Cut-throat competition
Cut-throat competition describes the tendency of dominant companies and oligopolies to force weaker competitors out of the market.
Demarcation
The substitution competition triggered by innovations must be distinguished from displacement competition . This power of displacement exerted by new products or services on the market is generally viewed positively by economic agents. A current example of a substitution competition in the sense of creative destruction is the progressive replacement of landline telephones by mobile phones .
Strategies
The strategy of a dominant company in cutthroat competition can consist in preventing other competitors from entering the market or making it more difficult to participate in the competition by means of a price policy at a lower cost ( dumping ) .
Unlike in ruinous competition , one or more larger companies can expand their market position in cutthroat competition without endangering themselves. Sectors are particularly susceptible to cutthroat competition in which the threshold to market entry for new market participants is high due to strong positive economies of scale - for example because of high fixed costs. In such situations, individual companies can ultimately achieve a solid monopoly position through cutthroat competition.
Examples
A well-known example of a cut-throat competition is the successful implementation of the Internet Explorer company Microsoft against then leader Netscape Communications with its Netscape Navigator . The events between 1995 and 1998 are presented in the article Browser War .
literature
- Herbert Wilkens: Deregulation as a regulatory and procedural task. Duncker & Humblot, Berlin 1986, ISBN 3-428-05967-0 .