External Influences - Competitive Situation

The number and power of competitors in a market influences the success of individual firms. Competition is good for consumers; the race against competitors drives down prices and lifts quality (opposed to a monopoly situation).

Well-established markets are usually highly competitive; larger firms strive for low costs and better service to capture more market share. Costs of entry can be very high in these markets.

New products (innovations) are usually less competitive; first-movers are businesses that are the first to offer a good / service. If successful, the business will enjoy high margins (profits) until competitors (fast-followers) enter into the market to provide alternatives for consumers. 

The higher the number of competitors, the greater the challenges to retain a competitive edge.