WHY MONOPOLY IS MORE THAN A GAME

We have all played the great Hasbro game Monopoly. It’s usually our first taste of fun at business as we try to create our own monopoly by blowing everyone else off the board. That is after all the literal name of the game! We win by eliminating other players, one by one when they owe more than they can pay (after selling all their houses and mortgaging all their property.) If a player goes bankrupt to another player, they turn over everything they have of value (cash and property they own) to the player they owe the money to. A little like real life?

But how close to business reality is this? 

What is a Monopoly?

It’s a market structure characterized by a single seller, selling a unique product in the market. The seller faces no competition, and they are the sole seller of goods with no close substitute. They are called a monopoly as they dominate over their competitors in their area of expertise. 

True monopolies were outlawed in 1890 in the U.S. after Congress passed the Sherman Antitrust Act. This law was designed to protect consumers from large companies that sought to use their dominant market position to engage in anticompetitive business practices. 

While this law is still in place today, that hasn't prevented a handful of very powerful companies from gaining a huge amount of market share in their industries. Here’s a list of companies that could easily be considered near-monopolies today; Anheuser-Busch InBev NV (with brands such as Budweiser, Michelob Ultra, Beck's, Stella Artois and Bass), Illumina (dominates the genetic-testing market with a market share of around 90%), Intuitive Surgical (providing robotic surgical systems that enable smaller incisions that lead to less blood loss, both of which help patients to recover faster), Sirius XM Holdings (holds a monopoly-like position in satellite radio), Broadridge Financial Services (they collate and distribute investor communications for many companies. The company boasts a market share of 80% in the U.S. and more than 50% worldwide). And then of course one could argue that Netflix, Amazon and Google have neo monopolistic positions.

What’s this got to do with me?

Warren Buffet says the ability to control the pricing with a higher profit-margin is, “building a moat deep and wide around your business”.

To do this, we need to differentiate our product or service. The more differentiated our product or service, the more customers care about the difference. The more they care, the more control you have over pricing. The more control you have over pricing, the more valuable the company. And the more your product or service is differentiated, the less customers care about the price they pay and more about the value.

How we do this?

We need to get control of the market by either creating a better mouse trap (developing or inventing something superior to a device that is widely used) or developing a marketing strategy that makes you different AND that people care about.

When Tesla Motors decided to launch in the luxury sedan market in 2013 they were looking for differentiators. They undertook some extensive research with their potential target market and made some interesting discoveries. Designed in California wasn’t compelling. People were used to buying cars from all over the place, such as Germany, Japan and South Korea. Performance was owned by many other car companies, such as Porsche, BMW and Audi. However, they found out that Zero Emissions was very compelling to their core target market. A battery-operated vehicle that had high performance but no emissions was a real differentiator. 

Based on this research, Tesla marketed the new sedan car and it became highly successful in converting their target market consumers. With an estimated 50,931 units sold in 2016, the Model S ranked was the world's best-selling plug-in car for the second year in a row and by September 2018, the Model S, with global sales of 250,000 units, was ranked as the world's second best selling plug-in electric car in history after the Nissan Leaf.

So, creating a monopoly or neo monopoly can help us build the deeper and wider moat around our business, that Warren Buffets talks about, enabling us to build more value into our company. To do this, we need to differentiate our product or service in a way that consumers will truly care about. 

So, is Monopoly really more than a game?

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Peter M. Beaumont is a Business Advisor with Resultants For Business as well as the Founder and Principal of ConnXN Consulting. He is also the author of The Relationship Roadmap, a comprehensive guide to building relationships with strategic clients. Find out more at www.ConnXN.net