(Drivebycuriosity) - Recently I talked with a friend who complained about "the power of corporations". I don`t agree. Corporations have less power than people think and much less power than governments. Governments have state authority and they use armies and the police force to enforce their authority. Companies don´t. Governments are collecting taxes and imposing penalties. Corporations don`t. Government are passing laws and are setting rules for many things in life (regulations). Governments can legally imprison people. Companies don´t.
Milton Friedman said once: "There is no way in which General Motors can get a dollar from you unless you agree to give it to the company. That’s a voluntary exchange. It can only get money from you by providing you with something you value more than the money you give it. If it tries to force something on you that you don’t want, ask Mr. Henry Ford what happened when Ford tried to introduce the Edsel. On the other hand the government can get money from you without your consent. They can send policemen to take it out of your pocket. General Motors doesn’t have that power. And that is all the difference in the world. It is the difference between a society in which exchange is voluntary and a society in which exchange is not voluntary. It’s the reason why the government, when it is in the saddle, produces poor quality at high cost, while industry, when it’s in the saddle, produces quality at low cost. The one has to satisfy its customers and the other does not" (hoover).
The greatest force against corporation power comes from other corporations. They are competing against each other. When a corporation has success, her rising profits attract automatically others who want a share from the pie. Microsoft had never a monopoly because everybody could by an Apple computer instead - which I have been doing. Coffee lovers don´t need to purchase their dose of caffeine at Starbucks, there are dozens of alternative coffee chains and other copy cats. Nobody is forced to purchase an iPhone, there are many other smartphones available.
Amazon´s success has been animating a legion of copycats who also benefit from the ascent of e-commerce (and recently from the Covid-19 pandemic). Amazon is competing against huge retail corporations like Walmart, Target & Best Buy who are copying Amazon`s success, getting better over the time. Amazon is also competing with other Internet companies like Ebay, Wayfair & Overstock. And there are rapidly growing e-commerce platforms like Shopify, where companies can sell their products & services online. Facebook (and their daughter Instagram) and Google also developed platforms where companies can sell their products & services, independent from Amazon. Amazon`s cloud business AWS, which is also getting much attention from the trust busters (those who want to enforce stronger reulations), is challenged by Microsoft, Google, IBM, Oracle and other companies who also want to have a large piece from the pie. Microsoft`s cloud business won a huge contract with the Pentagon and is already growing much faster than Amazon`s cloud business AWS.
Amazon`s success helps many other companies - including small retailers (Amazon`s competitors) - to survive the pandemic. Amazon offers a platform for any company (or individual) to sell products online. The e-commerce giant also supplies logistic services for them, including storage, packing and transporting. Last year the giant invested more than $18 billion to help independent businesses to grow their sales on Amazon. With the help of Amazon other companies, including even small retailers, are also able to sell products nationwide - and often globally. Around 60 percent of Amazon’s sales come from third party vendors — i.e. other retailers — many of whom would not exist but for Amazon’s platform. During laast holiday season, American small- and medium-sized businesses sold nearly 1 billion products in Amazon’s store. According to the Financial Times independent merchants on Amazon’s vast marketplace made more than $200bn of sales in 2020, and tens of thousands of them had revenues of more than $1m a year (ritholtz ). So, far from destroying U.S. retail, Amazon has enabled U.S. retail to thrive and to survive the pandemic (truthonthemarket).
The other Big Tech companies aren`t monopolies either. Apple`s iPhones, iPads & MacBooks and services are competing against similar products & services from Microsoft, Google, Samsung, Huawei and a lot of other technology companies. Google & Facebook are fiercely competing against each other and myriad of other media companies because they all depend on advertising dollars.
Big Tech doesn`t need to be our friend, but the tech giants have to behave friendly otherwise they would go out of business. Adam Smith declared “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest”. That is also true for Big Tech. If Amazon would treat their customers unfriendly, if they would sell too expensive, deliver too slow & too unreliable, then customers would buy at Walmart, Ebay or elsewhere. That is the magic of competition. Because Big Tech has to compete against others they have to behave like friends. And competition is fierce as the sharp online revenue growth @ Walmart, Shopify & Target demonstrate.
The Internet makes it very easy to compare prices and to switch to other shops, sharpening the competition. Customers can choose the company which has the best quality, the best service and/or the lowest price which gives them a lot power.
As a result, customers have more power than the corporations.
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