Business Organizations - Essay Example

?Mk2053 Business organization may be differentiated into market leaders and market followers. In the opinion of Pickton and Masterson, p.38,“strictly, the market leader is the business organization that sells the most”. However, in using such a simplistic description of market leaders care has to be taken, for there may be differences in relation to different markets. For example, in the United Kingdom the market leader for chocolate may be Cadbury’s, but in the United States of America, the more likely market leader is Hershey’s. Another perspective of a market leader is that of a business organization that “leads the way in a market” (Pickton & Masterson, 2010, p.38). This market leadership may relate to pricing innovation, product innovation, new forms of promotion, development of new market segments, or initiating a new trend in the market. Quite often such market leaders may not be large organizations, but more innovative smaller organizations, like Dyson in vacuum cleaners; or organizations with better expertise, like specialized accounting firms or those with more talent and competencies, like Stella McCartney in fashion designing. Simon, 2009, p.29, terms such smaller organizations as “hidden champions”. These “hidden champions”, reframe the definition of market leadership to “market leadership not only in terms of market share, but see it as an extended claim to overall leadership in their markets” (Simon, 2009, p.29). Table – 1 below gives the advantages and disadvantages of market leadership. Table – 1 Advantages and Disadvantages of Market Leadership Advantages Disadvantages Benefits from economies of scale, or experience or innovation Higher investments Erection of barriers for competitor entry Elevated risks Defining the structure of the market Market segmentation difficulties and choice of strategic positions Influencing consumer preferences and purchase attitudes Consumer reaction unpredictability Possible stranglehold over scarce resources Efforts for market development Control over the more suitable distribution channels (Adapted from Ranchod & Garua, 2012, p.208). Market leadership is dynamic over time and fluctuates in different markets. A market leader in one market may not be a market leader in another market and market leadership could well change hands in many markets. Compounding the contribution of these factors to problems in identifying market leadership is the issue that some organizations, do not concentrate on achieving leadership by merely market share. They may to look to acquiring leadership in other aspects, like asset leadership, which gives them a boost towards taking over market leadership. Asset concentration may be in terms of competencies of the employees, or superior equipment or strength in distribution channels. Identifying market leadership thus becomes a more difficult endeavour (Pickton & Masterson, 2010, p.40). Following in the path laid out by a market leader are the organizations that may be called market followers. Market followers identify and keep a track of the successful ideas and strategies employed by market leaders. This does not imply that they follow a me-too product design and promotion strategy. Rather, the strategy employed is to allow the market leader to employ resources in testing their innovative ideas and strategies, and then cash in by employing the successful innovative ideas and strategies themselves. This can be seen from the example of the competitors of McDonald’s in the 1990’s waiting for McDonald to identify locations for its outlets, using its resources, before moving into the location as a competitor. It is these market followers that need to identify the market leaders, so as to copy their successful innovative ideas and strategies (Pickton & Masterson, 2010, p.39). 2. The EC Unfair Commercial Practices Directive and the German Act against Unfair competition define unfair competition as “unfair commercial practices that are likely to distort the economic behaviour of consumers” (De Vrey, 2006, p.4). Stronger organizations are in a position to harm smaller organizations on the basis of their relative strengths. However, a clear line deeds to be drawn between large organizations employing their accumulated competitive strengths, as against the organization employing the same for unfair practices. An imaginative example of unfair competitive practice would occur if Wal-Mart were to harm a small competitor through the use of price fixing, selling goods below the cost, selling counterfeit goods, substandard, and dangerous products, stealing trade secrets, employing false and misleading advertisements, and the like. However, Wal-Mart would not be employing unfair competitive practices should it open an outlet close to a smaller competitor and the competitor goes out business, because of its use of its stronger bargaining strengths (Baker, 2011, p.46-47). Large organizations possess tremendous power in comparison to smaller organization, through its command of larger resource base, production at lower costs, and the ability to withstand market fluctuations. Concern does not lie in the possession of corporate power, but in the misuse of this corporate power to gain unfair advantage over its competitors at costs to consumers (Lawrence & Weber, 2010, p.210). A clear use of anticompetitive practices to gain unfair advantage is present in the Microsoft case. Microsoft was charged with using anticompetitive practices to gain unfair advantage by the U.S. Department of Justice in 1994. The charge levelled was that Microsoft had erected barriers to thwart its competitors in the operating systems through exclusive purchase agreements with computer manufacturers, which prevented the computer manufacturers from installing any competitor’s operating system or made it cost prohibitive to do so. Additionally, Microsoft was also charged with using its position of monopoly in the applications market to derive unfair advantage. This was achieved by lack of disclosure of operating features to get more use of the application, which resulted in consumers having little interest in the operating systems of competitors. Another issue was its prohibition of the display of competitor icons desktops using Windows. The defence of Microsoft was that its domination in the computer market was not a result of anticompetitive practices, but a result of its superior products and competitive pricing strategies. Hence, there was no need for Microsoft to employ the anticompetitive practice of locking out competitors. In addition, Microsoft argued that the computer market is a strongly contested market and all that it has done is to act competitively in this market. Its dominance of the market was the result of its genius. The court thought otherwise. In the opinion of the court Microsoft dominated the computer market and had used this dominant position in the market to gain unfair advantage through anticompetitive practices. As a consequence of these practices competitors and consumers were harmed. Through its stifling of competition and placing a limit on the choices of consumers, Microsoft had prevented consumers from the benefits of better and less expensive information technology (Schiller, 2011, p.202). Literary References Baker, D. J. 2011, The Right Not to Be Criminalized: Demarcating Criminal Law’s Authority, MPG Books Group, Cornwall, UK. De Vrey, R. W. (2006), Towards a European Unfair Competition Law: A Clash between Legal Families, Koninklijke, Utrecht, the Netherlands. Lawrence, A. T. & Weber, J. 2010, Business and Society: Stakeholders, Ethics, Public Policy, Twelfth Edition, Tata McGraw-Hill, West Patel Nagar, New Delhi. Pickton, R. & Masterson, P. 2010, Marketing: An Introduction, Second Edition, SAGE Publications Ltd., London. Ranchod, A. & Garua, C. 2012, Marketing Strategies, Indian Edition, Dorling Kindersley India Pvt. Ltd., Noida, India. Schiller, B. R. 2011, The Micro Economy Today, Eleventh Edition, Tata McGraw-Hill, West Patel Nagar, New Delhi. Simon, H. 2009, Hidden Champions of the Twenty-First Century: Success Strategies of Unknown World Market Leaders, Springer, Heidelberg. Read More