The Scope And Effect Of Competition On Entrepreneurship

With the growth of opportunities has come the growth of people who are ready to take the plunge. Perhaps a century back when an individual decided to set up something of his/her own he/she simply had to think about the sufficiency of capital and the saleability of the good or service that would be offered by the individual. Since then much has changed. The expansion and development of the market has made the setting up of even a simple venture an intricate and difficult task it is now not enough just to have a vision of sufficient magnitude. Practical aspects have to be given careful thought.

There is nothing new under the sun is a much used phrase which is in part very true. All entrepreneurs do not come with unique ideas of revolutionary technologies or services. Some-times joining the bandwagon is a more practical choice. If the industry provides promise and one has the sufficient expertise it is really not a bad idea.


In the above scenario the questions that an entrepreneur needs to ask himself would include the following:

  • Am I offering an innovative product or am I offering a product in existence?
  • What is the density of availability and of the providers of these goods or services?
  • Will I have the sufficient capital to involve in promotional activities if such density is high?
  • What could be the life cycle of my product or service?
  • Will it be long enough to get adequate ROI in the current competitive environment?
  • What is the scope for entry and exit of firms in the industry I am entering?

These additional criteria would definitely require the use of market research techniques in the form of surveys and other mediums. It is possible that professional assistance for such research may also become necessary.

To recognize competition as a factor while setting up ones own business has become critical. It may serve as the decisive factor in the survival and success of a business. To go by actual numerical evidence such as market share, consumer preference and market penetration is important to decide whether to make the plunge or not.

There is sufficient evidence of this phenomenon in every aspect of the market. The example of a small town market would be appropriate here. Say a certain individual sets up a grocery shop and is the first person to do so in the particular locality. After a couple of years another entrepreneur seeing the profitability of the business decides to do the same. Loyal customers remain with first store but there will be many who will go for the new store maybe because of its competitive pricing. This will ensure that the new store makes profit without harming the profitability of the first store substantially. After a certain period two more entrepreneurs decide to set up shop. This is the beginning of the glut and a signal that there is no more market share left to take. Despite this if more entrepreneurs without doing sufficient research enter the arena they will become sore losers. In this scenario the customers will prefer only the old players or diffusion will take place causing a loss to all the players. It is therefore clearly an unwise decision to enter such a market scenario.

It is also important to focus on the advantages of competition in an entrepreneurial environment. Competition is sure to keep any business robust and ready to face challenges. This would lead to better product and service quality and ensure customer preference when it comes to gaining market share.

Without competition a business might become sluggish. It is important to keep up with the market if a venture is to be actually commended for the service it provides.

An entrepreneur facing competition and who is an existing market player needs to ask himself the following questions:

  • Am I ready for the competition?
  • Are other contenders proving a better good or service?
  • Is my technology up to date to keep up with the developments in the market?
  • Is my capital sustainable to remind customers of my existence?
  • How much margin do I possess and how much can I currently sacrifice?
  • Is it wiser to exit now than continue and incur potential losses?


It is also in part necessary for an entrepreneur to be competitive. It may not be possible to find a competition free environment.

Guest Article by Divya Anne Selvaraj, Maconza

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