What is one negative effect of competition for some businesses?

The chosen answer points to a significant challenge that many businesses face in a competitive environment. When multiple companies vie for the same customer base, they often resort to lowering prices to attract customers. While this strategy may increase sales volume in the short term, it can severely impact profit margins. As businesses continuously reduce their prices to stay competitive, their overall profitability may decline, which can affect their ability to invest in growth, development, and other critical areas of the business.

Other aspects of competition generally lead to more positive outcomes. For instance, customer loyalty is often enhanced when businesses strive to differentiate themselves through superior service or innovative products. Similarly, competition can motivate businesses to innovate and improve their offerings, as there may be an expectation for ongoing development and adaptation to meet changing consumer needs. Finally, businesses may also benefit from broader market reach through strategic competitive efforts, such as marketing campaigns and strategic partnerships. However, the pressure to lower prices stands out as a detrimental consequence of competition that can hinder financial performance.