Wednesday, January 21, 2015

Targeting Oversaturated Markets Can be Lethal to Businesses

When density of living organisms of the same species within a given area starts to slightly increase, this does not have any effect on the rate of death of those organisms. When their densities further increases, the death rate tends to increase. In many organisms, if the density keeps on increasing further, it might lead to a very high death rate due to overcrowding which results in extreme competition over resources.

In the business world, similar patterns may show up. A totally virgin market with no players in it could sustain a number of new businesses taking a share in it. As more and more new businesses target such market, the death and failure rate of such companies increases yet still the total number of surviving companies does increase. If the number of companies targeting this same market keeps on increasing further, not only will the rate of death and failure substantially increase but the number of surviving businesses may see a decline till it reaches a point where all such companies fail due to the vanishing of any substantial market share to sustain them.