of products of various groups.

Monopolistic competition is a type of market structure in which there are many producers who produce a differentiated product. The products of such companies are similar to each other, but are not completely interchangeable, i.e. a small company produces a product that is slightly different from a competitor's product.

The main features of monopolistic competition are:

a monopolistically competitive company sets its own price;

company access to the market is free and attractive to firms with competing brands of goods;

there is no dependence of firms on each other, collusion in such a situation is impossible;

rivalry can be both price and non-price;

This type of market provides an opportunity for producers to realize themselves. As a result, consumers gain greater freedom in choosing products. However, monopolistic competition can lead to the emergence of new monopolies or oligopolies, which will develop until government intervention occurs or small companies succeed, which in principle is rare.

Monopolistic associations play an important role in the modern market, which, having advantages in the production of goods, try to set a higher price for them and thus prevent the establishment of an equilibrium price. However, no matter how much they want to implement their plans, by force of circumstances they are forced to reckon with the average price, as A. Smith (1723-1790) argued, the natural price. That is why he actively opposed state intervention in the market economy. A. Smith was a supporter of the import of imported goods when they turned out to be cheaper than domestic ones.

Laureate Nobel Prize in economics, Friedrich von Hayek (1899-!988) wrote that when demand for products exceeds supply, there is a shortage and the price will certainly increase. Conversely, when there is a surplus of goods, and demand decreases, the price falls. Therefore, the market is a self-organizing and self-regulating system.

However, the market should not be considered an absolutely self-organizing system. After the Great Depression (1929-1933), economists recognized the need for government intervention in the functioning of the market during recessions and crises. The very nature of socio-economic systems creates such a need, because people can correct the shortcomings of self-organization. external organization, i.e. consciously manage and regulate the system. However, these factors should not be opposed to each other, but, on the contrary, should be in accordance with the requirements and internal capabilities of the system's self-organization.

Considering the advantages of market competition, it is necessary to mention the disadvantages. Competition can lead to disproportions between supply and demand, irrational use of society's limited resources. Competing companies carefully guard their developments in the field of technology, as this helps to win in the competition, but this can lead to a slowdown in technological progress. Competitive market fails to solve the problem social inequality and equal distribution of income, it is designed to manage the economy rationally through the use of resources.

Market relations can be considered only when prices are set taking into account supply and demand, because it is prices that are the main regulator of the market, as they reflect the relationship between supply and demand. Given the demand, the market can increase the output of goods needed by consumers. To do this, manufacturers begin to develop new production technologies, master the achievements of scientific and technological progress, and improve the quality of the product. In the competitive struggle for the market, the winner is the one who can achieve the highest quality product at the lowest cost. It is competition that makes manufacturers more enterprising and inventive, they must eliminate the shortage in time and organize or expand the production of the necessary goods.

The most important function of the market is to meet the needs of consumers in a timely manner. This function is carried out through the relationship of supply and demand.

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Modern enterprises are in constant search of countering competitors and adapting to the conditions of the external environment. One of the distinguishing features of the world economy is that the economic relations of its subjects are in competition, which is immanent (inherent) in the market economy system.

Competition is strong driving force the entire system of the market economy, the type of relationship between producers regarding the establishment of prices and volumes of supply of goods on the market.

The stimulus that motivates a person to compete is the desire to surpass others. Competition is a dynamic process, accelerating its movement. It contributes to a better supply of goods to the market. Competition is an element of the market mechanism that ensures the interaction of market entities in the production and marketing of products, as well as in the field of capital investment.

Competition(lat. Concurrere - collide) means rivalry between individual subjects of the market economy for the most profitable terms production and sale (purchase and sale) of goods.

In a market economy, such a collision is inevitable, because it is generated by objective conditions:

A large number of equal market entities;

Complete economic isolation of each of them;

Dependence of market entities on market conditions;

Confrontation with all other market entities for the satisfaction of consumer demand.

Competitive struggle for economic prosperity and survival is the economic law of the market economy. It is a struggle among sellers, among buyers, between sellers and buyers. Sellers want to sell their products at a higher price, but competition forces them to sell their products cheaper to stimulate consumer demand. Sometimes used in the market dumping(eng. Dumping - dumping, artificially lowering the prices of goods in foreign markets to conquer them, eliminate competitors) - the sale of goods at extremely low (so-called bargain) prices.

