The essay aims at evaluating the mega firms or else the superstar companies in the market. The evaluation includes analysis on the emergence and rise of mega-firms. The topic rotates around analyses on the structural growth of an industry from junior, through struggles and finally in the largest market share. The superiority and fast growth are analyzed by considering factors such as empirical facts, market evolution, mechanism, and policy and strategy implications.
A superstar firm is evaluated and grouped among other superstar companies when it surpasses some achievements. Originally, all firms start from scratch with zero records. The initial size of a company is not enough to rate its superiority. Many huge companies have been sold out due to lack of consistency and required profits to run its functions ( Choi, Lou & Mukherjee, 2018, Pg44 ). In this case, it’s clear that superstar is indicated by the nature of the firm months or years after the launch. A superstar can be implied by the strategies tabled after the launch. A competitive strategy includes a complete purpose statement that aligns with the nature of the market. In this case, the working strategy of a company is noticed and identified after the process of manufacturing and retail begins.
Delegate your assignment to our experts and they will do the rest.
Other implications of a superstar firm are the overall production in terms of labor productivity, market share, profits and revenue. A group of superstar firms dominate the market by the largest share. For instance, among 6000 companies, it is possible to find 20 to 30 superstar firms. In this case, the fraction of the total count may dominate the market share by 80% plus.
Paper outline
The paper systematically covers different concepts related to the rise of the superstar firms. The paper begins with a general description of superstar. Gradually, the discussion climbs to the main topic regarding the rise of superstar firms. Categorically, the essay discusses the main differences between fast growing and superstar companies. After that, the paper analyzes the key recent industry trends and important facts on superstar firms. Lastly, the essay highlights on the policy and strategy implications, and market revolution.
2. Superstar Firms
2.1 Define superstar firms
The superstar is phenomenon used across firms and other sectors such as cities. The term is used to describe superiority basing on the performance of the subject area in relation with other similar competitors. The standard of growth is based on technology, growth strategies and mechanism. The superstar dynamic is currently occurring for firms from every part of the world. All firms are subject to become a superstar firm when they hit some targets ( Akerman, 2018, Pg11 ). The metric of analyzing the superstar dynamics of a firm are worth of the profit beyond and above opportunity cost and the economic profit. These two metrics can prove whether a firm can be considered mega. In this case, a superstar firm is described as a firm with a high market share, revenue size and overall productivity growth. The understanding of a superstar firm can be traced through examining success. The superstar firms dominate the market by surviving longer, growing fastest and earning highest profits within a given duration of time.
According to other sources, value added per worker (labor productivity) is a metric of consideration when evaluating whether a firm is superstar. Human resource is an important factor that attribute to the success of a firm. However, human resource is more productive if the efficient and quality services are delivered.
Superstar Firms and High Growth Firms
Superstar firm is different from a high growing firm. Superstar is a title achieved after a long time of strategizing and selling products. All superstar firms are either related to fast or slow growth. The fast-growing companies are mainly found in the first stages of growth. The growth is gradual all through. Superstar firms are as a result of a combination of failure and success. At some point, these kinds of firms experience a good flow of successful operations. At some time, the firms also go through a tough time in the market. Therefore, a fast-growing firm cannot necessary be referred as superstar. However, a superstar firm can be in a fast-growing spell depending on the profit and market share.
A superstar firm emerges as a result of good marketing strategies and the condition of the market. The success is normally a process that gradually pushes the favored companies to the highest level. At first, firms differ in productivity from season to season. In this case, some firms related to high production will experience high profits and average or lower costs. The high profit margins enable firms and other sectors to adjust their prices in favor of the consumers. The consistent affordable price helps the firm to expand its market share with time. Eventually, the market environment changes as tense market competition emerges. The customers therefore, begin excluding less competitive firms from their wish list. As time goes, the poorly managed firms exists the market. In this case, the strong firms gain a competitive advantage whereby they sell a lot of their products without a stiff competition. The condition can rise to birth of superstar/mega firm.
On another account, industry globalization, internet and deregulation can contribute to the existence of superstar firms. The process is aided by increasing market competition, reallocating market shares and resources, and commanding the less productive firms out of the industry.
Another reason why the large firms can evolve to superstar is due to the current ICT revolution. The price of quality ICT services has been declining dramatically hence building attention for aggressive firms. In this case, the firms have huge opportunities to sell their products effectively. These include creation of strong marketing networks based on propriety logistical software. The big box retailers benefit from high turnover of inventory, efficient logistics and good product variety at an affordable rate.
2.2 Empirical facts
A legal and certified superstar firm is recognized by its market power, prices, employment, investment and profit margins. These key facts are important in any mega firm.
Profit margins
The superstar companies are characterized with huge profit margins compared to other companies. In most cases, the companies dominate the highest revenue in the entire industry. The huge profit margins come as result of high market share. In most cases, their products are of high quality hence serving as the most demanded.
Prices
Superstar firms have an access to a high market share due to their low prices. The prices are low compared to the quality of their products. In this case, the inferior firms are affected by low productivity ( Bonfiglioli, Crinò & Gancia, 2018, Pg4 ). Some of these firms are unable to raise enough funds to develop their company hence quitting from the industry. The condition helps the competitive firms to sell their products at low cost. In this case, the firms reduce the price of the product in the favor of the customers.
Market power
Mega firms are characterized with a strong market power. On the account, the high market share is a result of a reliable quality product. The high quality is as a result of massive investment, ethical hiring and timely data collection.
