Competition Contd 2

Competition Contd 2

Competition (cont'd)(2) In its sense of activity, competition refers to the ways in which firms vie with one another for custom, when they may not only adapt themselves to given market conditions but also attempt to change them. This is close to the common meaning of competition, defined by Dr Johnson in his Dictionary as 'the action of endeavour-ing to gain what another endeavours to gain at the same time'. The main difference is that there need be no winner. Firms compete by making their products attractive, striving to secure lower costs than their rivals and attempting to get more resources to work with.

Competition in its technical meaning of market situations embraces only impersonal adaptations to given conditions; competition as activity is strictly personal, comprising the acts of production managers, sales managers, workmen and so on.

Economists use competition in the sense of activity when investi-gating industrial research, innovation, location of economic activity, scales of production, sizes and types of organizations, and the principles determining choice between alternative possibilities. It is in this sense also that it becomes meaningful to speak of 'cut-throat' competition and 'wasteful' competition. Cut-throat' competition is often the weak participants' term for vigorous competition; but some activities, such as selling 'fighting' brands temporarily at less than even direct costs solely in order to eliminate competition, are different in kind from a firm's more usual attempts to do better than its rivals. 'Cut-throat' competition is intended to be short-lived and to end in the destruction of competition. 'Wasteful' competition may refer to activities which add to an industry's costs without improving its service to consumers or changing the relative standing of the firms involved. Some advertising which simply offsets that of rivals, as in detergents or cosmetics, may fall under this head.

Successful activities strengthen firms and unsuccessful ones weaken or ruin them. Taken altogether, these activities result in a social process which constitutes competition in its third sense. This is the process by which products that people are not prepared to pay for, high cost methods of production and inefficient organizations are weeded out and opportunity is given for new products, methods and organizations to be tried. By selecting and rejecting alternative uses of resources, the competitive process spreads the knowledge throughout society for the better satisfaction of individual wants. It provides a means of discovering the most wanted products and the least cost methods and scales of production (which are usually taken for granted in technical analyses of competitive market situations).

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