What are the characteristics of competition in the online market?

Morphological characteristics of product market in network market

More enterprises and lower entry barriers.

In the traditional geographically divided product market, not all enterprises can participate in the competition in all geographical markets due to the limitation of enterprise scale and ability. Therefore, the competition of products is limited to the local regional market, and the number of enterprises in the local regional market is extremely limited, and the competition is extremely insufficient. However, although the huge global network market connected by the Internet cannot directly increase the number of enterprises in reality, because this trading platform is open to ordinary enterprises, the cost for them to enter this network market is relatively low: a computer, a telephone line and a small investment can participate in global competition. Therefore, the number of similar enterprises in the online product market is far more than that in the traditional local market, and large and small enterprises will participate in the same competition in the online trading market.

Business and product information is more transparent.

Due to the characteristics of network technology, the interactivity, directness and immediacy of information exchange in the network market are far higher than those in the traditional market restricted by regions. Because of the large number of enterprises and optional products involved in the transaction, it provides rich product information and enterprise information, which greatly changes the information inequality between enterprises and consumers in the traditional market and makes the information of merchants and products in the online market more transparent and complete.

More products with different quality.

For most industries, due to the huge number of consumers in the online market, the needs of consumers are more diversified. In order to meet the needs of consumers and compete better, enterprises have greatly strengthened the ability of consumers to customize products. Therefore, the vast majority of products between enterprises or even between the same enterprises are different and not completely homogeneous, which provides consumers with more abundant product choices.

According to the division principle of product market structure by modern industrial organization theory, from the analysis of product market morphological characteristics of the above-mentioned online market, it can be seen that most product markets in the online market belong to monopoly competition market structure. Even for industries that are closer to oligopoly market in traditional market, the appearance and rapid development of online market has greatly promoted their further transformation or promotion to monopoly competitive market.

Analysis of competition in network market

However, the online market, a monopolistic competition market, is extremely unstable, the overall average profit of the industry is gradually decreasing, and the price difference between products is decreasing. Therefore, it is a market with some characteristics of perfect competition and the trend of weakening monopoly. Compared with the traditional market with geographical division, the horizontal competition in the product market in the online market is greatly intensified. These characteristics of the network market are fundamentally brought about by the characteristics of the Internet, which are mainly reflected in the following aspects:

A large number of competing enterprises

Because the network market is a global market, the number of enterprises participating in the competition of similar products is extremely large, which is not an order of magnitude compared with the number of enterprises in the traditional regional market, and many industries are even two or three orders of magnitude higher. Due to scale, profit, R&D investment, raw materials and other factors, the cost difference between these enterprises is huge; Therefore, it is difficult for enterprises to succeed in the competition only by cost advantage and price strategy.

The improvement of consumers' dominant position

Due to the limitation of enterprise capacity, the number of enterprises entering the traditional geographical segmentation market is very small, and there are few types of similar products available. For consumers in need, it is a last resort to accept this small set of optional products, and the status of consumers is relatively passive. The competition among these enterprises is relatively small, and they can even form a supplier alliance with each other to obtain higher market profits. For most industries, the online market is a trading market with a large number of similar enterprises, similar products and corresponding information. Consumers can easily find a large number of similar products, make a detailed comparison, and even easily get a lot of evaluation information about this product. Consumers have more opportunities to choose products, their ability to choose products is enhanced, and the cost of choosing products is greatly reduced, which leads to the decrease of consumers' brand loyalty; More importantly, the position of consumers in the transaction process between supply and demand sides has changed from passive to active, thus competing for consumers, the competition among enterprises has intensified, the possibility of establishing price alliance has decreased, and the profit space of enterprises has further decreased.

And the substitutability of the product is enhanced.

Although the quality of most similar products in the online market is uneven, the substitutability of similar products is greatly enhanced because of the extremely rich products, the difference of similar products is reduced and the continuity of product distribution from low-end to high-end is enhanced.

