Competitive environment definition
Competitive environment in economics and marketing is a dynamic system within a defined marketplace where different businesses compete. This system has its rules and regulations and is affected by numerous factors, such as the number and type of competitors, barriers to entry, and more.
How competitive environment affects businesses
No business exists in a vacuum. Typically, there are multiple external forces that affect it in various aspects. One of the most powerful among these forces is competition.
Generally, competition is good for both businesses and customers. For the former, it creates incentives for innovation and provides the push to outperform their rivals. For the latter, competition ensures that they get quality products at reasonable prices.
Yet competition also makes life harder for businesses, especially new ones. Therefore, it’s vital for them to understand their competitive environment, analyze it, and take it into account when outlining strategies.