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What Is a Competitive Structure?

Esther Ejim
Esther Ejim

Competitive structure refers to a system used by an organization to evaluate its goods or services with the aim of finding out the way in which it compares to similar offerings in a competitive market. The evaluation of the product or service through the use of competitive structure may involve the evaluation or analysis of other competitors and how easy or difficult it is to penetrate a targeted market. It may also require an examination of the levels of supply and demand in relation to the product.

Established companies may make use of the study of competitive structure to analyze their products, while prospective investors may use the same method to study a market with the aim of finding out the state of the market in relation to their chances for success. One factor prospective entrants study during a competitive structure analysis is the ease of entry into a new market. For instance, a company that wants to venture into the energy sector may find there are some companies that with a kind of exclusionary hold on the sector, making it somewhat hard for new entrants to penetrate in any meaningful way.

Businesswoman talking on a mobile phone
Businesswoman talking on a mobile phone

Some companies may decide to carry out periodic studies regarding the current state of their products on the market in relation to that of other competitors. For instance, a company that manufactures toilet paper may carry out different studies, such as a study of the consumer base, spending habits and consumer demographic. This information will help the company find out the preferences of consumers in relation to other offerings by competitors. The information gained during this competitive structure analysis will help the company make any necessary changes to its products with the aim at making the product stand out from that of the competitors.

Another type of competitive structure study that companies must carry out as part of their environmental study is a study of the number of competitors the company has in the area under consideration. For example, if the company that produces toilet paper rolls is situated in America, it will need to find out the number of companies that produce similar products in that country with the aim of learning the market saturation. This study may also be done on a smaller or more immediate level, such as finding out the number of such companies in the state instead of an entire country or even internationally. The levels of supply or demand simply means a study of the competitive structure to find out if the level of supply of the product is at par with the demand from consumers, or if the demand for consumers is at par with the level of supply by producers.

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