Monday, October 12, 2009

Artificial markets are just that

First up, Asterix (and Obelix) turned fifty this week - and this line goes out to its creators for giving us such a wonderful hero to look up to. If its not known to the reader (or is not conspicuous by the name of the blog) I am a fan of Obelix. So I was re-reading their series and read this particular story "Obelix and Co."

In this story, Caesar send one of his economists to the Gaulish village to disrupt normal life there. This chap goes and buys Obelix's menhirs at exponentially rising prices and turns the village into a unit producing menhirs and hunting boars. The menhirs don't have an existing market so extensive marketing and brand building is used to create a market for them. But competition lowers the prices and trade unions force policy changes for even more entrants. The profits decline while menhirs are being bought at exorbitant prices. It causes a credit crunch at Caesar's.

Lessons to be learnt from the story -
1) Artificial Markets are Artificial. Only if you serve a genuine want of the customer, do you have a chance when the novelty of the product/idea goes out.
2) Relaying on predictions when the artificiality of the market is not recognised can be dangerous. Augmenting your inventory on rose-colored predictions which don't take into account competition and customer sentiments is as huge a folly as any one else.
3) If you don't have a niche, you wont survive. The competition will always catch up. the head start that you had might not be good enough in most cases - more so in the manufacturing sector than the services sector. The customer must be able to look at the product and say - hey, I want this brand. Not I want this product -any brand will do.

Fascinating how much one can notice when one is not looking!

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