Friday, January 23, 2015

How Many Companies Can a Market Support?

In nature, the size of a population tends to be regulated through various means. For a virgin habitat, a new species occupying it may multiply rapidly till it reaches a point where the population is stabilized and does not see further increases in number. For a habitat that already hosts a number of different species forming a community, some of those species might have reached the stability point where its population is being regulated. Too much crowding of a species in a given area would limit its reproduction and even its growth. The increase in number may also make the population more prone to falling prey to some predator. Other forms of population size regulation also exist in the natural world.

In the business ecosystem, similar forces exist to control the 'population' of businesses in a given market. Too much businesses targeting the same market may witness a decline or a reversal and become weakened due to very high competition on resources (the market) which can no longer sustain them all.