The most common market structure is when new firms enter a perfectly competitive market. It is a type of economic environment where there are many buyers and sellers, no individual has any control over the price, and all transactions between buyers and sellers take place at prices that are determined by supply and demand in the marketplace. This article will explore what it means to enter such an environment as well as some strategies for success in this type of market.
Benefits of entering a perfect competition market: It is the most common environment entrepreneurs enter when starting their own company. The major benefit to such an arrangement is that it requires little capital for start-up and will allow you to develop your product or service without breaking the bank.
There are many ways in which new firms can compete on this type of playing field, but all have one thing in common–the need for innovation! You must be continually looking outwards at what others are doing so as not to fall behind the pack. These may take shape as small changes made to manufacturing processes like increasing efficiency and decreasing waste or they could mean adjusting prices based on demand fluctuations over time (e.g., raising prices when demand is high and lowering them when it’s low).
Successful strategies include:
Reducing production costs. This could be done by investing in new machinery or switching to a less costly supplier, for example. – Increasing efficiency of the current operation–productivity gains from greater automation or better use of space are other methods that may work well here! Providing customers with faster delivery times can also go a long way towards increasing profitability.
Introducing something your competitors don’t offer yet–new products and services should always be on your radar screen as they’ll not only generate additional revenue but will allow you to stand out among all competition by utilizing an innovative strategy! Some examples might include introducing seasonal items that are in demand, adding new services to an existing product line (such as a car wash that also offers interior detailing and buffing), or changing the menu at your restaurant.
Diversified production–having different products on hand can help you weather tough times when demand for one of them is down. So if coffee prices are low but orange juice sales are up, you’ll be able to offer both without having to worry about purchasing inventory
The following steps will allow firms entering a perfectly competitive market to increase their profitability:
Increase efficiency by investing in new machinery or switching suppliers; increasing productivity gains from greater automation or better use of space; providing customers with faster delivery time; introducing innovative new products and services; diversifying production to help weather tough times when demand for one of them is down.
Make price cuts to match those of competitors and aggressively pursue positioning strategies
Diversify pricing—charge more on goods with high margins, less on low margin ones; introduce a premium service or product line with higher profit margins
Redefine the market–offer products in different forms (e.g., bulk sale vs convenience items); offer services not currently offered by your competition)
The following are some general considerations that firms should have when entering into a perfectly competitive market:
Know what you’re going up against before making any decisions about marketing strategy so there are no surprises later. Find out how big the other companies in your industry are, how many customers they have, and what kind of prices they charge.
Know your strengths-what can you offer that the competition doesn’t? This market knowledge will help when it comes time to devise a marketing strategy. For example, if you’re an expert in antique furniture restoration but there are no other companies in this industry operating within 100 miles of your location, then you know that potential customers might be more willing to spend money with someone who specializes in their needs than one company offering everything under the sun at low prices. So knowing your strengths gives you some leverage when marketers start competing for attention (e.g., advertising) from these prospective clients by highlighting different advantages each has over others. It also helps when deciding where to advertise, how much to charge for products, and when to introduce new or updated items.