Essay

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          Business Competition is essentially a rivalry among business for sales to potential consumers. Competitors are individuals who are selling in the same market. Consumers can choose from different buyers to buy the same product. In order to get the most profit out of the competitions around, the competition mostly depends on the efficiency of the production and product quality. In contrast, the pressure of the competition drives most competition into improving products, but many competitors may have different perception in increasing efficiency of production and product quality. Competition in the microeconomics theory is further divided into four different types of business which are monopolistic competition, perfect competition, monopoly and oligopoly. As in business market, everyone wants their product to be the best and more outstanding than the others.

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          A company can achieve efficiency of production and product quality by following some of the social responsibilities. Efficiency is gained because competition among buyers forces them to pay their maximum demand price by obeying Just in time (JIT) inventory strategy, which aims to increase efficiency and reduce waste by only taking in goods sufficiently during production, therefore inventory cost can be deducted. This method requires that producers are able to accurately forecast demand. Quality of a product is based on many factors which are quality control, quality assurance and obeying Total Quality Management (TQM).

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          In the economic context, there are four types of business competition that contributes in the economic growth. I will further elaborate on the four different types of business competition to determine whether each of these competition encourages the efficiency production and improve product quality. Firstly, looking at the monopoly competition. Monopoly is a market where it only has one seller and many buyers. There is no competition in the market. For example, the only electrical utility company in Malaysia is Tenaga Nasional Berhad (TNB) which provides distribution of electricity throughout Malaysia operates in a natural monopoly which requires a huge investment in capital. The reason why Malaysia having only one electrical utility company is mainly because TNB is under government’s legal protection. “The demand and supply for electricity in Malaysian households depends solely on Tenaga National Berhad.” (Damin, 2012) Electricity is an essential utility and everyone requires electricity daily. The industry must have only one firm in the industry to maintain the production cost to increase. Quality of the product or output of electricity will not be affected as there is only one company to compare from. Small companies which try to engage to this industry may be very difficult as the capital of the company must be large, for example a hydroelectric dam needs approximately 1 billion Ringgit Malaysia to be built. Besides that, government work closely with TNB and already gained trust from the netizens by controlling the tariffs of electricity. Monopoly market does not increase either efficiency of production or product quality because there is no competition.

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         Secondly, oligopoly market is the companies that dominates in the country, usually large companies. Examples of oligopoly companies in Malaysia are the most popular telecommunication companies which are Maxis, Digi, and Celcom. These service providers are always competing in price range and working on marketing strategies to attract more users or subscribers. For example, Digi reduces their service price, and so would other telecommunication companies reduce their prices. On the other hand, these telecommunication companies corporate and work with each other is to assume their control on the market and benefit them from additional profits for a long time. “Furthermore, they would work together to avoid new companies from entering the market, and there are high entry barriers which is caused by copyrights, patents companies, advertisements and the economics of scale” (Maniam, 2013) Oligopoly market may help increase product quality but not always affect the efficiency of production because sellers will work together and competition is not effective.

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          Besides that, perfect competition is a market structure where many firms offer a homogeneous product. There is freedom to enter or exit the market, companies will earn normal profits and prices will set according to the market price and competitive pressure. Perfect competition is when there are many sellers and many buyers, it also depends on supply and demand, but the most important factor is, it only focuses on only one product. For example, the agriculture market in Malaysia, mainly rice, Maniam (2013) provided information that “companies do not have a very comparable factor between other companies as it does not affect by the price or production. The companies have perfect knowledge about the price and cost of the product across the market.” Another example is the fresh fish market, there is no quality control and no need of efficiency of production as all fishes caught are all from the sea which is based on season and area of fishing. Chai (2013) provided information that “sellers must set prices according the market price as they have no market power.

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          Lastly, for monopolistic competition can be most defined as the real-world situation as monopolistic competition usually sells everyday items which is the market with large number of sellers and many buyers to satisfy the same needs. However, sellers aim to have unique traits and different characteristics to stand out of most competitive product, this is called product differentiation. Monopolistic competition is easily seen in the retail industry as it comprises thousands of brands and companies. Smithers (2012) states that “popular retail companies like Zara, Gap and Topshop cannot influence the whole market alone, and market power and popularity is achieved by firms producing differentiated products. In Malaysia, retailers come out with different marketing strategies to boost their sales by doing promotions, giving out product samples, advertising and many more.” Setting Zara, the fashion’s leading retailer worldwide as an example, it can outstand other fashion clothing retailers by launching the newest fashion in the industry at first time. However, Zara do not focus on top quality products, thus saving manufacturing cost moreover setting a lower price as a strategy. Monopolistic competition companies have different marketing strategies that will influence its sales revenue.

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           In conclusion, to sum up my discussion, I disagree with the statement business competition encourages efficiency of production and leads to improved product quality because only one of type of business competition encourages the statement which is monopolistic competition. However, in other words, I agree that monopolistic competition encourages efficiency of production and leads to improved product quality because many similar companies which is under the same industry will have to compete in the market to gain public interest and brand loyalty in order to survive in the monopolistic competition.

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(Word count: 1100 words)

 

 

 

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References

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