What role does market growth play in competitive pressure?

Market growth plays a significant role in generating competitive pressure primarily by attracting new competitors. When a market is experiencing growth, it signals potential profitability and opportunities for businesses. This favorable environment encourages new entrants to join the market as they seek to capitalize on the expanding customer base and demand for products or services.

With new competitors entering the market, existing businesses may face increased pressure to innovate, differentiate their offerings, and maintain customer loyalty. This influx can lead to heightened competition, potentially driving down prices and forcing existing companies to improve efficiency and service quality to retain their market share.

While growth can have mixed effects on existing competition—such as providing some breathing room to current players due to a larger market to share—it primarily serves as a magnet for new entrants looking to benefit from the expanding opportunities.