Competition Hurts Consumers?

by Shaun R Smith on February 23, 2010

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Remember Econ 101?  We were taught that competition is good.  That the more competition, the better for consumers – and the economy as a whole.  When there is more competition in a market, the competing entities must increase their efficiency and their prices tend toward the marginal cost of the item or service.  Usually competition produces a benefit to the consumer – through more choice, better quality, and lower prices.

So what is happening with Apple’s entrance into the ebook market?  After speaking with someone who works for corporate sales at Apple, I learned that the iPad is a rival, not to the tablet computer, but to the Kindle.  Apple wants to become the leader in the ebook market – the same way they revolutionized the music industry.

What’s interesting is that in breaking up Amazon’s virtual monopoly in this market, Apple has actually HURT the consumer!  Of course, they could have positioned their entrance to the market differently.  But instead they chose to align themselves with the publishing industry and to give them pricing power that Amazon had taken from them.  Who gets hurt?  Consumers!  Prices will actually INCREASE.  Will consumers pay anyway because the product is better?  Possibly.  I haven’t seen or used it yet – and I still think the economics behind the Kindle are very unfavorable – so I’m still using paper.

What’s our business less?  Maybe there is an area you could explore where you could partner with someone in your distribution or marketing channel and gain an advantage.  Hopefully it won’t have the effect of hurting the market’s consumers as it did in this case.  But you might gain an advantage over a rival.  Or improve your product or service for the same cost structure.  Or even deliver something new.

How can you learn from Apple’s move?  Better improve your business now so you can afford those increasingly pricy eBooks.

Photo By: / CC BY 2.0

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