Thursday, September 29, 2005

Market Extremes

Interesting post on market dynamics in a variety of industries as various competitors angle to become either low cost or high value players. The companies who successfully establish themselves at the extremes seem to win the majority of the business while those caught in the middle lose share.

Why is this happening?

I think that there are a couple of factors: 1. Increased technology and information tend to drive costs lower – from Wal-Mart in retail to just about everything in technology and electronics costs continue to fall, relentlessly; 2. Falling barriers to trade and barriers to entry allow new firms enter markets as low cost leaders and allow premium players to leverage increased scale; 3. It seems that consumers’ choices are becoming more bipolar – either they really care about a product or service and want the best that they can afford or they just need the product and want to pay as little as possible.

Maybe there are other factors at work here, but it seems reasonably clear to me that the era of middle of the road competitors is ending.

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