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Competitive Environment – Influence on Monopolistic TrendsFiled Under: General

Internet-driven e-commerce will have a significant impact on the competitive environment of commerce. Because in e-commerce the entry cost is low, and transaction costs are lower, it allows small entrepreneurs to enter the marketplace easily. On the other hand, e-commerce especially facilitates enterprises whose success depends on network effects—“winner-takes-all” situations for companies with significant market share—which further facilitate their growth and market dominance. This effect may create problems for competition and antitrust policy. Certain players may become monopoly holders, which will have greater (and dire) consequences for competition. The recent evidence from Microsoft case has shown that there is considerable potential for weakening the competitive process. The monopolists will have strong interests in
locking customers into network relationships. The concepts like trust, reputation, loyalty, pricing and commitment take on new meaning for online business (Uzzi, 1997).

Since e-commerce would transcend geographical boundaries, many big firms of known brands may not only expand their markets, but also may enter into new business activities across the broad spectrum of business activities. This may help to reduce the costs and prices, but it will create the danger of creating an e-commerce monopoly by a few corporations or networks of corporations. Many firms may use a low-price strategy to grab the market and eliminate the competition. Several mergers and alliances, in which two or more firms combine to achieve a large market share and have large economies of scale, can result in eliminating meaningful competition (Sharma and Gupta, 2003b).

Taken From : Digital Economy – Impacts, Influences and Challenges