Competing against large Businesses

[Amaroq]

This may be taking the topic a little off topic from the OP's post, the phrase "too big to fail" has been used before in debate against me. I maintained that anyone good enough to compete with the big businesses would be able to, but I was told that the big businesses would just lower their prices until any new competition has gone out of business, and then raise their prices again. Is there any argument against this, or is there even anything wrong with that in the first place?

[softwareNerd]

This may be taking the topic a little off topic from the OP's post, the phrase "too big to fail" has been used before in debate against me. I maintained that anyone good enough to compete with the big businesses would be able to, but I was told that the big businesses would just lower their prices until any new competition has gone out of business, and then raise their prices again. Is there any argument against this, or is there even anything wrong with that in the first place?

The best argument is reality. Dell started selling computers from home, competing against all the big guys; he ended up as one of the biggest companies in the business. Small Microsoft, writing operating systems for IBM's PCs, ended up forcing IBM to abandon PCs and PC operating systems. Kroger is an old company, yet little Walmart sped past it and the once much larger K-mart went into bankruptcy. The big-three auto companies were once much larger than all their competition, Japanese included; yet, they've been eating dust for a decade. Meanwhile, the Korean companies threaten the Japs. Consider how Southwest in the US and Ryan Air in Ireland came from nowhere and grew in the capital-intensive airline business.

There are many billions of dollars desperately looking for good investment opportunities.

Of course, if the big business is able to lower price (and/or improve its product) not simply as a short-term tactic, but more consistently, then it can fight back.

[agrippa1]

This may be taking the topic a little off topic from the OP's post, the phrase "too big to fail" has been used before in debate against me. I maintained that anyone good enough to compete with the big businesses would be able to, but I was told that the big businesses would just lower their prices until any new competition has gone out of business, and then raise their prices again. Is there any argument against this, or is there even anything wrong with that in the first place?

The main argument against this is that products and companies are not homogeneous, with few exceptions. Competition usually arises in niches ignored by a major player, not directly at their core product, and competitors often enter based on differences in quality or improvements in processes. If a competitor can make widgets 10% cheaper than the Widget Monopoly, it will have no trouble finding investors to bankroll it through WM's attempt to dump at a lower price, or a buyer may contract the competitor to provide long term supply, below what it knows the big business can sell at over a long term. And if it makes rechargeable widgets, WM can dump all the plug-in widgets it wants and not make a dent.

An exception would be a product that is homogeneous, like, oh, say, aluminum. You can't produce a much "better" aluminum than aluminum, so if a company folds profits back into innovations in aluminum production it could maintain a significant cost advantage over any comers, and thereby maintain a non-coercive monopoly without the need to dump product. That's exactly what happened at Alcoa, America's only non-gov't-sponsored monopoly, and the result was very high quality and low cost aluminum. The gov't prosecuted them, of course.