THE WORLD HAS WITNESSED THE DOMINATION OF ONE COMPANY OR ANOTHER IN DIFFERENT ERAS. IT'S ALL ABOUT HOW TO BREAK 'EM UP. HERE'S HOW.
A Dominant market share. High barrier to entry. A seething absence of close substitutes Earning Super Normal Profits. And being the Ultimate price maker. These are the perks of being a monopolist. Since the 1900s, the emergence of capitalism in America and the rest of the world has also given birth to some ingenious monopolies. Today, let's have a crack at their formation, establishment & eventual downfall.
DIAMONDS ARE FOREVER. OR MAYBE NOT FOR DE BEERS.
Since its inception in 1880s, De Beers has captured the mines and minds of many around the world. The company's founder, Young Brit Cecil Rhodes found a void in the global diamond trade. Till the 1880s, diamonds were found only in India & Brazil. But De Beers went on to buy all the major mines in many African countries like South Africa, Angola & Namibia and even signed an exclusive deal with the Government of Botswana, giving the nation a 15% stake in return!
The discovery of diamonds in Canada, Russia & Australia finally broke the deadlock. Today, De Beers has a respectable market share of around 25-30%, a far cry from its hey days of 85%. The one thing De Beers did successfully was make Diamonds artificially rare by brilliant advertising & supply control, It's "Diamonds are forever" are a folklore in the diamond & advertising communities till today.
This was a Pure Monopoly where the company had complete control over the supply of a commodity which has no substitutes not even a remote one.
Similar Case Study: Rockefeller's Standard Oil monopoly & JP Morgan's US Steel after merging with Andrew Carnegie's Steel Company.
AT&T: WIRING IT'S WAY WITH THE GOVERNMENT
After a flurry of court cases & government intervention (detailed explainer here), two players emerged in the nascent American telephone market in the 1910s: The long distance AT&T & a slew of local competitors. After nationalizing the industry in 1918 due to security concerns, the government paid a healthy return of >10% to the dominant player i.e. AT&T every year. After a year, the industry was de-nationalized & rates were regulated. Again, the government made sure AT&T earned healthy returns! This may seem incredulous right now but this was the result of hard lobbying and short sightedness.
Finally, the company was forced to break up into 7 "baby bells" when AT&T lost the anti-trust lawsuit in 1984.
However, many sceptics believe a duopoly of AT&T & Verizon is brewing. And rightly so.
The main source of AT&T's monopoly power was the government. And regulation by the same lead to it's eventual demise as well.
THE QUEEN OF SHADES: LUXOTTICA
Italian giant Luxottica is the world's largest maker of eyewear. The company owns a wide variety of designer brands and had a near monopoly with a staggering share of 80% in Europe & North America. A glimpse at the brands it owns will tell you why.
Apart from owning the designer brands, the company has also adopted a policy of Vertical
Integration by controlling retail outlets as well as vision insurers. Vertical Integration essentially means moving up & down the value chain of a product. The company was also the first to computerize its processes in the 1990s & achieve mammoth production to enjoy economies of scale. So, essentially the company has been a price maker for decades.
Recently, the increasing proliferation of e-commerce has allowed smaller players to grab a larger share of the pie. Nonetheless, the Luxottica still dominates luxury eyewear and charges a hefty premium for its designer products.
Now let's take a look at some existing monopolies & how they might be broken
THE OS WARS
Microsoft & Google are fairly ubiquitous in our lives. Everyday we use our laptops and mobiles which are usually operated through Android or Windows.
By open sourcing their product & allowing manufacturers to use their OS, both Windows & Android defeated macOS & iOS respectively despite having inferior products in the beginning. Simply put, the only was this dominance can be evaporated is by open sourcing & licensing Apple's OS (another implausible event as it makes no business sense). Till then, this looks like an impossible mountain to climb.
PIDILITE : STICKING ITS WAY IN
Although this monopoly is restricted in South Asia, the size of the target market leads its shoo-in. The brand moat of this company is so powerful that people in this part of the world ask for "Fevicol" (it's flagship adhesive) and not gum.
The company established its monopoly by what I like t call the "grassroots" approach. It tied up directly with carpenters & made using adhesive an unmessy affair by virtue of its product innovation. It's sly amrketing and endorsement by professional carpenters cemented this legacy. Only disruptive innovation in packaging or product can break this near monopoly.
I sincerely hope I could add a bit of insight into your conscience :)
Have a productive day.
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