Competing Theories of Business: Profitability and Other Motives

Topics: Rate of return, Profit, Investment Pages: 3 (772 words) Published: February 28, 2012

Competition has always been part of human nature, therefore business as well, as a human creation. The tendency to be better and more successful has been transferred to business in idea of making profit and being successful. This enabled economy, as a whole, to evolve and provide civilization with higher quality and lower prices. In addition, it resulted in technological improvement. Competition led to creating competing theories in business in order to enable more and more businesses to be competitive and make profit. Those theories have been thoroughly researched by experts and developed to the point where they can be applicable and useful. But the question arises whether they are solely enough for a business to achieve the state where they can make profit or does the business have to make individual decisions. This paper will address some of these issues.

Introducing competition
Competition occurs when two or more organizations act independently to supply their products to the same group of consumers. Competition can be direct or indirect. Direct competition exists where organizations produce similar products that appeal to the same group of consumers. Those products are often substitutes. Indirect competition exists when different firms make or sell items which are different but still compete for the same money of consumer’s expenditure. The effect of competition is to bring the consumer a greater variety of products at a lower price. All companies aim to add value to their products and turn some of that value in profit, which can be reinvested into more efficient production. Businesses are strongly affected by competition in a way that the price they charge is limited, the range of services and the nature of the product they sell is influenced by the level of competition. For example, a business selling an inferior product to that of a rival will struggle to...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • business Essay
  • Profitability notes business Research Paper
  • The Theory of the Business Essay
  • business Essay
  • Essay about business
  • Essay about Business
  • Game Theory Applications in Business Essay
  • Business Essay

Become a StudyMode Member

Sign Up - It's Free