Any time we talk about perfection, we present ourselves with a big problem. This is especially because we are living in a world that has so much been tainted by human selfishness that it is almost impossible to attain perfection especially in the business field. Nevertheless, we can talk about perfect competition in business by considering several parameters. Generally, perfect competition can be said to occur when there is no participant involved in the business that has power to influence the market. In this kind of a scenario, no one has the power to influence the price or the quality of goods or services provided on the market. The market should be governed only by demand and supply which is not influenced or controlled intentionally by anyone.
Several determinants can be used to describe a perfect market. Some of those determinants include the following. One, there should exist a very large number (almost infinite) of buyers as well as sellers. Two, there should be no barriers that can prevent someone from entering or leaving the market. Besides, every participant in the market should have all the information that is needed to participate in the market. It is also important that there should be no costs incurred in transaction processes. Another characteristic that can be seen in a perfect market is the presence of products with similar characteristics and quality.
A stock market is a classic example of perfect competition provided firms do not influence the price of stocks intentionally. This market has an infinite number of buyers and sellers apart from exhibiting all the other characterized of a perfect market model. Another example of a perfect market can be seen in third world countries food market in the streets. This market has a large number of buyers and sellers, has no entry and exit barriers and has products with similar quality and characteristics among other desirable characteristics displayed in perfect competition.
Globalization, which is the integration of global economies and markets, is affecting competition significantly. A perfect way to look at how globalization is affecting markets is by looking at trade agreements like NAFTA that allow goods to move across borders tax free as markets are merged. One result of these agreements is unfair competition especially to poorer countries where producers as farmers in countries like the United States are given government subsidies. This makes it impossible for their counterparts in other countries to compete with them. This has for example led to loss of jobs for farmers in Mexico and other countries.
Globalization can avail a larger market of buyers and sellers scattered all over the globe. This can help to create jobs, expand economies and generally reduce poverty. For example, some world countries have really benefited from agreements like AGOA, which has allowed goods produced in third world countries to reach developed economies. On the other hand, emerging economic powerhouses like China and India are growing rapidly as a result of opening to the global economy. Globalization can therefore avail better prices for producers and expand markets for people all over the world expanding the global economy in general. Producers all over the globe can therefore compete fairly. This however depends on the model of globalization that the world is adopting, as has been seen, trade agreements like NAFTA are really hurting producers in developing nations.
Perfect competition is elusive in our world today. This can however be achieved by structuring globalization in such a form that it allows perfect competition to occur. As has been seen, globalization in itself provides some requirements for a perfect market like an infinite number of sellers and buyers. However, other requirements like market influence for example need to be worked on.