Monopolies in a Positive Light

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Inevitable monopolies

Before this lecture, I believed that monopolies were a negative result of capitalist extremes, but Prof. Bylund made me realize that monopolies are inevitable, and the power always rests on the consumer, not on big corporations.

Companies must be responsive to the demands of consumers in order to remain in business, so it is consumers who choose (through their purchases) who to give power to. Being the sole seller of a product or service doesn’t mean that consumers must buy them, and I think people should take more personal responsibility for monopolies as opposed to blaming it on innovators who attempt to satisfy needs in the best way possible.

In fact, capitalism is based on the increased consumerism of people, and the transfer of power between customers and entrepreneurs gives innovators an incentive to think through better ways of doing things. Therefore, if one is to enjoy the benefits of a capitalist economy, people must get used to the idea of monopolies, at least for the short run.

What Does Monopoly Power Mean?

Prof. Bylund defines monopoly power as a company that can innovate, create greater value for society, or that cannot experience any sort of competition due to legislative prohibitions. I fully agree with his idea, but I think there’s another way companies can gain this sort of power.

Although the company has been constantly critiqued for the adverse health effects that its products could bring, Coca-Cola currently owns 46.3% of the soft-drink market. They attempted to innovate by creating zero-sugar or zero-calorie beverages, but these drinks still did not compare to other healthier drinks in the market. And since it didn’t have the power to “do” what other businesses could, Coca-Cola acquired SmartWater, VitaminWater, and even FairLife.

In this case, I think Coca-cola has some monopoly power not because of its unique ideas or the absence of government regulation, but because they are taking over the major options that do create value for society. Monopolies have power only because consumers choose their products, but is it really a choice if the company owns the alternatives? Cocacola is not a monopoly by definition, but I don’t think this sort of power is a good thing, and I support government intervention in the matter.

Another source of monopoly power

Prof. Bylund argues that consumers buy the products that give them the most value, therefore giving companies the possibility of monopoly power. I do agree with this statement, but I also think it’s a matter of perception.

At this point, smartphones across all brands have very similar capabilities, but Apple still owns a slightly larger market share. Consumers see Apple in a more positive light and might favor their products (despite their high prices or lack of complete originality) because of their first-mover advantage. I think there is an important source of power that is given to the innovator just by being first, not only through the value that they bring to society.

Although Apple products are a symbol of ground-breaking technology, people still can choose to buy other phones to “satisfy” their needs. However, the first-mover advantage might give innovators a sort of prolonged edge in the market, and I agree with Prof. Bylund to view it as a positive thing. As opposed to having all the options owned by one company like Coca-cola, consumers are subconsciously choosing the ones that came first, and although that might create skewed markets, it pushes innovation.

Monopolies are responsive to consumers, so where will this drive society?

Shein, a clothing company, is known for satisfying customer demands by providing in-style clothing items at extremely low prices. But they have built an incredibly large client base at the expense of underpaid workers as well as damaging the environment.

Consumers don’t care about a company’s means to meet their desires as long as they get a T-shirt for under $5, and the power that they could give to potential monopolies by purchasing their products could easily become dangerous for plenty of stakeholders.

It’s important to address the issue of corporate social responsibility when talking about monopolies because creating value should not only equate to producing money, as there are many ways to ‘create value in society’ that don’t necessarily result in a payout.

I think monopoly power could potentially become a bad thing when companies ignore those members of society who cannot defend themselves, like the environment. For this to change, I think that society should reevaluate what value means to them. Does it only mean satisfying their needs and potentially making others suffer, or satisfying my needs in a way that doesn’t tarnish others?

Sources

https://tracxn.com/d/acquisitions/acquisitionsbyThe-Coca-Cola-Company

https://www.statista.com/statistics/216459/global-market-share-of-apple-iphone/

https://www.statista.com/statistics/225388/us-market-share-of-the-coca-cola-company-since-2004/