Marketings Impact on Other Businesses
Critics also charge that a company's marketing practices can harm other companies and reduce competition. Three problems are involved: acquisitions of competitors, marketing practices that create barriers to entry, and unfair competitive marketing practices.
Critics claim that firms are harmed and competition reduced when companies expand by acquiring competitors rather than by developing their own new products. The large number of acquisitions and the rapid pace of industry consolidation over the past several decades have caused concern that vigorous young competitors will be absorbed and that competition will be reduced. In virtually every major industry—retailing, entertainment, financial services, utilities, transportation, automobiles, telecommunications, health care— the number of major competitors is shrinking.
Acquisition is a complex subject. Acquisitions can sometimes be good for society. The acquiring company may gain economies of scale that lead to lower costs and lower prices. A well-managed company may take over a poorly managed company and improve its efficiency. An industry that was not very competitive might become more competitive after the acquisition. But acquisitions can also be harmful and, therefore, are closely regulated by the government.
Critics have also charged that marketing practices bar new companies from entering an industry. Large marketing companies can use patents and heavy promotion spending or tie up suppliers or dealers to keep out or drive out competitors. Those concerned with antitrust regulation recognize that some barriers are the natural result of the economic advantages of doing business on a large scale. Other barriers could be challenged by existing and new laws. For example, some critics have proposed a progressive tax on advertising spending to reduce the role of selling costs as a major barrier to entry.
Finally, some firms have in fact used unfair competitive marketing practices with the intention of hurting or destroying other firms. They may set their prices below costs, threaten to cut off business with suppliers, or discourage the buying of a competitor's products. Various laws work to prevent such predatory competition. It is difficult, however, to prove that the intent or action was really predatory.
In recent years, Wal-Mart has been accused of using predatory pricing in selected market areas to drive smaller retailers out of business. Wal-Mart has become an object for protests by citizens in dozens of towns who worry that the mega-retailer's unfair practices will choke out local businesses. However, whereas critics charge that Wal-Mart's actions are predatory, others assert that its actions are just the healthy competition of a more efficient company against less efficient ones.
For instance, when A Wal-Mart recently began a program to sell generic drugs at $4 a prescription, local pharmacists complained of predatory pricing. They charged that at those low prices, Wal-Mart must be selling under cost to drive them out of business. But Wal-Mart claimed that, given its substantial buying power and efficient operations, it could make a profit at those prices. The $4 pricing program was not aimed at putting competitors out of business. Rather, it was simply a good competitive move that served customers better and brought more of them in the door. Legislators in several U.S. states, at least, appear to agree. For example, lawmakers in the U.S. state of Wisconsin are proposing legislation that would do away with the state's minimum price markup law on prescription drugs, allowing Wal-Mart to make its low generic drug prices available in that state.21
Consumer Actions to Promote Sustainable Marketing <PP6i9-625)
Sustainable marketing calls for more responsible actions by both businesses and consumers. Because some people view business as the cause of many economic and social ills, grassroots movements have arisen from time to time to keep business in line. The two major movements have been consumerism and environmentalism.
Continue reading here: Environmentalism
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