GMAT Essays : AWA / AWM Issue Essay 3.1

Issue Topic 3.1 Competition is invariably advantageous to a business because it compels changes to improve established methods.

Discuss whether you agree or disagree (partially or totally) with the view expressed providing reasons and examples.

ESSAY (Contributed by Jenni)

In this era of cut-throat competition, one must run as fast as one can to merely maintain one's position. Competition can be viewed as healthy or unhealthy. It is the fine line that separates the two that has to be recognized. As the term suggests, unhealthy competition which involves some form of cheating is definitely an undesirable path to tread on and does not lead to the final goal for a company. Healthy competition obviously is always beneficial to a company.

In healthy competition, the company and its employees must be alert to changes and happenings such as the launch of a new product by the competitor, change in sales strategy, or change in pricing policy. The speed with which an organization picks up these changes and reacts to them swiftly and creatively determines whether the company remains part of the competition. What follows then is an ongoing process with a constant effort toward introducing new ideas and products as well as improving quality of products, services, sales and thereby increasing the profitability of the company.

As a result of this, there is no place for complacency to set in and people working for the company become very efficient thanks to the merit-based pay hikes and promotions. The final goal of healthy competition for a company is invariably a bigger market share, increased revenue and higher profits. A competitor forces a company to update and to think differently and innovatively. Many such ideas are required to just remain competitive, and just one such innovative idea could bring about a sea change in the company's fortunes. I recall this incident from the book 'The Alchemist" by the Brazilian author, Paulo Coelho. A merchant had a shop at the top of a hill with beautiful crystal ware; however, business was poor. There were tea-stalls at the bottom of the hill, but none at the top. His employee suggested that refreshing mint tea be served in the crystal glasses and sold to the tired people who climbed the hill. Two things would happen by entering the competitive tea market. One, the people would come to the shop to have tea, and two, some of them would appreciate the crystal ware and end up buying them. The idea was implemented and the business flourished. Eventually, believe it or not, people climbed the hill just to buy crystal ware.

On the other hand, unhealthy competition can ruin a company. Competition based on cheating, bribing or other such practices is unhealthy. The focus here is toward adopting tactics to merely get ahead of the competitor rather than adopting methods toward true improvement in the company. This leaves a company with no time for real research, and innovations are made in the wrong direction. In such a situation, the competitor has only distracted a company from focussing on a clear vision and mission.

Another policy adopted at times is that of reducing prices of products or services. What happens here most of the times is that it becomes economical to use cheaper raw material or manpower due to which quality of the product or service suffers. Hence, any which way, this unhealthy competition does not lead to the final goal of profitability for a company. On the other hand, the company may be incurring huge losses because of this blind one-upmanship.

Thus, it is vital to recognize the type of competition and the path each type of competition leads to. Simply put, the presence of a competitor is always beneficial to a company provided healthy competition prevails. This healthy competition forces a company to change itself in ways that improve its practices.