Why Competition Is Important in Business and How to Benefit From It

This post may contain affiliate links and I may receive a small commission if you make a purchase using these links – at no extra cost for you. Please read my disclaimer here.

Business rivalries are nothing new.

Pepsi has been in competition with Coke for as long as anyone can remember. Marvel Comics and DC Comics have been butting heads for a long time that they have a fan base that hates each other just as much.

Then, there's McDonald's versus Burger King. 

You get the picture, right?

Rivalries in the business landscape are necessary. In some cases, a bit of competition is healthy for both the company and its clients. 

This article aims to answer the question of why competition is important in business and how consumers can benefit from it.

Importance of economic competition in the market

The federal antitrust laws of the United States aim to protect competition, which shows just how vital “pro-competition” is in the marketplace.

Why Competition Is Important in Business and How to Benefit From It

source: (https://www.imd.org/research-knowledge/articles/the-competitiveness-challenge/)

It's important for companies, especially those operating in the open marketplace, to compete in providing consumers with high-quality goods at a lower price.

Because without competitors: 

  • The industry would be less competitive. 
  • Goods and services would be of lower quality and then marketed for higher prices 
  • Firms would lack the motivation to strive for excellence and to operate as efficiently as possible. 
  • Innovation and advancements would not be pursued. 
  • Lack of fear in losing a sale to a competitor, resulting in bad sales practices and customer service.

All of these result in a marketplace with substandard yet expensive offers. Thus, the important role competitors play.

With good business rivalry, jobs and businesses are saved and the purchasing power of consumers is protected.

Moreover, it opens doors for individuals and aspiring entrepreneurs to enter the marketplace.

But there are always two sides to the story.

The many faces of business competition

As a business, you're likely to compete with other firms in your industry in various aspects.

Quality of products and/or services

What better way to make a sale than to market the quality and features of what you're offering?

This is where you tell consumers and potential buyers about how your goods are better than the competition. 

In this level of rivalry, great ideas and innovations are born. A good example is appliances that are more energy-efficient than other brands. 

You can even market your services as a package for a price of one, where there are more inclusions than your competitors.

Excellent customer experience

This is one of the intangible aspects of a business that can make a huge difference. People prefer to work with a company that can provide full customer support in a courteous and intuitive manner. 

Your selling point could be that your customer representatives know what clients need before they realize it.

Competitive pricing

If not for similar products and services competing on price, consumers would be paying hugely for something low-end.


A box of pizza, for example, would cost you a lot more if not for Pizza Hut or Domino's competing for a share of the market. 

It is also in this aspect that brands considered superior can charge premium rates. If you happen to be in the same bracket, profit is substantial.

Lower unit cost

In order to drive competition out of the market, some producers lower the unit costs. While this doesn't always work in ousting competitors, it does help a business create excellent products and customer service.

This is why competing for unit costs provides businesses with a significant advantage.

Brand awareness

It's a fact that consumers tend to choose products and services that they know, often by experience, as reliable and credible.


This is why companies compete to establish and sustain a reputable brand.

For consumers, this means that the products and services they receive are maintained at high quality.

Otherwise, a brand will suffer from negative feedback and backlash. 

Prime location

In business, location is everything. 

Entrepreneurs often compete for the best spot before they put up their storefront. They take into consideration foot traffic, accessibility, safety, and other factors. 

Whoever gets the prime location first, has the biggest advantage.

Number of sales closed

A salesforce that can close a significant number of sales provides a business with a competitive advantage.

This is especially true for business-to-business services and similar industries.

In this aspect, companies work hard to train their sales team to ensure they deal with customers properly. Clients, in turn, get to enjoy the best treatment.

Established technology and standards

The competition between tech companies or even between hydrogen and electric-powered cars fuels innovation and advancements.

Life and living are so much better now with better technology and improved standards. Additionally, created technological products and software make our lives easier in many spheres from banking to transportation and logistics.

Brand/company reputation

Companies compete to establish a good reputation. Because when a company is known for its quality, reliability, and sustainability, they often get the biggest share of the pie.