Virtual nature of network transaction

Online market transactions are electronic transactions, which have the characteristics of directness, quick response and low transaction cost. With the sharp drop of transaction cost and the increase of transaction speed, many small and medium-sized enterprises can directly compete with large enterprises and face a large number of consumers, who cannot bear the huge cost of customer search (including huge advertising expenses), negotiation and signing contracts, and the cost of building and controlling a huge marketing network and dealer network.

Shortening of product life cycle

The easy imitation of products in the online market and the rapid spread of technologies such as enterprise design, production and marketing have prompted enterprises to continuously strengthen their R&D and innovation capabilities and quickly introduce new products that meet customer needs, which greatly shortens the product life cycle, leading to the continuous upgrading of products in the market and the instability of the product market.

From the above characteristics of online market competition, it can be seen that for most enterprises, with the further maturity and development of the online market, they will increasingly face more effective and comprehensive fierce competition from a large number of enterprises, and it will become more and more difficult for an enterprise to maintain a long-term monopoly position, which fully reflects the fact that the competition in the online market has intensified, and also fully shows the weakening trend of the monopoly of the online market relative to the traditional market.

Monopoly analysis in network market

Generally speaking, monopoly in economic behavior can include the exclusive control of economic resources, products, technologies or markets by all individuals, organizations or groups. In the online market, a trading market with global scale and intensified competition in virtual space, although there is a tendency to weaken monopoly, there are still many monopolistic behaviors and monopoly manufacturers. The essence of monopoly in the online market is the same as that in the traditional market, both of which are aimed at maintaining a long-term market position or higher market profits, but there are certain differences in the behavioral characteristics and effects of monopoly, as shown in Table 2:

The rise of network market has not fundamentally changed the root of monopoly behavior and monopoly manufacturers in the market. On the contrary, the maturity and development of online market has also led to the intensification and concentration of endogenous monopoly. The main reasons are as follows:

The source of monopoly has not changed.

Only when the market entry barriers are high enough to make it difficult for potential competitors to enter the market, production concentration will lead to monopoly. The three main reasons for entry barriers are unique natural resources, advanced scientific and technological level and strong economies of scale (including economies of scope). Although the appearance of network market has lowered the entry threshold of competitors to a certain extent, it only directly reduced the marketing cost, and did not fundamentally improve the competitiveness of competitive enterprises in the above three aspects.

Scale economy and scope of network market

The global consumers and abundant and almost continuous product line demand brought by the network market enable monopoly enterprises to obtain low cost and competitive advantages brought by economies of scale and scope without major changes in organizational management and production processes, and further enhance the monopoly ability and degree of the original monopoly enterprises.

Customization and consumer orientation

The increasingly personalized demand of consumers makes customization, a new production-driven mode, gradually become the mainstream of enterprise production mode, which puts a severe test on the R&D ability, production capacity, capital and distribution capacity of enterprises, and these adaptability are just the weaknesses of most small and medium-sized enterprises.

Transparency and accessibility of product information: In the online market, the information of similar products is very rich and easy to obtain directly. Therefore, consumers can easily compare similar products from different enterprises, which will make it easier for them to focus on the products that can best satisfy most consumers, so that the enterprises that produce this kind of products can gain an advantageous position. If this dominant position can be maintained and enhanced, it will lead to the network effect of product and customer locking, and then.

From the above analysis, we can see that the monopolistic behavior in the online market tends to weaken and strengthen at the same time. The fundamental reason lies in the great changes in the scale, transaction characteristics and consumer status of the online market compared with the traditional market, and it is also a direct manifestation of the intensified competition in the online market.

In short, in this global network market close to monopolistic competition, a prominent feature is the coexistence of high growth and high risk. This market is rapidly changing, extremely unstable and more competitive. It is very difficult to obtain a monopoly position and maintain it for a long time, and the risk is quite high; At the same time, the opportunity to gain a competitive advantage is also considerable. In order to survive and develop better, enterprises must put customers' needs in the first place, strengthen R&D and innovation, provide quality services, and strive to improve their ability to adapt to the networked market environment.