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Posted at: Nov 15, 2017, 12:40 AM; last updated: Nov 15, 2017, 12:40 AM (IST)

Monopolistic success formula

Monopolistic success formula

Dr. Vivek Bindra

Every start-up business firm should strive towards building a monopoly instead of being a competitor to others. Monopoly is the situation where an organisation can regulate the price of products and services by creating various entry barriers for other players to get into competition with them. 

Monopolistic organisations are placed to generate and preserve long-term value for themselves, where creation of product and services is more important than innovation. Some of the features of entry barriers to create a monopolistic organisation are:

Intellectual Property Protection: Identify and formulate a trade secret for your business so that competitors can not make an entry in your targetedsegment. For example, Coca Cola and KFC have developed a secret formula in order to protect their businessand are doing amazing business.

Patent & licenses: In order to avoid rival firms to counterfeit your invention or product formula, a business firm should get its product formula licensed from the government authority. This process entitles a firm a sole owner of such formula. Pharma industry is the best example to find numerous examples of Patenting & Licensing 

Strong distributor network: Building a strong distribution network by making good association with your partners will prove to be a boon for running a successful business. Take for example the current mobile handset industry. OPPO & VIVO have created an entry barrier for other well-known brands (Nokia or Samsung) by empowering the retailers who were not satisfied with such brand giants on profit margins.

Exclusive rights: In order to create an entry barrier another strategy could be taking exclusive rights of a particular product from their originating country. For example Amazon & Flipkart in India usually adopt such tactic by grabbing selling rights of international products from their original company in order to create monopoly in the market. 

Economies of scale: Enhancing economies of scale by selling the products in large volume with lower margin can also be one of the strategies for a business firm to create a monopoly in the market. The classic examples are: Walmart, D-Mart, Big Bazaar, they do centralised purchasing of products and sell them in the market with lower margin,  which, in turn, enhances their profitability and makes them successful in creating an entry barrier for rival firms.

High capital investment: Another strategy is to invest in new segment or technology. This strategy is applicable for established firms that want to rebuild their market positioning. This is what Reliance Jio has done in telecom industry for making monopolistic entry in the market. They invested Rs 2.5 lakh crore in the new technology to createentry barrier in the market. 

Proprietary Technology: This is another form of patent or licensing strategy that allows business firms in generating customer loyalty. For example, Bill Gates , who is the richest man in the world because of adopting proprietary technology over Microsoft Windows. 

Excellent customer service: By providing exceptional customer service also a business firm can create monopoly in the market. Domino’s is the name when we talk about entry barrier being created through excellent customer service. Though many other brands have tried to enter the market, but were unable to provide the unmatched service. Thus, Domino’s enjoys 60 per cent market share in the organised sector.

Loyalty beyond logic: This is driven by human nature and classic example of this will be Maggi. If you remember the ban that replaced them at the top and other players tried to take the advantage of the situation, but as soon as the ban was lifted, the consumer shifted back to their beloved brand of decades.

— The writer is International Motivational Speaker, Business Consultant & Leadership Trainer

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