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    « The Deep Dive (part 2) | Main | Affinity Groups and Commoditization »

    August 25, 2006

    Scarcity versus Abundance

    I have heard several people over the last two weeks talk about "buying power".  They mentioned how joining an organization like ReproMAX, RSA, or the PEIR group gave them "buying power". 
    I am not convinced that is as valuable as some think it is.  The reason for this is:

    1. To be successful in the today's market you either need to be:
      • Focused on delivering value added services, or;
      • Selling high volumes of a commodity
    2. If you are selling high volumes of a commodity you probably already have "buying power"
    3. If you are focused on selling value added services you  need "partnerships" with strategic vendors.
    4. If you are not sure which camp you are in, you had better figure it out quickly.
    5. If you don't believe your company can sell value added services you should consider joining forces with a larger company that has the buying power and the economies of scale.

    Commodity businesses tend to focus on scarcity because it is a "zero sum game".  Everybody is fighting over scarce revenue and scarce profits.  There is only so much printing business in a geography.  The only way to grow your business is to take the business away from your competitors, or to buy your competitors.  The way to maximize your profits is to take profits from your suppliers.  In this type of market the Walmarts or the ARC's of the world get bigger and squeeze more out of their suppliers.  The problem with this is, in commoditized markets over time the profits move closer and closer to zero.

    There are markets which have an abundance of opportunity.  There is enough opportunity for many companies.  I believe that many reprographers are so focused on fighting the zero sum game that they overlook areas where there is an abundance of opportunity.  To seize the opportunity will require some significant changes in a company's business model.  It requires a more consultative business model.  It doesn't have to happen overnight. This can be done overtime. 

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