Market competition

#3. Perfect Competition

Perfect competition is nearly a real-life market competition. In this type of market competition, there are a large number of buyers as well as a large number of sellers. A perfect competition market is the opposite of a monopoly market competition.
In perfect competition, because there is a large number of buyers and sellers. The prices of products are reflected by the supply and demand. Each company earns enough profit so that it can stay in the market.

#4. Monopolistic Competition

Monopolistic competition is a perfect real-life type of market competition. In this type of market competition, there are a large number of sellers as well as buyers.
But in monopolistic competition companies don’t sell identical or homogeneous products; rather they sell products with a slight differentiation. That means these products are not perfect substitutes of one another.
The examples of industries where monopolistic competition exist are textbooks, restaurants, clothing industry, deodorant and fragrance industry, cereal industry, shoe industry, and service industry.

Followings are the features of a monopolistic competitive market.

1. 
   No single company has complete control over the market price of products.
   
2. 
   There is a large number of sellers and buyers in a monopolistically competitive market.
   
3. 
   Consumers don’t differentiate among the products of different competitors based on price.
   
4. 
   A company in the monopolistic market has control over the price of the product that they sell.
   
5. 
   There is a low barrier to enter and exit the market. Any company can enter or leave the market at any time and a low cost.
   
6. 
   The decision of one industry does not influence the decision of other companies in the market.
   
7. 
   There is high demand elasticity in a monopolistically competitive market, which means the demand for a product is highly influenced by the change in the prices. Customers will easily switch to closet alternative when there is a hike in the price of the product that they have been using.
   
8. 
   Companies make a high economic profit when they are new in the market, but as they become old other companies enter the market (due to low barriers to entry) and share the profit of the market.
   
9. 
   In a monopolistic competitive market, companies are required to take the help of advertising and other methods of marketing because people switch from one product to another because the products sold in a monopolistic competitive market are close substitutes.
   

Competition is the energy source of evolution, capitalism, and markets. Competition for scarce resources, customers, ideas, capital, talent, and climbing the ladder, feed the engines of innovation, growth, and creative destruction.

Competition is the collective action of individuals and organizations pursuing gain against each other. There are many ways to define the gain, including value, profit, customers, prestige, competitive advantage, resources, talent, market share, etc.
A market is created when parties exchange goods in the form of products, services, resources, or information in exchange for currency, barter, or something of value. Typically a market involves buyers (customers) and sellers (competitors). The collective purchasing behavior of all buyers creates a demand curve that plots out how much demand there is for a particular good at different prices.
Demand curves are typically downward sloping, meaning at high prices there are fewer buyers and demand for the good, but as the price drops more buyers would come into the market and increase demand for the good. On the flip side, suppliers create a supply curve, which can be created by plotting how much quantity of a particular good suppliers will offer to buyers at different prices.

Now, here is where things get personal for strategic leaders; markets constantly evolve. We live in an ever-changing dynamic world, where demand curves evolve and shift due to changes in tastes and preferences, needs, incomes, substitutes, advertising, and adoption curves. And, supply curves evolve and shift due to competitors’ ability to drive down costs and increase value through innovation, technology, better design, and other structural improvements. As demand and supply curves evolve and shift, prices, total demand, and the number and volume of suppliers can quickly transform the competitive dynamics of a market. Below is a representation of shifts in demand and supply curves, and the corresponding shifts in the equilibrium between quantity and price.
Market theory is not perfect, given we live in an imperfect world. Not everything behaves according to supply, demand and equilibrium prices but 80% of it does happen probably 80% of the time in the real world. And, the important takeaways for strategic leaders hold true, which include: