What is competition? When I think of this term it usually coincides with sports and games I would play with either my friends or family. It’s not necessarily a word that I would immediately pin to economics, probably because I try to avoid this subject as if it were the plague reincarnate. However, BusinessDictionary.com defined it as a “rivalry in which every seller tries to get what other sellers are seeking at the same time: sales, profit, and market shares by offering the best practicable combination of price, quality, and service…[and as] a regulatory function in balancing demand and supply.” To put it in laymen’s terms, economically when two entities battle to see who is better , then end result for the better side one hundred percent of the time prevailing in sales and profit.
For example, two fast food chains such as McDonald’s and Burger King have been in economic competition for years. The two company’s strive to one up the other in the previously noted categories. The quite simply compete. The proverbial needle has been pinned to either company as they excel fiscally. The fast food industry makes a perfect example for economic competition due to how relate-able they are. Who hasn’t had a Big Mac or a Whooper right? the two of them track daily , weekly, monthly, and annually their sales and profits. These could change drastically due to different trends and variables that they may or may not control . Such examples would be menu items, price, advertising, and customer service in their restaurants. They make millions of dollars each day and yet they are so closely tied within competing with each other.
Now that we have covered the categories, doesn’t mean their aren’t loopholes right? For instance , not every company who does an immense amount of sales is necessarily profitable. McDonald’s may make 10 million everyday and Burger king may make 8 million. But, if it costs McDonald’s 11 million to pay their staff and cover food costs and manager their properties and it takes 7 million for Burger king to do the same thing, Burger king would be winning their economic competition by definition. Burger king is Turning a profit, they are in the green and making money. McDonald’s on the other hand in the front end of the business may look like they are winning this fiscal fast food battle but in order to really find out who’s winning you have to take a closer look at the profits, or lack there of. When we analyze these numbers we can see that Burger king is netting 1 million dollars in profit and McDonald’s is in for a net loss of 1 million dollars.
These can all be connected by to the black letter definition of what economic competition it. An example of that would be supply and demand. A company may have an immense demand for a product, and they may sell that product to a large sampling of consumers. Different factors would have to line up before one would be able to definitively say whether or not they were profitable. You have to ask the important questions. How much does the product cost to make? do you have enough inventory to accommodate for the demand. Does the company know well enough when not to flood the market with the product with more supply so that the demand does not decrease. When two companies compete in the same space, they ask the same things. The battle. They factor in all of the variables needed to prevail in these categories. When I express what it means to have economic competition, these are all of the things that I find relevant and pertain to what the definition that one could easily understand and interpret would be.