General characteristics of the competition
General characteristics of the competition,competition is an economic phenomenon, which refers to such a state of a free market economy, where firms, independently, strive to gain as many buyers, to achieve their objectives, such as: profit maximization, of sales, market sharing etc. Competition creates an economic environment where firms can operate freely in achieving these objectives, while consumers, in turn, benefit from prices set based on the interaction between the forces of supply and those of supply. Competition is not an end in itself, but a necessary instrument in achieving the highest levels of social welfare, rewarding companies that offer lower prices, better quality and greater choice for consumers.
It creates a climate of uncertainty, which forces companies to adopt aggressive competitive strategies in response to the movements of their current or potential rivals, thus helping to realize those goods or services for which consumers have the most need.Competition is a situation in a market in which the sellers of a product or service try to independently attract buyers to achieve a certain trading objective, for example, profits, sales and / or market share. Competitive rivalry between firms can exist in terms of price, quality, service, or a combination of them and other factors that customers can value. Free and undistributed competition is the cornerstone of a market economy and the Competition Authority exercises the necessary powers to oversee the conduct of companies that violate competition as well as to control various normative acts, for the implementation of the law on protection of competition.
If competitive mechanisms are hampered by an unnecessary restrictive regulation, which prevents the entry of more efficient enterprises into the market, there would also be a slowdown in consumer demand, which would significantly reduce the overall efficiency of the economic system. Lack of competition can hamper innovation and hamper research and development efforts. Enterprises that are part of a competitive market, require innovation to challenge existing enterprises, to realize as much profit as possible and better respond to the growing market demand. A competitive environment ensures that there will be more than one potential entry into the “race” to produce a new product or provide a better service. As a result, strong competition is the main driver of productivity growth and ensures that the market remains competitive.
At the same time, it has a positive effect on consumers, because the latter benefit from the possibility of choices, quality, fair prices and new products. Competition is the main driver of competitiveness between firms and leads to the economic growth of a country. It forces inefficient firms to exit the market and redistributes productive resources from failed firms to the strongest competitors. In order to build a more competitive economy, the implementation of competition law and competition policy plays an important role.
Competition policy includes the totality of measures and the legal framework within which enterprises operating in the private or public sector can freely exercise, on the basis of free, effective and fair competition, their economic activity. Competition policy is based on the judgment that a competitive market leads to the achievement of productive efficiency, fulfilling the condition that the price is equal to the total cost per unit of production, as well as the allocation and consumer efficiency, thus realizing the condition that the price equals the marginal cost. In contrast, non-competitive markets, mainly monopolies, do not yield these results and are therefore generally undesirable for society. The drafting of the national competition policy is based on law no. 9121, dated 28.7.2003 “On the protection of competition” and is the task of the Competition Authority. The basic mission of competition policy is to correct market distortions, keeping in mind that a competitive market generates development and enhances the overall well-being of our society.