Supply side of an industry fragmented

Question

Why is the supply side of an industry fragmented?

Answer 1

Any of several reasons can explanation for why the supply side of an industry is fragmented:

i. Market demand is so diverse and so extensive that very big numbers of firms can simply coexist trying to accommodate the variety and range of purchaser requirements and preferences and to cover all the required geographic locations.

ii. Low entry barriers permit tiny firms to enter cheaply and speedily.

iii. An absence of scale economies allows tiny companies to fight on an equal cost footing with larger firms.

iv. Purchasers need relatively small quantities of customized products.

v. The market for the industry’s service or product is becoming more global, putting companies in more and more countries in the similar competitive market.

vi. The technologies embodied in the industry’s value chain are exploding into several new regions and along several different paths that specialization is necessary just to keep abreast in any one region of expertise.

vii. The industry is young and crowded with aspiring candidates, with no firm having yet developed the competitive capabilities, resource base, and market recognition to command a important market share.