Market Competition in the Business Flow

Posted by Kingstone Joseph on November 17th, 2016

Markets work better when there is competition. The objective of Competition policies and Competition commission is to regulate markets, promote competition and make markets work better. These policies ensure that there are no monopolies and consumers have a wide array of choices available to them, at the most competitive price. Such policies often lead to innovation in the field of technology.

The major regulatory mechanism for Germany is European Union (EU). EU makes the competitive policies that benefit all the members of the union. EU have framed laws in order to prevent anti-competitive business practices. It reviews all major deals including mergers and acquisitions to keep a check on anti-competitive activities. With consumer welfare being the objective EU has set up guidelines to be followed by all business organisations. EU’s competition law promotes healthy competition and has a positive effect on the organisations working here.

Markets are dynamic i.e., they always changing. Factors such as demand, supply, and elasticity and customer perceptions have effect on long term and short term decisions.

In Perfect competition, Price is determined by both buyers and sellers. It is the point where both agree to exchange and the price is called Equilibrium price. For Example: Mobile phones the sellers keep testing the market with different prices and consumers generally wait to buy until the price is just right. This leads to Equilibrium price.

Seasonality also plays an important role in pricing. For example, during rainy season the price of the umbrellas rises as there is a rise in demand, while rest of the year it comes down.

Merger & Acquisition also lead to change in demand. The combination of synergies increases competencies and usually offer better product. Recent acquisition of Skype by Facebook is good example. It was a tactical decision by Facebook too in response to Google. Tata Motors acquiring Land rover and Jaguar is another such example where competencies where combined and a better product.