The problem with consolidation is that companies that gain a majority market share are operating at the lowest of margins, so there is little room for new competitors to move into that market space.
Since these companies already own the market, it is too expensive for another company to enter that market space while competing successfully. The larger and more established companies already have economies of scale that are tilted in their favor. The only way for a new company to compete successfully against an entrenched business is by leveraging new technology or huge investments to bring their cost lower than their competitors.
And we’ve seen that happen in the past with agribusiness, they get large investments and just buy up all the other companies and put them under their own umbrella.
The problem with consolidation is that companies that gain a majority market share are operating at the lowest of margins, so there is little room for new competitors to move into that market space.
Since these companies already own the market, it is too expensive for another company to enter that market space while competing successfully. The larger and more established companies already have economies of scale that are tilted in their favor. The only way for a new company to compete successfully against an entrenched business is by leveraging new technology or huge investments to bring their cost lower than their competitors.
And we’ve seen that happen in the past with agribusiness, they get large investments and just buy up all the other companies and put them under their own umbrella.