A perfectly competitive market is one which deals with a homogeneous product and in which there are so many buyers and sellers that no individual buyer or seller can individually influence the price of the product. There exists a "market price" at which all sellers sell the product and at which all buyers buy it. Except during periods of adjustment due to changes in the total supply or demand, no individual has any incentive to bid one penny higher or lower than the "market price."
In reality, a truly perfectly competitive market is an abstraction that does not exist in its purity on planet Earth. The paradigmatic product that comes very close is wheat. It's all pretty much the same thing, there are millions of buyers and sellers, and no individual buyer or seller can significantly influence the market price (although with the rise of "big agribusiness" this may be changing).
What does that mean for you and your business is that you have to operate a little different, offer your customers something that say you apart from you competition. There is easy entry and exit to the market place because of low startup cost.
The drawback is that there are too many companies doing the same thing which give the customer a lot of choices. Prices and services have to be competitive and the atmosphere is almost cut throat.
In reality, a truly perfectly competitive market is an abstraction that does not exist in its purity on planet Earth. The paradigmatic product that comes very close is wheat. It's all pretty much the same thing, there are millions of buyers and sellers, and no individual buyer or seller can significantly influence the market price (although with the rise of "big agribusiness" this may be changing).
What does that mean for you and your business is that you have to operate a little different, offer your customers something that say you apart from you competition. There is easy entry and exit to the market place because of low startup cost.
The drawback is that there are too many companies doing the same thing which give the customer a lot of choices. Prices and services have to be competitive and the atmosphere is almost cut throat.
To survive and make money in this make businesses have to offer something unique to its customers. Something that only they can give the customer, like customer service or a rebate or a free analysis.
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