Advantages and Disadvantages of Competition in Business

Advantagesand Disadvantages of Competition in Business

Competitionin business has been considered inevitable for the betterment ofconsumers. In case there is no competition in businesses, then therewould be less or no development in the products and services providedfor the social well-being of humans. This makes competition sociallyuseful. Although competition in business has been criticized at timesfor its disadvantages, it has been appreciated for the benefits thatit brings to the society. For example, it is because of competitionin business that the society has been in a position to have productsmanufactured through new and advanced technologies. Therefore,competition seems necessary in the making of progress in the societyand realizing success in business. The aim of this paper is todiscuss the advantages and disadvantages of competition in businessand support the idea that competition is necessary in the making ofprogress.

Advantagesof Competition in Business

Oneof the advantages of competition in business is that it leads tocustomers having an opportunity to have a wide variety of commoditiesto choose from at a lower price. This is most practical forbusinesses competing in the IT industry. In the IT industry,businesses try to use emerging technologies in producing commoditiesthat will offer them a competitive advantage against other businessesin the same industry. Since new technologies are usually costeffective, IT businesses tend to compete by producing commoditiesthat have a competitively low price, while others try to producecommodities that are differentiated from other businesses still at alower price. For instance, because of competition in businessesoffering mobile phones, consumers have been capable of accessingbetter phones at a low price and have a variety to choose from. Thisis an advantage that comes with competition. Another advantage ofcompetition in business is that it promotes innovation. As a resultof competition, businesses have always attempted to come up with newideas that can make customers choose them and not others. Forinstance, businesses dealing with the same products have come up withnew ideas that make their products look better than their rivalbusinesses in order to keep their customers. Some businesses havegone to an extent of adding extra elements in order to make theproducts look even more appealing to their customers. This has givencustomers the freedom of choice. An example, where competition inbusiness has led to innovations entails businesses dealing withcomputer products. These businesses have employed innovation inenhancing their products so that they maintain their competitiveness.In addition, competition in business has made businesses to becomemore efficient in providing services. Since businesses desire to havecustomers back to their businesses, after providing satisfactoryservices, they always tend to compete against each by ensuring thatthey provide services with efficiency. For instance, competition inthe banking industry has made banks become efficient in the provisionof banking services in order to maintain loyalty to their customersand competitiveness in the industry. This is the same case in thehealthcare businesses.

Disadvantagesof Competition in Business

Competitionin business has some disadvantages that make it socially destructive.One of the disadvantages of competition in business is that it maydiscourage other businesses from operations, leading to the creationof oligopolies or monopolies. This is most common in businesses,where the entry cost is exceedingly high. In such a scenario,businesses with large financial muscles may tend to sell theirservices at an exceedingly lower price than its competitors in orderto restrict them from entering the market or continuing with theiroperations. This can lead to the creation of monopolies oroligopolies. The creation of monopolies or oligopolies may become adisadvantage to consumers since they may be forced to pay more forcommodities or services. An example is competition in the airlineindustry. Another disadvantage of competition is that it may lead toexploitation of customers. Sometimes, competition in business maylead to businesses adding decoy options or changing the referencepoint in order to exploit customers. For example, restaurants maysteer consumers to goods and services of higher margin through addingdecoy options like higher priced wine. Besides, businesses offeringcredit card services may take advantage of consumers that do not knowhow interest rates and late fees are calculated. In addition,competition may lead to loss of jobs. For example, in themanufacturing businesses, some businesses may not be in a position tocope with competition and end up closing its operations. This wouldimply that people that provided labor in such businesses would losetheir jobs.

PersonalPosition and Opinion

Competitionis significant for the attainment of progress and success. Sincecompetition promotes innovation, businesses are likely to engage ininnovative aspects as they offer services and commodities. Thisinnovation is critical in the attainment of progress in society sinceas businesses become innovative, more new commodities becomedeveloped. These commodities provide a measure of progress in thesociety. With innovations, society will always have a new directionbecause the products of innovation will help in realizing new ways oftackling needs in the society. Competition is necessary for progressbecause it leads to businesses providing their services withefficiency, which is a driver for progress. For instance, competitionin the healthcare businesses has led to healthcare businessesoffering their services with efficiency. This is an important aspectbecause it promotes the well-being of individuals in society.According to personal opinion, I would support the idea of businessesbeing involved in competition because the society would benefit fromthe competition through people paying less for services andcommodities and having a progress in the development of commodities.Besides, through competition, businesses would achieve high levels ofsuccess because they would always think of how they can servecustomers better.


Despitecompetition in business having the disadvantage of the creation of amonopoly, loss of jobs, and customer exploitation, it is of immensebenefit to customers and society at large. Competition encouragesinnovation, which is critical in the development of new products.Besides, competition helps to promote the freedom of choice sincecustomers are offered with a variety of commodities to choose from,and ensures efficiency in the provision of services. Businesses thatdo not compete do not think of how they can add value to theirservices and products in order to suit the needs of their customers,but business that are in competition constantly think of new ideasthat can enhance their services and products for the satisfaction oftheir customers. Therefore, due to the immense benefits ofcompetition in business, it should be encouraged.