What is Dog Eat Dog?
Dog eat dog refers to intense competition in a market. Dog eat dog competition most commonly arises in markets where products or services have become commoditized. In this case, no company can create a competitive advantage in any way other than competing on price. Such intense competition often results in reduced profit margins. One synonym of dog eat dog competition is "cutthroat" competition.
- Dog eat dog refers to intense competition in a market where products or services have become commoditized.
- The term comes from the behavior of two hungry dogs and how intensely they can compete for a scrap of meat.
- A dog eat dog market can lead to unethical or illegal behavior in pursuit of making more sales.
- Opposers of capitalism argue that dog eat dog markets can cause monopolies.
- Companies can avoid a dog eat dog market by creating a competitive advantage.
Understanding Dog Eat Dog
A dog eat dog market refers to such a high level of competition that competitors run a significant risk of compromising their ideals or engaging in unethical or even illegal behavior in the name of making more sales. The term comes from the behavior of two hungry dogs and how intensely they can compete for a scrap of meat, even to the point of one dog killing its competitor. A dog eat dog market may also result in a price war.
Amid dog eat dog competition, competing companies may operate under the assumption that every sale their competitors make is one they have lost (and vice versa), and that the goal of such competition is the destruction of a competitor. Such behavior is indicative of a zero-sum game, ignoring the fact that competing companies should focus on serving customers with the best possible product and maximizing their productivity and efficiency.
Dog Eat Dog Competition and Capitalism
Such a high level of competition is often used by anti-capitalists to illustrate why the capitalistic economic system does not serve its participants. They argue that dog eat dog competition leads to destructive behavior, and in the end, monopolies. There is some evidence to support this claim, with Congress enacting the Interstate Commerce Act of 1887 partly to regulate unfettered capitalism in the railroad industry. In the Great Depression of the 1930s, President Theodore Roosevelt and J.P. Morgan' s "House of Morgan" entered into gentlemen's agreements that sought to shore up failing businesses (and acquiring healthy ones) by creating cartels and monopolies to limit competition, otherwise known as "morganization."
Dog Eat Dog Competition Defenses
The best firms build an economic moat around their products, preserving their pricing power. A firm can create barriers to entry to its industry through heavy advertising, creating customer loyalty, securing critical intellectual property and other means. For instance, iPhone maker Apple Inc. (AAPL) has built a strong brand through innovation and superior aesthetics, allowing it to charge a premium for its products and maintain higher profit margins.
Examples of Dog Eat Dog Sectors
Investors should be aware of sectors that are subject to dog eat dog competition. For example, the airline industry has faced price wars and weak profitability throughout most of its recent history. In fact, legendary investor Warren Buffet’s company Berkshire Hathaway Inc. (BRK.B) sold a swath of his Delta Air Lines, Inc. (DAL) and Southwest Airlines Co. (LUV) shares amid slumping profitability during the 2020 coronavirus crisis. In the retail sector, big-box retailers, along with e-commerce giant Amazon.com, Inc. (AMZN), have used their size and logistical network to operate off razor-thin profit margins that have effectively swallowed many of their smaller competitors.