Strategy

Posted 12 Aug 2019, Editor's Desk

10 Tips on How to Create Monopoly in Business

Introduction

  • Do you have an entry barrier in your business?
  • Do you know how to create monopoly in business?


Replicating a successful business idea of others is an old-fashioned way of doing business, which may not every time give you expected results. A business should be so unique and powerful that no one dares to enter into it. 


You should create a monopoly in the market create an entry barrier for competitors entering into it. 

Now let’s understand how to create monopoly in business with given 10 tips-




Intellectual Property Protection

You can create a trade secret of your business that no one knows in the market except you. 


For Example:

1. Coca Cola created a trade secret of their beverage that no one could copy in the market so far. Coca Cola didn’t reveal the method of preparing their beverage, which prevented others from producing it.  


2. KFC also created similar trade secret with their recipe for making a chicken burger, which created an entry barrier for others and scaled up their business across the world.



Patent and Licensing

Patenting and Licensing gives you special right that prevents your competitors from making a similar product.


For Example: 

In the pharmaceutical sector, two types of medicines are produced- Generic and Molecule. Generic medicines can be made by anyone without any patent rights.


Whereas, molecule medicines are those specific medicine made by a company through their research and development. 


It gives you a monopoly over pricing as it is produced by you only while barring others from entering into the market.



Distribution Network

A strong distribution network gives you an upper hand over your competitors in monopolizing the market.


For Example:

Though Nokia’s had a huge distribution network across the country, it didn’t build good relations with retailers, as it gave them very less margin which made their survival difficult. 


When retailers were unsatisfied with Nokia, Chinese manufacturers Oppo and Vevo made a remarkable entry in the Indian market and snatched the tag of the largest distribution network from Nokia. 


Retailers became loyal to Oppo and Vivo as they gave them the highest margin in the market, which automatically became an entry barrier for competitors.



Exclusive Rights

Getting exclusive rights to sell an international product automatically creates a monopoly in the market by creating an entry barrier for others. 


Flipkart and Amazon have exclusive rights to selling products of some of the biggest international brands in India, which disrupts the business of others.


For Example:

Flipkart has 70% exclusive rights of selling international products, while Amazon possesses 30% exclusive rights of such products. Only they get exclusive rights of special sales and deals in India.



Economies of Scale

Another powerful method to monopolize the market is increasing your sales so high that it automatically finishes the competition in the market. 


Although it reduces your margin, it increases overall profitability massively on the sale of products.


For Example:

Walmart, DMart and Big Bazaar work on this model, where they purchase a huge amount of inventory on heavy discounts, and sell it at very lower prices, without decreasing their profitability. This method gives them an advantage over others, who don’t work on economies of scale.



High Capital Investment

This technique is used by conglomerates to monopolize the market through massive investment in innovative products.


For Example:

Reliance Jio used this technique by investing 2.5 lakh crore on new technology which incumbents didn’t have. It left competitors working on old technology out of business.


Jio monopolized the mobile networking market so extensively, that, it led many companies to merge with each other’s to save their existence, reducing the total number of mobile networking companies from 13 to only 3.



Proprietary Technology

The problem-solving technology that only you have in the market, without significant efforts make you only in the market.


For Example:

With a 90% gross margin, Bill Gates’s Microsoft Windows has 90% market share in the world.  Nobody could make windows that could compete with Microsoft for decades.



Excellent Customer Service

Domino’s Pizza, with more than 60% market share in the organized industry, has emerged as an excellent customer service provider through its “30 minute or free” offer in India. 

This excellent experience by Domino’s created an entry barrier as no Pizza company could compete it so far. 



Brand Equity

Synonymous branding is a unique way of registering your product’s image into the customer’s mind that it comes up first when they talk about that particular product.


For Example:

M-Seal, although its product’s name is epoxy compound, became massively popular among customers as M-Seal, through ad campaigns that its name became synonymous to product type.



Loyalty Beyond Logic

In some particular region or community, loyalty beyond logic can be created by providing the products and services that connect with their belief system.


For Example:

The health care company Hamdard became so famous among practitioners of Islam in Hyderabad, that they never used products of other companies, even when they sold at discounted rates. 


Once when Hamdard stopped making products due to strike, although they began using products of Baidyanath, returned to Hamdard as soon as it restarted manufacturing products due to their loyalty beyond logic.


Implementing the above given 10 significant tips on how to create monopoly in business will certainly help you become king of the market by creating an entry barrier for competitors.

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