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No, this doesn't really work because other people will ultimately run you out of business with their compounding profit and reinvestment advantage.
by pfisch 8y ago
No, this doesn't really work because other people will ultimately run you out of business with their compounding profit and reinvestment advantage.
- bumby 8y agoDoesn't that imply they compound profits by either 1) raising prices and thus reducing demand for their product in the presence of non-profit maximizing suppliers or 2) creating efficiencies to increase profit margin at an equal-or-lower price? In situation one wouldn't the advantage go to the non-profit motivated supplier and in situation 2) doesn't it ultimately benefit the customer with lower prices?
- taysic 8y agoI think the point is if one company is making outrageous profits it’s trivial for a competitor to undercut them. The food industry for example rarely makes more than 2% in profit because it is so competitive.
- bumby 8y agoI would agree, but only with industries with a low barrier of entry of commodity businesses. There are also other moats that prevent trivial competition. Examples may be intellectual property, branding, switching costs etc.