What is a competition

competition

Competition, for the market economy (necessary and) characteristic principle of order. Competition is the "battle" of the supplier for the demand, but also that of the applicants for a job. This competition should i. d. Usually run through the process of price formation and promote the development of new and generally better products or services. However, the competition can also take place via other influencing factors than the price, e.g. B. about quality, advertising, hidden discounts or non-monetary perks when buying. Restraints of competition

A process between different parties in which each party tries to achieve its goals and thereby competes with other parties. For example, if vendors offer similar products, each vendor will try to get the largest possible market share. The competitive process generally has a positive influence on the performance and development of competitors, but it can also have a negative influence on the (long-term) profitability of the average competitor.

Competition describes the performance struggle between companies in the markets, which is carried out with the help of sales and procurement policy instruments.

Competition can generally be described as the striving of two or more people or groups towards one or more goals, whereby the higher degree of goal achievement of one competitor is at the expense of another. Applied to market-based competition, the following characteristics are characteristic: 1. Existence of market forms with at least two suppliers or buyers, 2. A common market object, with the help of which (the) same goal (s) should be achieved, 3. Antagonistic Behavior of the supplier and / or customer and 4. Measures of the competitors, which lead to an improvement of the achievement of their own goals at the expense of competitors.

Market transparency, freedom of choice, sufficient financial, technical and human resources, willingness to compete, flexibility and open markets (market) can be cited as prerequisites for the emergence of competition. If one of the prerequisites is not met, the effects of competition worsen or competition cannot develop in the first place (see also market failure). The modes of action, functions and premises of competition are viewed quite differently in different theories of competition in economics. In the neoclassical theory of perfect competition, competition is analyzed in the context of a static approach with regard to the establishment of price-theoretical equilibrium states. Under the premises of the perfect market, the bilateral polypol (see market forms) comes to an equilibrium price at which the profit of the supplier and the benefit of the customer reach their maximum. Suppliers whose unit costs are above market prices are pushed out of the competition. The main points of criticism of the neoclassical approach are to be seen in the static approach and in the assumptions of perfect competition. In reality, there is not only the market form of the polypol, but in particular also that of the monopoly and the oligopoly. In addition, individual economic market entry barriers (high financial requirements, defense strategies of other market participants already active in the market segment) and political market entry barriers (admission restrictions), economic market exit barriers (high investments and the resulting capital commitment), political exit barriers (labor and social law provisions) must be observed. The ordoliberal theory of complete competition examines how competition is promoted by regulatory framework conditions (monetary stability, lowering of entry and exit barriers, private ownership of means of production, freedom of contract, liability of market participants for their actions, constancy of economic policy) and thus the emergence of monopolistic Market power can be prevented. The (unrealistic) assumptions of perfect competition are therefore not simply accepted; rather, attempts are being made to approach this state of affairs with the help of economic policy measures. Reference should also be made to explanations of the competitive process based on the theory of innovation. According to Schumpeter, competition is a development process in the course of which old structures are destroyed and new structures (new goods, technologies, types of organization) emerge. This theory of innovation is later continued by Clark, who describes competition as a dynamic process of advance and pursuit, innovation and imitation, in which the totality of sales policy instruments (sales policy) can be used. First of all, a provider brings an innovative service onto the market, which enables him to create a temporary monopoly and gain a competitive edge. After a while, other competitors react by either copying the innovative product and offering it cheaper or by bringing other innovations to market. This means that the innovative supplier's gains in the lead can be reduced again. If competitors are unable to react in this way, a permanent monopoly position could arise and a dynamic competitive process will not materialize. This problem also arises when all competitors behave in a passive manner. Both situations prevent a dynamic competitive process from occurring. The prerequisites for its creation are innovative and willing companies, the possibility of gaining a competitive edge with an innovative service, as well as competitors who are capable and willing to imitate and who can reduce these gains again. The innovators improve the coverage of needs (demand, need) with new goods and services; through imitation, their prices drop to the level of production costs. By choosing the competitive strategy, the individual competitor decides which role he wants to play in this process: that of the innovator (when pursuing a differentiation strategy) or that of an imitator (when pursuing cost leadership).

In the health industry:

An effort by two or more people or groups to achieve better performance in a direct comparison of performance.

In the economic sense, this is understood to mean a situation in which two or more providers of a product or a service and / or two or more customers for a product or a service are in competition with one another, i.e. do not behave cooperatively.

Competition is generally understood to mean a situation of mutual rivalry and the actions and processes initiated by it. As a market phenomenon, competition is an order and control principle of the economy (market economy).

