The greater the competition, the more difficult it is to forecast since by their action competitors can use the forecast to change the course of future events, thus invalidating the forecasts.
Attempts to foretell the future are as old as mankind. In competitive marketing, however, such attempts are particularly significant because they can influence those cost and price decisions resulting from the experience curve. In turn, they may impact the company strategy.
The forecast necessary must predict market sales potential. This prediction is based not only in general economic conditions but also on the interplay of total competitive activity – which often cause an explosion of the total market before deciding the individual strengths and weakness of the main competitors in the market place.
Increasing the degree of competition in industry then becomes an ideal or a goal to be aimed for.
In the 1950s, Lipsey and Lancaster proved that greater competition might lead to a loss of welfare in the economy if at least one industry in the economy was not perfectly competitive.
This ‘theory of the second best’ rebutted the general assumption prevalent at the time that greater competition was always good whilst greater monopoly was always bad.
Competition: the factor systematically influence predictability of future
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