Another from GMAT Issue Archive:
“The presence of a competitor is always beneficial to a company. Competition forces a company to change itself in ways that improve its practices.”
Discuss the extent to which you agree or disagree with the opinion stated above. Support your views with reasons and/or examples from your own experience, observations, or reading.
The author believes that the presence of competitor is always beneficial because it forces a company to improve continuously. There are many circumstances in which this statement holds true. For example, improvement in product, services,delivery of the goods, continued research and development, etc… However there are many circumstaces where the presence of competitor is not so beneficial. For example, presence of an established competitor in a market where a new company wants to enter. However, after a careful consideration I believe the competition is always beneficial to the company.
First, the comptition makes the company always on a lookout for improvement opportunities in various departments. If the company doesn’t act as quickly as the competitor then there are chances to loose market share and hence a dip in profit. This way it helps company to stay agile to changing market and customer requirments. For example, in consumer toothpaste market the presence of several major players make it impossible for any one of them to become complacent and it always helps them to do continuous introspection in the way they manage processes and practicies inside the comapny. This introspection can force them to change the unsuccessful or incompetent practices.
Second, the competition makes the company invest more into the research and development and innovation to come out with better products for consumers. For example, we have seen consumer electronics companies to present new and superior quality of TVs years after years. Such strategy always helps them to stay ahead in the game.
However, the competition can also be detrimental to some companies in some scenarios. For example – if there are too many competitors in a market such as refrigerator market, it becomes incresingly difficult for the companies to meet shareholder expectations on return. Such fierce competition forces the companies to cut the prices and profits which may lead them to a difficult financial position. In such cases cosolidation of market is more required than entry of another competitor.
Another example where the competition is not so helpful is where there is only one significant player enjoying a monopoly. In such case it becomes increasignly difficult for the new player to present it products and earn profits. For example, it would be difficult for a new retailor to enter in US market and compete with Wal Mart. The new retailor would have hoped that Wal Mart was not present in market so that new retailor doesn’t need to compete with price of Wal Mart which buys goods in bulk!
However from a higher level perspective it has been observed that a competitor in the market makes the company thriving for better results, products and earning. Sometimes only such tough competition has given birth to the innovations which has led to revival of several multi-nationationals such as Appel with iPod. Compe. So competition is a boon to the company and the market in which it works.