Its market share and operating profits depend on how competitive that market is. The best way to understand competition in an industry is to analyze its structure. They influence one another to varying degrees, depending on growth, cyclicality and other factors. Because they affect prices and costs in an industry, they also affect its profitability. Companies use pricing, advertising, promotions, new features, new products, quality, service and other means to compete with one another.
Price competition is the easiest type to match and the most destabilizing.
Buyers bargain for lower prices, higher quality, or more service. They encourage competition by pitting rivals against one another. Bargaining for higher input prices Suppliers can raise prices or reduce quality. They affect profitability and competition in an industry by increasing its costs. New competitors come into the industry New entrants add competitive resources to an industry.