Want to Start a Business? Understand the Market First

Businesses are run in three different ways, one, monopoly, two, duopoly, and three, oligopoly. These three businesses have different ways to handle the competition. A monopoly means only one company controls the entire market. Sometimes the entire market is controlled by two companies, that's Duopoly. Oligopoly means a handful of companies control the entire market.

Understanding The Market: Monopoly, Duopoly and Oligopoly

In order to benefit from the market, you need to understand the market. When you understand the market, you can start investing or start your business to build your wealth. Markets are basically categorized into three types, monopoly, duopoly and oligopoly.

Monopoly: Monopoly means online one individual or company controls the entire market. For example, until recently, more than 80 percent of the Diamond market worldwide was controlled by one company called De Beers. Microsoft is often blamed for creating a monopoly by buying new companies that Bill Gates thought would be a threat to Microsoft. Government is the best example of how a single entity can create a monopoly. The government introduces a law that creates a monopoly, it will never allow other businesses to work in certain sectors and will exercise a monopoly.

Duopoly: Duopoly means two companies control the entire market. For instance, the entire online advertising market is controlled by two companies Meta and Google. In a duopoly, two companies create a market condition where new companies cannot survive. Coca-Cola and Pepi, two companies control the entire soft drink market. These companies work in a way that no new companies will appear in the market, if there are any other new companies, they will work in a way that these new companies will shut down (due to unfavorable conditions created by duopoly), or they will buy these new companies.

Oligopoly: Apple, Samsung, Huawei, Xaiomi, and Oppo, these 5 companies control almost 70 percent of the smartphone market. Oligopoly means a handful of companies control the market. They kill the competition by eating all small fish, all the while exercising absolute control of the market

How They Built a Billion Dollar Company?

A lot of people believe that you can become a millionaire by starting a profitable business (your own business), investing in various markets (stocks, real estate, mutual funds, etc.), trading (stocks, commodities, and forex), etc. While business, investment, and trading can actually help you become rich, you cannot become a millionaire just through business, investment or trading. You need to build a proper wealth ecosystem.

Jeff Bezos is the world’s, second-richest man. Does his company Amazon sell only the products and services from other businesses? Amazon has its own unique products, such as Alexa, Kindle, Amazon Prime, etc. 

Netflix is probably the world’s biggest streaming service. Does Netflix only offer streaming services for the movies and shows produced by other companies? Are there any Netflix original series and movies?

Is Google Search, the only service offered by Google? Aren’t there a lot of services offered by Google? Google offers a lot of things from video-sharing platforms to online advertising solutions, even a phone called Pixel.

How Do Big Businesses Generate Sales?

Generally speaking, there are two ways to sell, one, you sell to the masses, and two, you sell to a certain segment of the society. In the first method, you are selling a lot of products to generate profits. The profit margin per product is small because you are selling to the masses and the masses cannot afford expensive products as they will only buy a moderately priced product. In the second method, you are selling to a certain segment of the society, mainly the elites, or affluent people. You sell relatively smaller quantities, yet manage to earn a good profit margin per product. When you are selling to a niche, your product is expensive as it is not made for the masses. The best example of these two selling practices is iPhone and Samsung Phones. iPhones are expensive, these devices cannot be afforded by the masses. Therefore, Apple sells comparatively few phones but manages to generate a lot of profit. Samsung, on the other hand, produces budget phones and cheap phones and sells in volume and generates profits. Well, Samsung also has high-end devices but these devices cater to wealthy people and Samsung uses the same tactics to sell expensive devices that Apple has been using for iPhone