International competition and e-commerce

International competition occurs when overseas businesses compete for customers in a domestic market — the market within a country itself. Your local shops and suppliers now compete with rivals based anywhere in the world.

Globalisation — the growing connections between countries through trade, transport and communication — increases this foreign competition. As it becomes easier and cheaper to move products across borders, overseas businesses can enter domestic markets and win customers who once bought from home-grown firms. If domestic businesses lose too many sales, they may be driven out of business.

Why the internet has sped this up

The growth of internet use has accelerated international competition. A customer can compare prices from several countries in a few minutes, and an overseas seller can advertise to them directly. Distance and the cost of setting up shops abroad matter far less than they used to, so foreign rivals appear quickly.

Undercutting means beating a rival by charging a lower price. Foreign firms often have lower costs, so they can undercut domestic firms. For example, a small British firm making garden tools finds an overseas manufacturer selling a similar set online for £20 less. Sales fall, the firm cuts a shift, and two staff are made redundant; if the decline continues, the business may close.

E-commerce opens up global markets

E-commerce is buying and selling online. It lets a business reach potential customers anywhere in the world without renting premises overseas. A workshop in Cornwall selling model railway parts can take an order from a customer in New Zealand at 3am, because the website keeps selling while the owner sleeps — so time differences become much less of a barrier. Automatic translation tools reduce language problems, and clear photos and standard card payments make buying from abroad feel as easy as buying nearby.

E-commerce also benefits customers: they get global variety, choosing from products made all over the world, and often lower prices because sellers from many countries compete for their order. A business that offers both wins orders a single shop never could, raising its sales revenue.