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Competition

Competition. Motivational question :. Where have you recently met with competitors and at what occasion ?.

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Competition

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  1. Competition

  2. Motivationalquestion: • Wherehave you recently met with competitors and at what occasion?

  3. Market mechanism can operate effectively only in terms of competition.Producers wish to sell manufactured goods for bestprices and consumers seek to buy as cheaply as possible in order to satisfy most of their needs.

  4. The demands of the two are contradictory, but everyone is trying to achieve maximum benefit for themselves. • Differentsubjectsthat come on the market to realize their interests and goals are trying to get the favour of buyers.

  5. Competition is bringing together various subjects in the market, each of them wanting to realize their economic interests.

  6. The creation of demand, supply and prices are always carried out under the pressure of competition. • The economist Adam Smith called competition „the invisible hand“ that leads individuals while pursuing only their own benefit, whilethey satisfy the interests of society more than if it was a conscious endeavor.

  7. Competitionrules are: • According to market players:                   The competition on the demand side               Competition on the supply sideAccording to market conditions:                   Perfect competition               imperfect competition

  8. The competition on the demand side • Every consumer wants to buy as much as possible and as cheaply as possible, even at the expense of other consumers. • This is reflected particularly in the absence of the goods and services which consumers are trying to get and there is competition among consumers. •   This situation is used by manufacturers to increase prices.

  9. Competition on the supply side • each manufacturer is trying to maximize their profits, even at the expense of competitors.  This is reflected particularly in the surplus of goods and services. •   Manufacturers are trying to get the best possible market position, to weaken others and to dominate the market.  This competition may be price or non-price.

  10. Price competition - its essence lies in the fact that manufacturers reduce prices and believe that their competitors will not be able to adjust prices. • The aim is to destroy price competition competitors, to dominate the market in order to dictate terms and theincreaseofprices in the future. Therefore, theyevengive up the profitsfor a shorttime.Non-price competition - is based on an attempt to get customers by other than price advantages. • Manufacturers pay attention to advertising, packaging, offer discounts, selling on credit, providing services etc.

  11. Perfectcompetition • a theoretical abstraction, an ideal condition of market economy, which doesnotoccurin the real functioning market economy. • The assumptionfor a perfect competition would be to create exactly the same conditions for all market players. Perfect competition would take place under the following conditions: • The existence of a large number of buyers and sellers • Price eouldbe the invariable parameter • Therewouldbe full freedom of every person to access production

  12. Imperfectcompetition • Ischaracterized by a situation where output isproduced by a limited number of producers, often even only one producer has pricing power.This imperfect competition manifests itself in the following forms: • monopolistic competitionoligopolyabsolute monopoly

  13. Monopolisticcompetition • market is one product that are produces by a number of different manufacturers.Products are differentiated so that the same goods from different manufacturers have different design, packaging, color, etc.  Manufacturers use different marketing strategies, trademarks and so on.

  14. Oligopoly • a form of imperfect competition where a small number of large competing companies have much economic power that partially restricts the entry of other firms in the market sector.

  15. Absolute monopoly • a situation where in the market there is only one manufacturer of a product which is purchased by a large number of buyers.The manufacturer is called a monopoly manufacturer who can determine and maintain the monopoly and high prices can reach excessively high profits and it is not under competitive pressure or forced to reduce production costs.  Monopoly in a market economy is anunhealthy phenomenon and its existence interferes with the market mechanism system.  The state makes antimonopoly steps to order to ensureconditionsofthemarketinacompetetiveenvironment.

  16. Questions and Tasks: • What is the role of competition in a market economy?What is the difference between price and non-price competition? • Give an example of companies in the form of monopolistic competition, oligopoly and absolutemonopoly.

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