#71: A disturbing side-effect of competition

For me, one of the more disturbing side-effects of competition is the belief that size beats all. Why is this disturbing? Well, in business terms, size equates to the capacity to produce output in volumes great enough so that each unit you produce costs less than that of your competitor. This is efficiency in action.

Here’s the rub: 'sunk costs'. Once you have invested millions in a facility that can churn out huge volumes cheaply, you will be very reluctant to write-off that investment and produce something different, even if your customers demand it.

You're sunk in more ways than one, because an obvious side-effect of increased output is a need to find more customers. The outcome? Increased competition! And increased competition means that you must invest to become more efficient than your competitors.

Am I the only one who smells a treadmill here?


I’m james@nonsenseatwork.com

Copyright: 2007 James Henry McIntosh

James can be heard on Public Radio, 88.9 FM WCVE, Richmond VA.
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