Competition is the engine of economic progress, since market rivalry leads to success if the entrepreneur cares not only about maintaining, but also about expanding his production. To do this, he tries to improve the technique and organization of labor, improves the quality of goods, reduces the cost of producing a unit of output and thereby has the opportunity to reduce prices, expands the range of goods, improves trade and writing services for customers.

The form of existence of competition is a social system of norms and rules of market behavior of business entities (enterprises), which is determined by market methods of functioning of the economic system and state norms (economic policy).

Modern economic science identifies two forms of competition; free (pure or perfect) and limited (imperfect), which was the result of the evolution of the market system. As a result, the laws of competition are modified, the manifestation of which is that free competition turns into regulated competition.

As historical experience shows, the evolution of the market system went through three stages:

I) from the 16th century until the 70s of the XIX century, which was characterized by the dominance of free competition;

II) from the 70s of the XIX century. to the 1940s, where monopoly and market power become the dominant market structure;

III) from the 30-40s of the XX century. until now, which is characterized by the dominance of limited (imperfect) competition based on state restriction monopoly and promotion of competitive relations. It comes in two forms - monopolistic competition and oligopoly. Free competition has the following features:

Mobility (mobility) of production resources within the market;

Free entry to and exit from the market;

Independence of actions of manufacturers (sellers) from each other;

Homogeneity (standardization) of the produced product;

Availability and completeness of pricing information.

So, perfect competition corresponds to a model of market relations in which:

The goods are produced by a very large number of independent enterprises, so the share of each firm in the total production of the industry is extremely limited;

The amount of capital employed by an individual enterprise is so small that no firm has the ability to significantly affect the volume of supply of goods;

Competing firms produce standardized products (this means that for the consumer there is no priority of the manufacturer)

Possible free entry into the industry, exit from the industry (the low quota of each firm leads to the fact that the market for a standardized product does not actually respond to the appearance or disappearance of another seller of the product);

The individual firm has no influence on the market price level.

Related to this form of competition is the notion of efficient competition, where sellers and buyers act independently, even if the market is not purely or fully competitive.

During the period of domination of free competition, not only intra-industry, but also inter-industry competition dominated.

Intra-industry competition- competition between producers of the same industry producing a standardized (homogeneous) product. its result is the formation of a single market value, or price, of the commodity. Interindustry competition- this is a struggle for profitable areas of capital investment, its mechanism is the free movement of capital from less profitable to more profitable industries. The result is the formation of an equilibrium (average) rate of return, that is, equal capital receives equal profit, regardless of the industry of its application.

In modern conditions, the market model of pure competition happens very rarely, the time of its domination is in the past (XVII-XIX centuries). Today it finds itself in limited markets for some agricultural products (corn, cotton, wheat) and partly in the markets for securities and foreign currencies.

Perfect (pure, free) competition allows the market mechanism of self-regulation for prices, supply and demand to operate in full force.

Free competition necessarily has a price character. Price competition is based solely on price fluctuations, because the standardized product of different firms does not have much difference. Thus, the model of perfect competition operates on the principles of "invisible hand" and is controlled by the price mechanism. The price is sensitive to changes in supply and demand, thereby determining the required production volumes, which makes it possible to prevent overproduction.

The impossibility of direct intervention in the pricing mechanism forces firms (to increase income) to maximize production volumes, stimulates the full and rational use of all types of resources. Thus, the competitive market mechanism solves economic problems without the need for bureaucratic intervention (state regulation).

So, perfect competition is an ideal model for the functioning of market relations and can be a kind of criterion for assessing the perfection and efficiency of other types of market structures.

Free competition led to the development of concentration and centralization of production and capital, and at a certain stage (the last third of the 19th century) led to the emergence of monopolies.

Monopoly- the exclusive right of the state, production, organization, seller (that is, one that belongs to one person, group of persons or the state) to carry out any economic activity. By nature, monopoly is a force that undermines free competition, the spontaneous market and becomes the basis for the formation of market power.

market power- the degree of control a firm or group of firms has over price and production decisions in a particular area. In the case of a monopoly, the firm has a high degree market power, firms in perfectly competitive industries have no market power.

A monopoly firm acquires an exclusive position in the industry market, due to which it sets monopolistically high prices (if it is a manufacturer) or monopolistically low prices (if it is a buyer or consumer) for a product and receives monopoly high profits, keeping competitors out of them.

