Business Competition As Level 3 Co-existence
In coexistence, competitors don’t have a formal agreement but recognise each other’s position in the market and don’t try to compete aggressively.
A simple example would be if two chains of discount shoe stores compete in the same general geographic area. Each could have a policy that it will open new stores in towns with a population of 20,000 or more but won’t open a competing store unless the population is over 100,000. The logic is that it is better to have a few highly profitable stores than many stores that struggle to break even.
This coexistence strategy recognises that competition can be a zero sum game where if one wins, the other loses.
It is one of the reasons why the idea of finding a special niche can work so well. Once you establish “ownership” of a strategic position in the market, any competitor will recognise that you are established and has a simple choice:
to ignore the niche; or
to challenge you in the niche with all the dangers of a frontal aggressive strategy, going up against your existing strengths.
No formal agreement is required for the co-existence level of competition to exist between competitors and to be stable. It is just common sense based around plentiful opportunities for making money.
The strategic threat is if profit opportunities dry up and one or more competitors are committed to further growth.