I often hear from readers that if they had to start a new firm today, they would rather keep their existing firm. This is true. However, if a company is more efficient and gets the benefit of new technologies in a more cost-effective way, they can get more growth out of it.
Although we don’t know how much of the new startup economy is already monopolistically competitive (and the future will tell us exactly that), there is a lot of evidence to back this up. A few years ago a research study showed that the growth rate of all new companies in the UK had fallen in the first few years of the 2000s. So much for the theory that new companies will rise and then fall so that there is a net gain for everyone.
The rise and fall of new companies is a bit of a funny thing, especially when you consider that the firms that rise and fall are the very same ones that you’ve probably spent the last few years working for.
Yes, new companies are always going to rise and fall, but the research shows that even a new company that is going to be a monopolistic force will have less chance of survival if it is started outside of competition. Also, the research shows that a monopoly tends to be less productive, which is pretty much what we’re all hoping for.
So, what about the research? Well, when you start a new firm, the first thing you may not be able to do is build a brand. At least, those new companies that are going to rise and fall are going to be able to build brands, and start branding themselves. However, brand building in the monopolistic market is a tough thing to do.
The first thing is to define what your brand is going to be. In other words, what are you offering that you are going to convince people to buy your products and your services? Branding, as a rule, is a process of building a brand. The question is how to do it. The research shows that when a company does it right, it can build a brand, but when it does it wrong, it can burn itself to the ground and never build the brand.
Some companies set the standards: Coke and Pepsi, for example. They set the standards and the expectations of what you are supposed to be doing. These companies are the companies that are going to take advantage of being monopolistic. They are the companies that are going to create this monopoly. They are the companies that will create the competitive market.
These new monopolists are going to have to be very careful in how they treat their competitors. There are no longer any guarantees that the competition will be treated fairly. The new monopolists will be very careful about how they treat their competitors in order to avoid being in a position where they can’t do that anymore.
So how do you like monopolizing, I wonder.
This is the kind of thing that is the essence of competitive markets. As monopolization expands, there will be more ways to get rid of your competition. In the end, you will have to fight for your own existence.