The monopoly became the dominant market structure at the second stage of market evolution, which lasted from the 70s of the 19th century. until the 30-40s of the XX century. In most industries, monopolistic non-competitive markets have formed, in which the market mechanism has lost the ability to restore market equilibrium under the domination of monopolistic structures:

One gigantic firm dominates the region;

She produces a unique product;

Entrance to the industry is completely blocked;

There is significant price control in the industry. That is, monopoly denies competition and is based on

exclusivity of the economic position of one entity exercising market power.

Based on different causes of emergence, monopoly can be reduced to three main forms: natural, administrative and economic.

natural monopoly arises due to objective reasons, when owners become natural monopolists - business entities that have at their disposal rare and unique deposits or land plots with unique natural properties (rare metals, land, etc.).

Administrative monopoly arises because the state (government or local authorities) creates exclusive privileged conditions for economic activity for certain enterprises or entire industries. Such business entities find themselves in a situation of artificially created protection from competition, which generates another phenomenon of economic exclusivity.

Economic (agglomeration) monopoly arises on the basis of the laws of economic development, when an enterprise finds itself in a situation of economic exclusivity, which is manifested in the possibilities of influencing pricing. Achieving favorable prices, such enterprises begin to receive monopoly profits.

The following concepts are associated with market power: monopsony(monopolistic position of one buyer in a particular market) oligopsony(type of market structure where there is a group of buyers of a particular product); duopoly(there are only two suppliers of a certain product, and there is no monopoly collusion between them about prices, markets, production quotas) bilateral monopoly(a type of market structure, when there is a confrontation between a single supplier and a single, often united consumer) in the industry market.

Elucidation of the economic nature and forms of monopoly in general makes it possible to thoroughly clarify the essence of pure monopoly as special type economic structure.

As noted above, the third stage in the evolution of the market system is associated with the dominance of limited (imperfect) competition, which is presented in two forms - monopolistic competition and oligopoly.

Monopolistic competition has the following features:

There are several dozen predominantly medium-sized firms operating on the industry market, competing with each other;

Competitors produce a differentiated product (a product of the same type, but with certain features inherent only to it), each of the firms has a monopoly on the release of its special product;

New competitors enter the market quite easily with their own differentiated product;

Non-price competition reigns, manifested in advertising, the existence of trademarks;

Price control exists within very narrow limits (on the price of one's own differentiated product).

Markets of monopolistic competition are most common in the modern market economy. This type of market structure covers the production of clothing and footwear, cosmetics, electrical appliances, medicines, personal computers, stationery, confectionery and sweets, textiles, retail, food processing, consumer services, etc.

Another common form of imperfect competition, along with monopolistic competition, is oligopoly (Greek Oligos - few, poleo - sell, trade). It represents a type of market structure that has the following differences:

Presence of several large manufacturers in the region (from 2 to 10);

Competing firms produce both standardized (same type) and differentiated (excellent in quality, amenities, aesthetics) product;

There are significant obstacles to the penetration of another competitor into the industry, primarily due to large sizes capitals;

Price control is limited or limited (in the case of collusion between competitors on price levels, markets, etc.);

A small number of firms in the oligopolistic market forces a large-scale application of non-price methods of competition.

In conditions of approximately the same financial and technological resources, the vast majority of competing large corporations refuse to use price methods of influencing an opponent, since, firstly, it is very expensive, because each manufacturer understands that when he decides to reduce the price of his product, the competitor will the same (from such a price maneuver, when competitors know everything about each other, there can only be loss of income); secondly, it practically does not change the market position. It is economically more profitable to use non-price rivalry. Since the mid-1950s - the period of the development of scientific and technological revolution - the most important methods of conducting intra-industry competition have been the renewal of goods and their timely entry into the market; improving the range and quality of products; improving the forms of attracting and serving customers, the use of price discrimination methods.

Price discrimination- simultaneous sale of the same goods to different categories of buyers at different prices, when the price difference is not justified by production costs; pricing practices are declared criminal (for example, under the Clayton Act in the USA) if they restrict competition. There are various ways in which firms distinguish buyers between those who can pay more and those who can only buy at low prices. Potential customers of a firm with more elastic demand for a product are subject to discounts, and customers with less elastic demand are subject to price discrimination.

Most characteristic feature oligopolistic model, focuses the action of all the previous ones, is the dependence of the behavior of each firm on the reaction and behavior of a competitor.