2.3 Mechanism
The rise of superstar firms has been contributed by several fundamental mechanisms. The mechanisms are either internally or externally structured. However, the subject firms are the main participators and plotters of the mechanisms. These mechanisms include corporate investment, technology, IT, corporate strategic behavior, investment in intangible assets and regulation.
The most crucial mechanisms have been quality ICT and investment in tangible assets. The mechanisms are aimed at creating a productivity difference among firms. Firstly, several firms have purchased propriety high quality ICT. The new advanced software helps the firms to coordinate their activities in a more precise way compared to their competitors. The simplicity allows the firm to lower their prices as the demand keeps elevating. As time passes, the firms secure the largest market share in the industry. At this time, the most competitive firms get access to superiority through increased market concentration. In most cases, the productivity difference increases hence affecting firms depending on their status. The less productive, and badly managed firms are forced to exit the market. In other cases, such firms merge to create a reliable and stronger firm. However, the most competitive firms emerge as mega firms hence accessing the largest market share.
The above mechanisms are applicable in all firms during the competitive period. However, the mechanism requires a lot of capital and superiority. In this case, the mechanisms are only efficient to huge firms. The small firms are met with challenges such as lack of funds to purchase updated software. However, the small firms can improvise the mechanisms to fit in their standards. The size of a firm is measured through productivity differences within the industry.
3 Market Evolution
The industry concentration caused by the largest firms should lead to price hike and lowered cost. In this case, true productivity is absent. Literally, the market is expected to shift from one standard to the other. The change can be described from several dimensions. The rise f these firms affect market, evolve concentration, and shape the R&D investments.
Mega firms will be contributed to increase in market concentration. In cases where the market is concentration is high, the prices of the products will be required to rise for the small firms ( Bonfiglioli, Crinò, & Gancia, 2019, Pg12 ). However, the mega firms will drop their prices due to the decreased cost. In this case, the investment in this area will decrease with time. The small companies will at large be affected to an extent of being forced out of the market. After the processes, a stiff competition will be developed against the remaining firms. In this case, the overall investment in the industry will shoot. The capital required to establish a reliable and competitive firm is subject to rise. Gradually, the market will be dominated by a few firms. However, the relationship between the customers will grow due to the quality and satisfying products. The customer relation will lead to shortage of market for new firms. The new firms will be humiliated to board the industry due to the unbeatable market share gap.
4 Policy and strategy implications
The emergence and rise of superstar firms is the subject to competition explanation. Superstar firms can lobby politicians, manipulate market, act strategically and confuse the regulatory system to enlarge the market share. These firms are characterized with dominating the market and growing large through illegal strategies.
Superstar firms can improve on the management settings and invest in productivity promoting practices. The results are lowered average cost that helps them to successfully dominate the market. The strategy aligns with the hypothesis of these firms. In this case, the firms are assured of successfully attaining the desired market share ( Veugelers, 2018, Pg7 ). Existence of productive firms offering products at a low cost decreases the entry to market and increases concentration. The condition proves that competition can raise market concentration without interfering with customer welfare and prices. The process is strategically structured to maintain a competitive condition. Competition policy have a role that is becoming subtler with time. In this case, the role does not include effort to stop market concentration caused by efficiency and investment in productivity. According to Bertrand settings, competition can reduce prices of products to marginal cost even when the market is shared between two mega firms. Collusion and coordination between dominant firms is a common problem that affect market concentration. In this case, a focus of competition policy should aim at leveraging the condition. Another focus is to ensure that the market is free and encourages other contestants. Actually, the entrance of new technologies should be analyzed and served with great care to challenge the current market leaders efficiently.
Creation and development of competition policies for superstar firms requires a primary notion. Depending on the condition of the marketing environment, contestability acts as great factor towards success. The process is engaged by various challenges such ability and might to invest. Superstar firms can purchase new advanced technologies capable of challenging their future dominance. For instance, successful firms acquire potential rivals with competing products and terminate targets’ drug development. Mega firms have repeatedly used start-up exit to push their competitors out the market. Moreover, the strategy is used to limit competition by hindering other rivals from entering the industry.
Anti-trust policy is important at this juncture whereby it scrutinize the effect of acquisition on corporate innovation. The policy will prevent acquisition that causes staggering of future competing technologies and products. Ultimately, mega firms can slow down innovation in the future through creation of innovative start-ups.
Conclusion
Superstar firms are related to huge market share and high productivity. The rise of a superstar firm grows gradually after several successful and unsuccessful strategies. Initially, the firms create a reliable and strong foundation that helps them stay stiff throughout the competition. Superstar dynamic is happening to different firms all over the world. A superstar firm is related to fast growing companies. However, all fast-growing firms cannot be regarded as superstar. The title superstar is achieved gradually after a firm surpasses the records of other firms by winning the highest market share.
Several fundamental mechanisms have contributed to the growth and rise of mega firm. These include IT, corporate strategic behavior and corporate investment. These firms have been reported to use their powers to acquire the market share illegally. However, the superstar firms have called upon competition policy that examines the eligibility of the strategies.
References
Choi, D., Lou, D. and Mukherjee, A., 2018. The effect of superstar firms on college major choice. Available at SSRN 2845711 .
Akerman, A., 2018. The Relative Skill Demand of Superstar Firms and Aggregate Implications (No. 2018: 2). Stockholm University, Department of Economics
Bonfiglioli, A., Crinò, R. and Gancia, G.A., 2018. DP12829 Firms and Economic Performance: A View from Trade.
Bonfiglioli, A., Crinò, R. and Gancia, G., 2019. Firms and economic performance: A view from trade
Veugelers, R., 2018. Are European firms falling behind in the global corporate research race?. Policy Contribution , 6 , pp.1-13.
