Important Factors for Competition

Important Factors for Competition

Important factor for understanding the current & future competition in the market are customer switching ability, competitor ability to exit, industry set up cost, entry barriers, growth opportunities, and long term demand for the product.

1.    Customer Switching  Ability

First important factor for understanding the competition in the market is customer ability to switch from one product to other.  For example if a customer can easily switch the mobile network, then the level of competition would be very high in the telecommunication sector.

2.    Competitor Exit ability

Second factor for determining the market competition understands the competitor ability to exit the market. In this regard company needs to study the exist barrier of a particular industry.

3.    Industry Set up Cost

This is one of the important factors for determining the competition in the market. If industry set up cost is very high, then competition will be limited. For example there is little competition for airline producing industry.

4.    Entry barriers

Entry requirement of new industry are known entry barriers in the market. There are variety of entry barrier varies industry to industry. Some entry barriers are low profit, already saturated market, high investment requirement, skilled labour, and a leading brand.

5.    Growth Opportunity in the Market

Growth opportunity will attract new entry in the market. Therefore tough competition is expected in the industry, which has high opportunity of growth. Competitor would love to capture some share of the market.

6.    Long term Demand

Industry with long term demand (demand is not going to finish) is expected to have competition all the time, for example clothing and shoe industry. There will always be a monopolistic competition for essential goods.