The Downsides of Market Dominance - Food & Beverage Magazine

The Downsides of Market Dominance

It is presumed that market-dominant players have a powerful advantage and can leverage that over time. Market dominance is a measure of the quality of a brand, its products, and services concerning its competition. Market dominance seeks to explain how a brand, an item, or firm has control over an item classification in a given geographical zone.

 

A few years ago, social networking sites such as Myspace, Bebo, and Friendster took precedence, attracting large numbers of users only to lose ground to new entrants in the market. On the contrary, Facebook has succeeded in being a market leader, dramatically expanding to the global market.

 

While this might sound exciting to new entrants, market dominance comes with downsides that you need to be aware of.

 

 

A Long Way to Fall

Business leaders consider market dominance as a triumph for business. Market dominance enables brands to enjoy premium prices due to their leader status, lower sales costs and short sales cycles due to their market awareness, and lower price cost due to the economies of scale. With such benefits, it’s easy to agree that market dominance happens in the best interest of brands and businesses.

 

However, dominance comes with more risks than if they weren’t controlling market aspects such as price and competition. Research indicates that when consumers only have one choice, they will use it out of resignation. When a competitor enters the market with a better alternative, consumers are likely to flood the new product or service, which is the greatest fear for dominant brands.

 

 

The Downsides of Market Dominance

When your brand dominates a certain industry, other industry players may accuse you of monopolizing the market. A monopoly is a market structure where a single seller sells a unique product.

 

In a monopoly, you face no competition, as you are the sole seller of goods with no close substitution. With a monopoly, you control the market and have the power to set new prices for goods.

 

As a market leader, you should be careful about appearing too successful and becoming too dominant. While it might be good for a business to cultivate and support competition, market dominance can trigger psychological reactance among existing and new entrants. Your potential competitors might also pose a problem to your brand as they believe you are blocking them from accessing profits within the industry.

 

Market dominance can be a disadvantage to your business if it triggers reactance within your customers. In this case, you need to work hard to appeal to your customers, who might be motivated to look for alternatives from other small players.

 

If you run a consumer or public interest organization, market dominance means public visibility. You have to cope with antitrust initiatives by the government. With more attention to your daily operations, you can find it hard to disguise your dominance in a particular market. Market dominance also means putting up with congressional pressure to fight inflation through enforcing and stepping up antitrust laws.

 

Risk Reduction

If you conclude that market dominance is dangerous for your brand, you may need to adopt a few strategies to help reduce the risk rather than strategies that will reduce your market share. Having optimal market share is a function of profitability and risk. While you may choose to sit back and relieve stress with gel bead stress balls for work, note that any effort to reduce the risk of market dominance is equivalent to optimizing market share.

 

Consider strategies to help reduce the insecurities surrounding market dominance. These insecurities include public relations, dependence, legislation, competitive pacification, dependence, and social responsiveness.

 

Many companies implement public relations strategies to market and improve the image of the brand. While public relations is used for a good cause, it can also be used to cover up weaknesses. Therefore, you should use not only good words but also implement good deeds.

 

Another attempt to reduce the downsides of market dominance is by cultivating better relationships with competitors. You can also reduce these risks by making government institutions and officials depend on your defense-related commodities to help keep unemployment down or for political campaign funds.

 

This can help you acquire considerable power over policymakers and reduce the chances of your company is a target for lawsuits and government legislation.

 

What’s in for Both Small and Large Companies?

Settle for a large market share and not a dominant market share. Seek to implement comparative and supportive advertising to remind consumers about their choices because trying to push out competitors can be costly and unsuccessful. If your company is small, your goal should be finding an alternative as opposed to competing for head-on for the same customers.

 

 

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