Business Competition As Level 4 “Competition”
This is the normal situation as businesses compete head to head for customers.
Prices are kept in check by the other competitors but everyone behaves sensibly, recognising that a price war is bad for the long term profit prospects in the entire industry.
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.