Question

What would be evidence of serious competition between firms in an industry? Can you identify two highly competitive industries?

Short answer

Evidence of serious competition between firms in an industry includes frequent price adjustments, high innovation rates, a large number of players, aggressive advertising, mergers and acquisitions, low market concentration, and low barriers to entry. Two highly competitive industries are the smartphone manufacturing industry, with companies like Apple, Samsung, and Huawei, and the fast-food industry, including McDonald's, Burger King, and KFC. Both industries showcase continuous innovation, aggressive marketing campaigns, and intense competition for market share.

Step-by-step solution

Identifying evidence of serious competition between firms in an industry

Evidence of serious competition between firms in an industry can include the following factors: 1. Frequent price adjustments: In a competitive industry, firms frequently adjust their prices in response to competitor's prices to remain appealing to their customer base. 2. High innovation rates: Competitive industries tend to have firms that continuously invest in research and development to improve products and services, pushing rivals to innovate as well. 3. Large number of players: The presence of multiple players in the industry indicates intense competition, as each company must work hard to stand out from the rest. 4. Aggressive advertising: In a competitive industry, firms often engage in aggressive advertising campaigns to attract customers and differentiate from competitors. 5. Mergers and acquisitions: To gain a competitive edge in the market, firms might acquire or merge with other companies, which can be indicative of a highly competitive industry. 6. Low market concentration: In a competitive industry, there is typically a low market concentration, meaning that no single firm has a dominant market share, and many companies have a smaller share of the market. 7. Low barriers to entry: The ease with which new firms can enter the market is another indicator of strong competition in an industry. When there are low barriers to entry, like affordable start-up costs or minimal legal restrictions, competition thrives as firms constantly work to outdo one another.

Identifying two highly competitive industries

Based on the factors mentioned above, two highly competitive industries are: 1. Smartphone manufacturing industry: This industry has witnessed rapid technological advancements, with numerous players such as Apple, Samsung, and Huawei constantly trying to improve their products with new innovations. Companies frequently update their pricing strategies and use aggressive marketing campaigns to maintain or gain market share. 2. Fast-food industry: Companies such as McDonald's, Burger King, and KFC are always working to improve their menus, accommodate changing consumer tastes, and run attention-grabbing ad campaigns to expand their customer base. Many fast food chains are constantly adjusting their prices and engaging in promotional offers to stay ahead of their competitors. These elements, combined with relatively low barriers to entry, make the fast-food industry highly competitive.