Dog Eat Dog

Intense competition in a market. Dog eat dog competition most commonly arises in markets where products or services have become commoditized. In this case, no company can create a competitive advantage in any way other than competing on price. Such intense competition often results in very low profit margins.

Investors should generally try to avoid firms which face such intense competition. For example, the airline industry has faced price wars and poor profitability throughout most of its history. The best firms build an economic moat around their products, preserving their pricing power. A firm can create barriers to entry to its industry through heavy advertising, creating customer loyalty, securing important intellectual property and other means.