Business Studies

Discuss how a competitor’s reaction to your company’s marketing strategy could potentially change your sales and profits. Illustrate using a specific example. In replies to peers, provide additional examples that illustrate the ideas presented.

ANSWER

Effects of Competition on a Business’s Sales and Profits

Introduction

A competitive environment relates to how competition affects a business and the practices that the business adopts to enable it to compete effectively. All businesses are affected in some way by their competitors, which impacts the overall decisions that an enterprise makes. Understanding the strengths and weaknesses of competitors is crucial, as well as knowing the quality of goods and services offered, their prices, and customer service. According to Adiguzel (2020), businesses need to protect their strategies from their competitors and get the most they can about their competitors. Competitors’ reactions to a business marketing strategy may significantly impact the sales and profits made. For example, suppose a business introduces advanced features to their goods and services. In that case, their competitors may introduce similar or better features, leading to reduced sales and profits in the business.

Competition between businesses benefits the consumers since the enterprises will provide quality goods and services at a favorable price to attract more customers. Additionally, the competition keeps companies on their toes to introduce new ideas and features, thus improve their products and beat their competition. Therefore, enterprises need to anticipate and understand the actions of their competitors to effectively position their products and services (Adiguzel, 2020). Businesses will always desire to outdo their rivals, and consumers will go for the best quality offered at an affordable price.

Competitors’ reaction to a company’s marketing strategy could lead to a reduction in sales and profits. Take, for instance, companies A and B offering similar products. Company B could study company A’s marketing strategy, such as their prices, customer service, unique selling points (USP), convenience, and quality of products, then initiate attractive measures to get a more significant market share. However, some competition may be problematic if, for example, the companies are located in the same area; company B may set its price at such a low level that B is unable to compete.

Nokia emerged in Finland in 1865 as a well-established mobile company and led the global market share for a decade, but failed to keep up with its competitors, and its dominance declined. Nokia was the first brand of mobile phones in the market such that its operating profit moved from $1billion in 1995 to $4billion in 1999 (Panigrahi & Vijay, 2020). The company had a young, energetic, visionary, and creative leadership that understood the then-market concepts, its needs, and the adoption curve. However, within a decade, the company lost its agility, innovativeness resulting in a decline in its market value by 90% in 2011 (Panigrahi & Vijay, 2020). Nokia made some effort to introduce new ideas and products, but it was too late to keep up with its competitors.

Nokia’s competitors saw a gap in the market and made an effort to fill it, while Nokia remained adamant, failing to adapt to change. Panigrahi & Vijay (2020) state that Apple and Blackberry redefined their smartphones, introducing touch screens, while android proved that software is more important than hardware. In India, brands introduced attractive features such as dual sim, long-lasting battery, and low-end QWERTY phones. By 2008, brands such as HTC, Samsung, and Sony had gained ways to extend their market share, building economical, user-friendly, innovative models (Panigrahi & Vijay, 2020). Nokia failed to adapt to the changes, assuming that the touch screen phones would not have a scope in the future. Its entrance into the windows platform was too late, thus gave up its $7.1billion to Microsoft (Panigrahi & Vijay, 2020). Had Nokia countered its competitors’ efforts early enough, accepted the smartphone era was here to stay and introduced new marketing strategies, it could not have failed as it did.

Conclusion

Competition is essential for the successful operation of a market economy. Through competition, businesses strive to provide the best services to consumers. Further, competition drives innovation as competitors try to outdo each other. Competitor’s reaction to a business’s marketing strategy may lead to a decline in sales and profits; therefore, a company has to always be on the lookout to be creative and innovative to counter competitor’s efforts.

References

Adiguzel, Z. (2020). Examining the Effects of Strategies, Competition Intelligence, and Risk         Culture on Business Performance in International Enterprises in Handbook of Research         on Decision-Making Techniques in Financial Marketing. IGI Global.

DOI:10.4018/978-1-7998-2559-3.ch006

Panigrahi, C. M., & Vijay, J. (2020). Failure of Nokia–Lessons from Losers. Published in the       book’ Emerging Issues in Business Management’. New Delhi: National Press Associates.

https://www.researchgate.net/publication/343361872