That’s how all markets work with undifferentiated goods.

Company A can make 500 widgets for a cost of £1 each, company B can make 300 widgets at a cost of £2 each. But the total market size is 700 widgets, company A does not sell its 500 widgets for for £1.05 ( a small profit margin) it sells them for £1.99 (just undercutting company B and ensuring it sells all 500 of its widgets) while B makes up the rest of the market selling 200 of its 300 widgets for just over £2 each.

Any other strategy makes no sense for any market participant. If company A sold its widgets for £1.05 it would be leaving money on the table. The companies that make up the market demand of 700 widgets would all scramble and bid for the cheaper widgets from company A driving up their price as they compete to buy from company A. Rather than be forced to buy company Bs more expensive (but identical) widgets. Since company B can’t make the widgets for less than £2 assuming it’s rational it wouldn’t sell for less than it’s cost so the price equalises around £2, company A makes a huge profit and company B makes little or no profit.