Why competition is important

The main factors that effect consumer choice are:

• Price
• Product range
• Customer service

For example, if you wanted to buy a computer game on the high street, you would select the shop that sells the product at the lowest price, stocks the widest variety and has friendly and helpful staff. Competition helps improve these factors.

Price

If there is only one retailer the game may not be competitively priced. This is called a monopoly. If there are several retailers, each retailer will lower the price in an attempt to win customers. It is illegal for retailers to agree between themselves to fix a price. They must compete for business.

Product range

In order to attract and satisfy customers, software companies need to produce products that are superior to their competitors.

Customer service

Retailers that provide customers with a helpful and friendly service will win their loyalty.