Thursday, September 21, 2006

BestBuy and New Competition

According to NY Times Flat-Panel TV sales have helped the company during its second quarter. The robust demand for Flat-Panel TV is considered to be “the engine of growth” for this company. Today Wall Street Journal has reported the prospects of Flat-Panel TV profitability are not as bright as before anymore, since Home Depot has started to offer the item in its stores.

From an industrial organization point of view, this is very interesting. The concept of entering market is usually taught as a new business entering into market, so the number of firms increases. However entering market apparently is a wider concept and it includes offering new services and products by existing firms as well. Still one can argue the number of suppliers of that product increases without a change in total number of firms present in the market.

Regarding Flat-Panel TV the number of stores increases, however there is no new business in the market. What would happen to follow up technical services and warranty? Would the existing companies keep offering them? Or there would be new entry into the market?

The increasing competition among Flat-Panel TV suppliers promise a declining price, however declining price could mean decline in the marginal gains of warranty services so I wonder if a Flat-Panel TV still comes with a great technical support.

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