Sunday, January 3, 2016

It's possible - or rather likely - that some markets are of the type winner-takes-all by their very structure

Both existing players and potential new entrants to those markets that are structurally of the type winner-takes-all [a monopoly eventually] should assess their level of dominance and thus their chances of survival from time to time. If it can be confidently determined in advance and if it's confidently determined that they're not going to be the absolute #1 winner [implying that someone else is the winner or is going to be dominant], then it's possibly better to rapidly exit being a player in such markets, since being a #2 or a #3 or a #n isn't going to get these firms anything net positive on a sustained and long-term basis in such markets.

Although I'm not sure at this point, from the way economics seems to work in this market, it appears that online retail/shopping could be a winner-takes-all type of market [dominant player keeps getting stronger, making it near-impossible to beat it after a point]. Amazon is the winner in USA, Alibaba/Taobao/Tmall is the winner in China, and a bloody battle for supremacy is on in India [Amazon will likely be the eventual winner here as well].

Before hastily concluding that Amazon is forever going to be the #1 winner in the US, and Alibaba/Taobao/Tmall similarly in China, pause for a moment. Because there's no worldwide winner in online retail/selling/shopping yet. US, China, India, etc., can be considered full markets by themselves only up to the point in time till which these country-specific markets are closed [or effectively closed] to direct competition from foreign players. Once the online commerce markets of various countries are fully opened-up and thus integrated, it's again going to be a fresh battle for the #1 spot in this new, unified, larger, single global market, where a new winner will be determined.

Other types of winner-takes-all interpretations here, here, here.

Unresolved stuff:
  • Is it possible to accurately identify winner-takes-all markets/industries/products/services using a fixed set of characteristics?
  • Can a market be of winner-takes-all type today but not remain so tomorrow? Or must certain markets always remain either in or out of the winner-takes-all type?

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