This feature was first noticed in the 30s of the XIX century. French economist A. Cournot, who is considered the founder of the theory of oligopoly. Considering the interactions of oligopolists, he showed that each firm will seek to sell the quantity of products that maximizes its income.

To measure the degree of monopoly power in economic theory use the Lerner index, the Garfindel-Hirschman index, the thumb rule.

Oligopolistic markets are also very common. They exist in the production of steel, iron, rolled metal, aluminum, cement, alcohol, mineral fertilizers (homogeneous products), as well as household appliances, cars, ships, wholesale trade, etc. (differentiated product).

If in the market of monopolistic competition there are no special obstacles for the implementation of intersectoral competition, then in the oligopolistic market its limitations are very significant. Therefore, new methods of intersectoral competition are used: diversification of production, vertical integration and conglomeration.

Diversification of production involves the emergence of very large firms that operate in several related industries. By doing this, they limit dependence on suppliers of resources and components, weakening the position of the competing industry. Vertical integration is manifested in the unification within one company of the technological chain in the production of a product from the initial stages to its implementation. Conglomeration is the association of the capitals of unrelated industries in one huge firm.

All this leads to the emergence of huge diversified firms operating mainly in various oligopolistic markets. Here, intersectoral competition is carried out, as a rule, through internal company transfers of capital.

According to the research of the English economist M. Porter, the state of competition in any competitive market can be characterized by five competitive forces:

rivalry between competing sellers;

Competition from goods produced by firms in other industries and worthy substitutes (substitutes), as well as competitive in price;

The threat of the emergence of new competitors (the arrival of new firms leads to the upper limit of the industry's profitability);

Economic and trade power of suppliers (suppliers' ability to dictate terms)

Economic opportunities and trading abilities of buyers (the influence of buyers on the level of profitability of the company, the quality of goods, the provision of credit).

These five forces of competition ultimately determine the conditions under which each market and the economic units (firms) that form it operate. The state of each force and their joint action determine the possibilities of a particular type of market structure in the competitive struggle and its potential.

In M. Porter's model, the value and strength of influence of each competitive factor change from market to market, determining prices, costs, investment in production, sales of products and business profitability. Suppliers and buyers, trying to use a favorable situation for them, reduce the profit of the company. Competition within the industry also reduces profits, because in order to maintain a competitive advantage, you have to increase costs (advertising, marketing, etc.) or lose profits due to lower prices. The availability of substitute products reduces demand and limits the price a firm can charge for its product.

When developing strategies, enterprises must take into account substitutes, is a force, determines the pricing policy of the enterprise, the policy in the field of product renewal, as well as the economic opportunities and trading abilities of buyers and the emergence of new competitors.

Theoretical models of competitive markets were developed in the 30-60s of the XX century. (effective competition - by the Austrian theorist I. Schumpeter; monopolistic competition - by the American E. Chamberlin; oligopoly - by the American E. Cherberlin and his compatriot J. M. Clerk; imperfect competition - by the English theorist J. Robinson), when it became necessary to overcome the monopolistic market structure .

Summing up the consideration various models market, we can conclude that in modern conditions the most widespread are such types of market structure as monopolistic competition and oligopoly. That is, the modern competitive model is a kind of so-called reasonable competition (in the words of P. Samuelson). Large firms have always strived and will continue to strive for a monopolistic position in the market. Therefore, the effective functioning of the modern market system necessarily presupposes conscious state regulation, stimulation of "conscious", reasonable competition.

Such regulation is carried out by limiting (and sometimes by legislative prohibitions) those scales of concentration and centralization of capital at which a monopoly begins, that is, reasonable competition is a consciously supported government regulation the level of competition, which becomes an obstacle to the monopolization of the economy.

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In our opinion, the economic essence of competition is manifested in the following:

The law of competition is more effective in influencing the behavior of market participants than the law of supply and demand. Free competition moves prices to the point of equilibrium, which leads to equality of the opposing sides.

Competition plays a very important role:

Thanks to rivalry, since socially normal conditions are established for the production and circulation of goods;

Due to market struggle (new products appear);

Market competition eliminates backward and inefficient farms. Those who strive for new ones survive, modern technologies, organizational and economic achievements. Perhaps some of the participants in the competitive struggle dream of a market without competition, but is it possible to create such a market?

