Sunday, September 16, 2018

In some cases, a buyer should ensure that he helps all his different suppliers so that all of them survive, thus preventing a monopoly

  • It Apple continues to buy OLED / AMOLED displays from only Samsung, it's possible that in the future LG's OLED business goes bust, leaving Apple with Samsung as the only supplier. Assured extortion of Apple by Samsung will follow [considering the significant superiority of AMOLED over LCD and the lack of an alternative equivalent technology].
  • It is Apple's duty to make sure that a thriving supplier base exists for its needs, even if this means that sometimes Apple has to buy some components at higher prices - than can be bought from the dominant supplier - just in order to ensure the survival of weaker suppliers.
    • Such lessons aren't taught in business schools. MBA books preach / teach buying all your needs from the supplier which supplies you a component at the lowest cost [everything else the same], in order to minimize your costs and to maximize your profits. This short-term view neglects the possible negative future consequences of the erosion of your supplier base and the establishment of a monopoly supplier [not even God can stop this monopoly supplier from exploiting you in every possible way].
    • Such a dire scenario is all the more possible if you - like Apple - are a very large buyer, and if you not buying from a particular supplier - say LG - can result in the bankruptcy of that supplier. In such a case, it's vital that you help that supplier [in order to help your own self].

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