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Only if the infrastructure is something tangible, often the startup costs are regulatory, and not necessarily transferable. There is also the problem that if t

Only if the infrastructure is something tangible, often the startup costs are regulatory, and not necessarily transferable. There is also the problem that if the incumbents move to undercut, then any onlooker would assume that even if they bought the infrastructure they would also face the same undercutting; and would therefore have to remain solvent longer than an incumbant to make a return. I think this is why there is so much focus on tech or disruption; you need some way to compete against the scale efficiency of the incumbant.

AnthonyMouse 3y ago
Regulatory costs aren't lost in acquisitions. You buy the whole company. > There is also the problem that if the incumbents move to undercut, then any onlooker would assume that even if they bought the infrastructure they would also face the same undercutting; and would therefore have to remain solvent longer than an incumbant to make a return But the incumbent has the same problem. If the unit cost is $1 and they're selling for $0.90 to undercut you, they're losing money too. Anybody can see that they won't be able to keep that up forever, and as soon as they stop, whoever invested in the competition is making money. > I think this is why there is so much focus on tech or disruption; you need some way to compete against the scale efficiency of the incumbant. Most markets have a minimum scale past which being larger provides no significant efficiency benefit and only creates diseconomies of scale from bureaucratic overhead and internal politics. This is why companies try to commit antitrust violations to keep barriers to entry high enough that others can't get a foothold. Because once they do, the incumbent has no advantage and is commonly outmaneuvered because monopolists typically become inefficient from lack of competitive pressure and existing customers tend to hate them.
- doublespanner 3y ago
  Again, not all costs associated with regulatory compliance are transferable; this is by design to keep a barrier to entry. Many accreditations/certifications have a reset clause when something significant in a business changes (like owner), or have a not widely available cheaper streamlined version for long-standing businesses. This is even assuming that selling the whole businesses is the best way to exit; taking over the whole business rather than just the machinery (for example) is a restriction that might be detrimental. The thing you are not understanding, is that you have to be able to loose money for longer than the competition; it either requires an investment on the same scale as the total valuation of the incumbent, or a string of failed attempts from others to set the stage... And you can estimate ahead of time how long you can operate for, and how long the competition can, so you can likely tell before you start that you are going to be one of the failures.

AnthonyMouse 3y ago

Regulatory costs aren't lost in acquisitions. You buy the whole company. > There is also the problem that if the incumbents move to undercut, then any onlooker would assume that even if they bought the infrastructure they would also face the same undercutting; and would therefore have to remain solvent longer than an incumbant to make a return But the incumbent has the same problem. If the unit cost is $1 and they're selling for $0.90 to undercut you, they're losing money too. Anybody can see that they won't be able to keep that up forever, and as soon as they stop, whoever invested in the competition is making money. > I think this is why there is so much focus on tech or disruption; you need some way to compete against the scale efficiency of the incumbant. Most markets have a minimum scale past which being larger provides no significant efficiency benefit and only creates diseconomies of scale from bureaucratic overhead and internal politics. This is why companies try to commit antitrust violations to keep barriers to entry high enough that others can't get a foothold. Because once they do, the incumbent has no advantage and is commonly outmaneuvered because monopolists typically become inefficient from lack of competitive pressure and existing customers tend to hate them.

doublespanner 3y ago
Again, not all costs associated with regulatory compliance are transferable; this is by design to keep a barrier to entry. Many accreditations/certifications have a reset clause when something significant in a business changes (like owner), or have a not widely available cheaper streamlined version for long-standing businesses. This is even assuming that selling the whole businesses is the best way to exit; taking over the whole business rather than just the machinery (for example) is a restriction that might be detrimental. The thing you are not understanding, is that you have to be able to loose money for longer than the competition; it either requires an investment on the same scale as the total valuation of the incumbent, or a string of failed attempts from others to set the stage... And you can estimate ahead of time how long you can operate for, and how long the competition can, so you can likely tell before you start that you are going to be one of the failures.