Types of competitive markets

According to the degree of development of competition Kalyuzhnova N.Ya. and Yakobson A.Ya. There are four types of competitive markets. The ability to determine the type of market makes it possible to choose the right strategy of behavior on it.

1) Market of perfect competition.

2) Market of imperfect competition:

a) Monopolistic competition;

b) Oligopoly;

c) Monopoly;

The perfectly competitive market model satisfies three basic conditions. One of these conditions is the homogeneity of products. Homogeneity of products means that the goods are completely interchangeable and only the price can affect the preferences of the buyer. The second condition is the awareness of sellers and buyers about what prices and offers are on the market at the moment. The third condition necessary for the existence of a perfectly competitive market is the absence of barriers and freedom to enter and leave the market. Such freedom lies in the mobility of resources. As buyers' preferences change, sellers can easily shift to other more profitable products.

The market of perfect competition never occurs in its pure form, but the model of perfect competition plays an important role.

Thanks to this model, it is possible to judge the activities of small companies selling homogeneous goods;

It allows you to understand the logic of the firm's behavior, as if it were operating in a perfectly competitive market;

One of the criteria for perfect competition can be considered the presence of absolute elastic demand for products, which determines the pattern of income.

Perfect competition also has some disadvantages:

Small companies, typical of a perfectly competitive market, cannot use more efficient technologies, since only large companies can achieve economies of scale;

The market of perfect competition is not able to stimulate scientific and technological progress;

Real markets are markets of imperfect competition. The prerequisites for such competition are:

Large market share of individual manufacturers;

The presence of barriers to entry into the market;

Product heterogeneity;

Inadequacy of market information;

One type of imperfect competition market is a monopolistic market.

In such a market, there is only one supplier of goods. A monopolist can set any price or supply any number of products to the market, but he cannot combine these two actions, since at a high price the demand for a product will decrease regardless of the presence of competitors. The monopolist also dictates the quality of the goods, since the consumer is deprived of the right to choose.

There can be several reasons for creating a monopoly:

Possession of limited resources;

Acquisition of competing companies;

Formation of monopolistic associations;

Formal creation of a monopoly when competition is undesirable;

Monopoly by its emergence creates very rigid entry barriers for other enterprises. Such barriers may include:

Legislation providing for monopoly;

Economies of scale;

Many of these barriers cannot be called insurmountable; they can be overcome if there are competitive advantages. Small producers may not compete with a monopolist, but find a niche for which he does not even pretend.

A monopoly that is protected by the state is necessary. There are many important industries in society that need centralized management.

However, the monopolistic market also has disadvantages:

Freedom in the formation of prices for goods under a monopoly infringes on the interests of consumers;

The absence of competitors can lead to a decrease in the quality of goods;

These facts are very important, therefore, in countries with a developed market economy, an antimonopoly policy is being formed, the implementation of which is regulated by special legislation.

Another market of imperfect competition is oligopolistic.

This market is divided by a small number of large firms. Such a market has high entry barriers, and therefore is practically closed to small companies. However, oligopolistic firms cannot be free to set prices, since they are still competitors among themselves.

Each of the participants in the oligopolistic market is dependent on the behavior of competing firms. Large size and large capital make companies immobile in the market.

The important characteristics of an oligopoly are:

1) Economies of scale of production. Increasing the volume of production and sales of products leads to lower costs per unit of output. This volume may be able to satisfy most of the demand for these products.

2) Interdependence of firms - oligopolists. An oligopolistic company can independently set the price for its products, but the consequences of such a decision can be unpredictable, since the reaction of competitors may be different. Therefore, oligopolies try not to do this.

3) Price rigidity and non-price competition. Those companies that are not market leaders avoid price competition. Instead, they are trying to increase market share.

4) Mergers and acquisitions. With the help of such methods, you can increase your market share.

5) The desire for collusion. Collusion occurs between oligopolies regarding the level of prices and production. Through such collusion, companies increase their control over the market. This strategy is beneficial for all involved. However, this is not always possible to achieve. Direct collusion becomes possible when new companies cannot enter the market due to high entry barriers; a small number of companies operate; product homogeneity is very high; demand for products is constantly growing; entry into the market is hindered by peculiarities of legislation.

There is also implicit collusion. One such collusion is price leadership, where a large company changes its price and others follow suit.

6) Barriers for enterprises to enter the market. As a result of high entry barriers, the level of market concentration and the preservation of oligopolies are maintained.