Exam 4: Managing in the Global Environment

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One of the most important forces an organization confronts in its task environment is competitors. Competitors are organizations that produce goods and services that are similar and comparable to a particular organization's goods and services. In other words, competitors are organizations trying to attract the same customers. Rivalry between competitors is potentially the most threatening force managers must deal with. A high level of rivalry typically results in price competition, and falling prices reduce customer revenues and profits. Although extensive rivalry between existing competitors is a major threat to profitability, so is the potential for new competitors to enter the task environment. Potential competitors are organizations that are not presently in a task environment but have the resources to enter if they so choose. When new competitors enter an industry, competition increases, and prices and profits decrease.
I believe that having active competitors in a business environment is challenging to managers because it causes increased pressure to reduce costs, improve products, and enlarge the customer base. However, all those pressures benefit the customer because cheaper, better products become available. One example of this is the gyms in my town. When a new gym opened, the existing gym bought new workout machines, offered more classes, and discounted membership fees. Other gym goers and I benefited from this increased competition, but employees of the existing gym probably worried about how their business would be affected.