Especially if you studied economics, this is true. Do you remember how 2 dominant players played on a free, low-growing, undifferentiated market?
On a free market dominated by two players, there is only one way to play – this, of course, considering their objective is to maximize revenue and profits! If such a case, then the way to do it is basically mimicking the moves of each other. Never be too audacious or bold, especially if you don’t have any real differentiator. If one of the 2 players is the strongest, then this should dictate market rules, and the other would simply follow. This way guarantees the stability of the market, and higher revenues, through low investment and balance of market share. It is simple, don’t do radical moves, and we will both endure success on this cash cow.
This is something that seems is escaping the comments on the Portuguese consumer gas prices latest moves. The point is, this market is dominated by two players, Galp and Repsol, which really take the bulk of the market – all other players are considerably smaller, non-organized and don’t really have a nationwide strategy behind their moves. Gas is absolutely undifferentiated, a real commodity, that is even sourced out from the same suppliers (Petrogal refineries in Sines and Leça da Palmeira), and marketing efforts have been put behind more on consolidation of position (ensuring consumer loyalty through cards and points programs) than on trial and market share wins. The only major differentiators in this market are localization and… pricing. Though placing is the only investment that really is capable of generating additional revenue, share and margin improvement, it is pricing that is under the spotlight nowadays. That is because consumers don’t realize why, after severe price increases over the last few weeks, now that oil price is tumbling down, gas prices basically sit the same. But the point is… this is 100% at what we should expect, given the circumstances – theory has predicted it 100% sharp.
When you let two players dominate the market, this is the probable outcome. They will play to increase income, minimize investment and assure larger profits. They will reflect supply price increases on end prices to the fullest, and be shier on price decreases. And the second biggest player will always mimic the biggest, with hours or days of delay. It is the way to maximize profit – and it is 100% legal! They don’t need to do cartelization or unruly agreements to get special advantage positions in the market – the market is theirs by nature of play, since they are only two.
The only way to prevent such a rule on the market is not by setting price boundaries like some suggested. Is increasing competition . A third player would unbalance the market, and ensure price competition. The only issue is where to source this third player from, to compete on a small, no-growth, low revenue margin, on the outskirts of Europe…
On a free market dominated by two players, there is only one way to play – this, of course, considering their objective is to maximize revenue and profits! If such a case, then the way to do it is basically mimicking the moves of each other. Never be too audacious or bold, especially if you don’t have any real differentiator. If one of the 2 players is the strongest, then this should dictate market rules, and the other would simply follow. This way guarantees the stability of the market, and higher revenues, through low investment and balance of market share. It is simple, don’t do radical moves, and we will both endure success on this cash cow.
This is something that seems is escaping the comments on the Portuguese consumer gas prices latest moves. The point is, this market is dominated by two players, Galp and Repsol, which really take the bulk of the market – all other players are considerably smaller, non-organized and don’t really have a nationwide strategy behind their moves. Gas is absolutely undifferentiated, a real commodity, that is even sourced out from the same suppliers (Petrogal refineries in Sines and Leça da Palmeira), and marketing efforts have been put behind more on consolidation of position (ensuring consumer loyalty through cards and points programs) than on trial and market share wins. The only major differentiators in this market are localization and… pricing. Though placing is the only investment that really is capable of generating additional revenue, share and margin improvement, it is pricing that is under the spotlight nowadays. That is because consumers don’t realize why, after severe price increases over the last few weeks, now that oil price is tumbling down, gas prices basically sit the same. But the point is… this is 100% at what we should expect, given the circumstances – theory has predicted it 100% sharp.
When you let two players dominate the market, this is the probable outcome. They will play to increase income, minimize investment and assure larger profits. They will reflect supply price increases on end prices to the fullest, and be shier on price decreases. And the second biggest player will always mimic the biggest, with hours or days of delay. It is the way to maximize profit – and it is 100% legal! They don’t need to do cartelization or unruly agreements to get special advantage positions in the market – the market is theirs by nature of play, since they are only two.
The only way to prevent such a rule on the market is not by setting price boundaries like some suggested. Is increasing competition . A third player would unbalance the market, and ensure price competition. The only issue is where to source this third player from, to compete on a small, no-growth, low revenue margin, on the outskirts of Europe…
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