I think you are talking about the concept that firms become very
similar in order to maximize their 'area of differentiation'
- in other words, be perceptably better than their rivals in specific
areas, so that they are the closer choice.
a | b
--------
c | d
In this rather dubious model (a) dominates the [a] quadrant.
This all falls down because there is not one 'product'
- there are many products demanded, but only four are supplied, so the
consumer is forced to pick the nearest substitute.
Personally I would say that the number of firms in an industry is
related to the fixed costs - put crudely, if you can't cover your
fixed costs then you are bust.
However one mans liabilities are another mans assets, so one bankrupt
steel mill can be another mans bargain.
It is tempting to look at companies as if they were molecules of
oxygen, all striving to keep as far away from each other as possible,
but as much private territory as possible.
It is not really like that, a strong oxygen molecule can invade the
territory of a weaker molecule, kill it and feast on the corpse.
This is what has happened in the steel industry - also aircraft manufacturers.
However a really canny oxygen molecule can sit in near outer space,
its food supply is so trivial to the big players that they barely
notice it.
It really gets amusing when a big player notices a small player and
tries to move in on the small player's market.
The jist of what I am trying to say is that there is not ONE product
- and that amortized capital costs are incredibly important |
