Consumers and enterprises as actors on the market

Abstract

This conceptual paper discusses the phenomenon of differentiation made possible through branding or innovation or a combination of the two. Differentiation is eventually the driving force for the development of its own negation, commoditization. When customers have endured a commoditized market long enough the opportunities open up for creative destruction, this concept of Schumpeter (1942), means that an entrepreneur invents a completely new way of satisfying the customers’ unsatisfied needs, making the industry that no longer bothered about their customers. Many researchers have tried to re/brand destructive innovation as their own, with concepts, such as of ”transilience”, and “blue ocean strategy’, as opposed to ‘red ocean strategy’. The paper focuses on innovation as a differentiation strategy and on temporary monopoly rent as a driver of innovation. Increased competition and shortening and life cycles makes capitalism more volatile and the strategies to reduce the risks involved are discussed. These strategies lead to the real-world implementation of the concentration of capital forecasted by Marx and feared by Schumpeter. The paper identifies the need to continuously monitor the concentration of capital and to understand individual markets by studying the firm’s profit.