After all, consumers tend to buy products and services from reputable businesses

If not for these types of competitions, the business landscape would be less fun for both company owners and consumers. This goes to show that rivalries have their benefits.

When is competition good for business?

There are many ways that it might affect business in a healthy and beneficial way.


If you don't look at your competitor as the enemy, it serves a good purpose.

As an inspiration

Are you having a hard time figuring out how to rank high on search engines? Are you wondering why a rival business is making more sales than you?

The answer lies in what your competitor is doing. If you want to write an ebook, for example, take a look at what your competitors are selling and write something similar but better.

You can also look at a different perspective and take a different approach. 

If all the books sold are designed for advanced users, for example, write one for beginners. You'll be tapping into a different market that your competition doesn't cater to.

The same is true if you want to drive traffic through advertising. Since you're likely to share the same type of target market, find out what strategies they used to monetize their website or for Google AdSense that engages clients.

As a source of effective strategies

If your competition is successful in your industry, find out what they're doing right.

quality products
  • What marketing techniques do they employ?
  • Do they use a specific type of marketing material?
  • Who is their target audience?
  • What keywords do they rank for?
  • What content have they published that has the highest engagement?

You can then follow their techniques and enjoy the same success.

Of course, there's always the possibility that you won't succeed. But copying them increases your chance of gaining an edge over them. 

Here’s a good example.

You want to start a blog to market an affiliate web hosting program. Search online for similar blogs with huge traffic daily. Then, look into what type of content is published and duplicate it.

As a fount of new ideas

Even if your competition is very successful, you don't need to always copy them to duplicate their success. Instead, it's crucial to conduct competitor analysis and prepare a competitive intelligence report to identify their strengths and weaknesses.

You can take on a different direction based on competitor analysis.

Because there might be some aspects of a business that they missed but presents you with an engine for success. 

For instance, you want to open a courier service that directly competes against an existing provider. You noticed that many of its parcels and packages are shipped in plain brown boxes, so you decided to offer customers an option to use custom design boxes.

It was a hit for your clients, and you gain free advertising in the process.

As a weapon to use

In business, a company is bound to have weaknesses. Find out what they are and use them to your advantage.

Study the sales process, prices and pricing, vendors and suppliers used, and the website layout, among other things. Figure out what is lacking or where there’s something better that can be done. 

Based on your findings, address those business weaknesses. 

What does this look like in action?

For example, you want to create a travel blog, which is something everyone seems to be doing. 

When you check out the competition, focus on:

  • Domain authority
  • Accessibility, indexability, and navigability
  • User experience
  • Branding strategies
  • Content development and marketing
  • Social media marketing

Rank these factors from most to the least important and work out a plan of attack. When it's time to create your own blog, make sure it’s easy to navigate by both the readers and crawlers.

Work to increase domain authority by linking to and from authority pages. Keep site errors to a minimum or zero.

As a means to keep customers satisfied

Find out what customers are saying about your competitor. Are they happy or unhappy about the products or services sold? 

Because the goal is to boost customer satisfaction, you should keep track of a rival's dissatisfied customers. Check out product reviews and make a list of common complaints and negative feedback. 

Social media sites, such as Facebook and Twitter, and forums, can provide you with the materials you need.

What can you do with the information, then?

For instance, you sell electric scooters similar to what your competitor offers. You notice that most customers complain or wish that an extra charger is shipped with the product. 

You may spend extra to make this happen but the returns are huge.

Customers will love you for it and recommend your product instead.

As a partner

If you tried to compete and failed, consider sharing your competitor’s success. This is especially true if all your efforts have gone to waste.

business partners

The same is true if your competition has more resources than you like a huge team of SEO experts. No need to bleed more money and time than you already did.

A good way to do this is to partner with your competitor and earn a commission in the process.

Say, for instance, you're selling fishing rods but you're not making a huge profit because you can't outrank your competition for the same keywords being targeted.

Find out if your rival offers an affiliate program and sign up for it.

Every time you refer a customer and make a sale, you not only earn a commission but also increase your own website's exposure.

