Convergence
We live in a paradoxical time. Two contrary forces large corporations in oligopolies: the rapid pace of technical innovation and social change on one hand, and tendency to convergence on the other. While the world, the fashion, and technology keep changing, oligopolies are constantly in danger of being tripped up tendencies to converge.
Here are some ideas on how convergence inside an oligopoly happens:
Personnel
Oligopolies hire one another's executives. Over and over again, a successful VP of one company, perhaps passed over from the top spot, is lured away by a close competitor for higher office and higher pay. #2 and #3 want to have the magic of #1 rub off, and in industry like television where those ratings are strictly measured and frequently changing, the game of musical chairs goes on endlessly. But even in more staid industries like banking and insurance, the top lieutenants at company A are usually picked to head company B before company B's own aspirants. Further down the line, a midlevel management job at a Microsoft or Proctor & Gamble frequently converts into a higher-level job at some lesser competitor.
What results from this is a remarkable homogeneity in executive personnel between companies in an oligopoly. The practices and the values of different companies tend to resemble each other more and more over time. Companies fail to retain a special character or esprit. The idea of "that's the way we've always done it here" gives way to "that's the way my former, more successful company does it."
Products
An analyst recently compared the desperately conformist press corps to a group of fifth-graders playing soccer. You can always tell where the ball is on the field because it's surrounded by everyone on the field. No one takes a position; they all just converge on the ball, making for lots of inept play. Likewise, companies in an oligopoly , once they identify a trend (often innovated by someone else), spend much time and money in glomming on to the new trend. So Vanilla Coke generates Vanilla Pepsi, "Survivor" spawns a plethora of "reality shows", all foods go from "low fat" to "low carb" overnight,
That's why all car companies offer essentially the same mix of similar-looking sedans, SUV's and pickups, and the ability to distinguish a Ford from a Toyota at a glance, once so easy, has become so hard. It's also why CNN looks and sounds more and more like Fox News.
Of course, such imitation and trend-reaction has always been a major part of the business world. Borrowing someone else's hot idea, just this side of violating patent and copyright laws, is a lot easier than coming up with your own. Once an idea has reached the "tipping point," it seemingly goes overnight from nowhere to everywhere. And modern corporations are better placed than ever to retool themselves to meet the new need.
But in the age of oligopoly, companies seem to be far more highly attuned than ever to this process of trend chasing. With enormous and immediate numerical feedback, executives are more than ever aware of the minimal variations in demand for product and services, both theirs and their competitors. Every slight advantage from the opposition brings a counter-plan, usually to do the same thing that seemingly gave the opposition the lift. Through constant micro-adjustments divergent competitors offer more and more similar products. Any breakout is immediately pursued.
Methods
A similar process happens in the area of business methods. Take for example the science of site location. From a haphazard process of locating retail branches, over the last few years a whole new methodology for finding optimal store locations has arisen. At first only a few market leaders like McDonalds or Wal-Mart put the time and money into perfecting this approach. Now it's unthinkable that any retailer beyond a mom-and-pop would not call on the same methods, to the extent they can afford them, as McDonalds and Wal-Mart. Their competitors therefore end up making the same kinds of choices.
Similarly, the publicity rollouts of big studio movies follow a schedule and breadth (from the gossip column stories to the onslaught of TV ads) that has developed over time but is now is totally rigid and predictable, so much so that the campaign schedule for any given movie could be exchanged with that of any other with only trivial modifications.
That's why MasterCard and Visa are virtually identical in the way they work, and why American Express is desperately trying to follow their lead. It's why all banks seem like minor variations on each other, even to the same meaningless ads that trumpet how they care about their customers.
Joint ventures
One of the areas where competitors come close together is in joint ventures. These are all over the map. Petroleum giants BP and Exxon Mobil work together in some areas. Film studios regularly take on the some of the funding for other studios' films. Steel giant Arcelor works with rivals Nippon Steel and Shanghai Baosteel. Cingular is owned jointly by Bell South and SBC. And so on.
Working on joint ventures requires that two companies mingle personnel, products, and methods. It fuses a common interest that has to persist even when the two companies are strong competitors in other areas. It's a fast way to make enemies into "friendly enemies."
Trade associations
Trade associations like the RIAA (recording industry) and MPAA (film) are lobbying groups that fight for legislative advantages for their members, and usually only for their biggest members. In some cases, like the trade association for New York modeling agencies, they can be channels for price-fixing. But even without criminal complicity, they make oligopoly executives aware of their shared interests with those of similar companies, even if they compete with them in the market.
Market discipline
All publicly-held companies are under intense scrutiny by analysts and investors. When these see a competitor get advantage over the company in question, the pressure on each company to conform to the practices of its rivals is intense. That can be in terms of executives, products, and methods.
Whatever makes investor feel more comfortable in the short term gets done. After a while it makes all companies in the same field look more and more similar. The eccentricities that are possible in small companies (such as unusual benefits for rank-and-file employees or special community services) tend to get wiped out when the company as a whole is under scrutiny. Ben & Jerry's egalitarian culture diminished as the company got bigger, and really slipped when it was taken over by Unilever.
Mergers and acquisitions
Of course, after a merger deal, the methods and culture of one company is subsumed into another. There may be a mix, but that is rare. While the acquirer tries to reassure the acquirees that nothing will change, it inevitably will. First, the accounting systems have to be standardized, then the HR function. Finally, all the methods and culture get standardized. HP seems already to have totally integrated Compaq so much that it's hard to remember that Compaq ever existed. Disney is transforming Miramax, though the idea was that Miramax would act "semi-independently". No trace of Pillsbury except a few brand names exists since the 2001 merger with General Mills.
The pressures to converge are inexorable. What is fascinating, a subject we can't begin to cover today, is the way in which these conformist, converging industries have learned to keep from being overturned, for the most part, by disruptive rivals who can really adapt to changing technology and fashions faster.