Part of the firm tradition of the doctrine of competitive economics is »... that the driving force behind self-control lies in the selfish desires and aspirations of the economic units. The individual households and companies independently draw up business plans for their area, which exclusively serve their own interests. They try to implement their plans in the markets, i.e. the economic places where supply and demand meet. When there is competition for business deals with exchange partners, each economic entity is ultimately prompted to offer services which, in addition to their own egoistic goals, serve the common good in the sense of cheap consumer supplies. Due to the competitive coordination, the consumer interest is even better realized the more consistently the individual economic units perceive their own interests (market economy pseudo-paradox) ”(Bartling, 1980, p. 9).

Since its emergence over 200 years ago, competition theory has developed a large number of models (cf. Bartling, 1980, among others), which, to varying degrees, provided the basis for state competition policy and codified competition law (GWB).

Against the background of increasing cooperation and concentration in market economy systems, the distinction is made between the competition categories

- Individual competition and

- Group competition (system competition)

expedient.

The individual competition relates to market partners who are not or only insignificantly cooperatively bound, the group competition to tight cooperation systems. The inter-group competition characterizes the competition between several cooperative groups, the intra-group competition the competition between partners of a group (cf. Tietz, 1981).

Experience shows that the nature of competition is environmental: »The driving force of competition, the spirit of global competition, is subject to historical change and social influences. In economically highly developed countries there are usually enough competitive suppliers and buyers who do not allow their competitors to rest - provided that the performance incentives, such as profits and other advantages of various kinds, are not removed and the national and international markets are kept open "(Woll, 2000 , P. 300). In economically underdeveloped countries, competition fails as an economic steering instrument because the "economic ethos" necessary for the steering function is missing (cf. Woll, 2000, p. 300).

the dominant method in a market economy to solve the problem of what is to be produced (determination of the supply structure), how it is to be produced (choice of the processes to be used) and for whom it is to be produced (allocation of claims to the overall economic output). In detail, the macroeconomic competition functions describe the tasks assigned to competition in a market economy. Functional competition is understood by competitive theory as a dynamic process (i.e. leading to an improved market supply) in which companies try to gain demand by providing better performance at the expense of their competitors (competitors) and to realize their business goals. Companies that see their competitive position threatened by actions (competitive advances) by their competitors must react to this threat by also improving their market performance in order to avoid competitive disadvantages. The means that a company can use to improve its market position are varied. Relevant action parameters (competition parameters, competition means) can include price, quality, service, delivery times, range diversity, etc. m. be. Entrepreneurs who create new markets through the successful introduction of innovations are often referred to as Joseph A. Schumpeter as a pioneer entrepreneur (Schumpeter entrepreneur). Thanks to his competitive advantage, the pioneer entrepreneur can achieve a temporary monopoly position (Schumpeter monopoly) that is justified and legitimized by his superior performance and can realize advantage gains (pioneer profits, Schumpeter monopoly rent). Functional competition is characterized by the fact that the temporary monopoly of the pioneer is lost when the innovation of the pioneer is taken over by other companies (the imitators). The competitive pressure that this creates for the pioneering company deprives it of its monopoly rent. All of them are now offering the new, better product, so that, as a consequence of the competition, there is an improved consumer supply. Competition acts as a social sanctioning process through the profit opportunities that it opens up and through the threat of loss that becomes effective in the event of underperformance: The provision of market-oriented services is "rewarded" as a socially desired contribution to the realization of the goal of the best possible consumer supply through profits (positive sanction) ; Companies whose offers do not meet consumer requirements are "punished" with losses, and in the case of permanent weakness with the compulsion to exit the market (negative sanction). In connection with a system of freely defining market prices, competition ensures that the decentrally formulated economic plans of the individual production and consumption management units (companies and households) are coordinated with one another: Growing demand leads to rising prices with initially unchanged supply quantities; as a reaction to the newly created situation, there will be an expansion of supply and, due to the higher price, possibly also a decrease in demand, until supply and demand match again (market equilibrium). The advantages of the market-based incentive, control and control procedure competition are those opened by it. Room for maneuver and options, the innovation activity and adaptability it brings about and the renunciation of the use of state sovereignty for the coordination of individual economic dispositions and for the control of economic power made possible by competition. In order to illustrate the quality of the market mechanism, an anonymous, "depersonalized" and thus non-authoritarian incentive, steering and control system, it is often referred to as Adam Smith as the "invisible hand". Competition can only come about and endure if conditions are met that are referred to as competitive prerequisites. These conditions for competition also include a policy that effectively protects competition from being abolished or restricted by —competitive restrictions. Literature: Berg, H., competition policy, in: Vahlens Kompendium der Wirtschaftstheorie und Wirt-. schaftsppolitik, Vol. 2, 5th ed., Munich 1992, p. 239 ff. Kirzner, I. M., Competition and Entrepreneurship, Tübingen 1978. Lampe, H.-E., Competition - Competitive Relations - Competitive Intensity, Baden-Baden 1979.

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