As a repackaged idea

You don't need to reinvent the wheel, so to speak, in order to differentiate yourself from your industry.

If your competitor is doing well in the market, repackage their products and make it your own.

For example, you want to market production music that radio stations, film companies, and voiceover artists need for their projects. But, there's already an established company doing the exact same thing. 

Well, why not sell them as something else, like music for meditation?

If there is a good market for it, redesign your website and marketing campaign towards this direction. 

Be careful though, since it's going to be a challenge to develop a creative approach to the process.

However, if you manage to create something customers have never seen before, you have the potential to benefit from your competitor's customer base.

As a data source for competitive analysis

Using tools, such as charts and graphs or Google keyword research tools and analytics, will allow you to see a clear picture of what they are doing and not doing.

why competition is important

With enough research, you will gain an edge over certain things that the other company is missing. 

A likely scenario would be, you run a competitive analysis of every single product that a competitor sells. You discover that there is one or two keywords that they are not targeting but brings in a few people a month. 

If you overhaul and relaunch your site using those targeted keywords, you have the potential to immediately attract traffic. The odds of you gaining thousands of visitors every month will also increase. 

So even when a competitive analysis is time-consuming and exhausting to do, it's one of the things that will make competition good for business

Now, among the pointers listed above, some of them put you at risk of the adverse effects of business competition. You could end up focusing too much on your competitor rather than on your company.

Digging too much into what your rival is doing could also lead to you imitating them.

When is competition bad for business?

Because of competition, your market share and customer base become limited if you're just starting out. Both are also reduced if your competitor is trying to gain an advantage over you. 

These are not the only ways that it affects your business negatively, however.

Lower ROI

You may be forced to lower the prices of your products and services in order to stay competitive in a competitive market. The result is reduced returns on each item.

What's the point of doing business if there's no profit?

Under those circumstances, competition is unhealthy and bad for your organization.

time cost quality

Unsustainable levels of inventory

When there are too many companies producing or selling the same products, the market will be flooded and saturated in no time.

This can lead to the overproduction of goods. When inventory piles up, your capital will be tied to items that are just gathering dust.

Shortage of cash

Because of your inventory not earning a profit, you're unlikely to have enough cash on hand. This leaves you with nothing to pay for urgent expenses, such as payroll and rent.

If inventory levels remain high for an extended period, you may have to lay off workers or reduce work hours. 

The negative impact of economic competition not only affects the business but also the customers.

If companies go out of business because they can no longer compete against the biggest players in the market, consumer choices become limited. 

Without competition, monopoly sets in and product quality will suffer.

To compete or to dominate?

Although competition is important and good for business, your ultimate goal should be to dominate.

It's the best way to have the power to set the pace and get ahead in the race for unstoppable success in your industry. 

So don't just stop studying them. Study the dominant players in the market too. Then, work to establish your dominance. 

How do you do this? 

Turn yourself and your business as the go-to expert and company in your industry. Don't be afraid to promote your business as such but be sure to deliver so you can establish dominance over your competition. 

One way to do this is to find ways to solve your target market's pain points in a way that's completely new. This aligns with the strategy to repackage a rival's offer into something your own. 

Then, invest in new growth opportunities, so you're not stuck with what you and your competitors currently share on the market.

If you beat them to new ideas, you're sure to gain an edge. 

Think you can handle more?

You should try your hand at business transformation. It takes hard work and a strong resolve to be the next transformative company and product.

But when you succeed, you are sure to dominate the market.

Why competition is important in business: conclusion

Competition has good and bad effects, but that's the reality of the commercial and industrial landscape. You either lose, win, or dominate the competition. 

Do you think business competition is healthy?

Have you succumbed to market rivalry?

Let us know in the comments.

About the author 

Peter Keszegh

Most people write this part in the third person but I won't. You're at the right place if you want to start or grow your online business. When I'm not busy scaling up my own or other people' businesses, you'll find me trying out new things and discovering new places. Connect with me on Facebook, just let me know how I can help.

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}