What Is a Gorilla?
"Gorilla" is a term used to describe a company that dominates its industry but does not necessarily have a complete monopoly. A gorilla firm achieves its dominance through exerting control over the pricing and availability of its products relative to competitors in the industry. This influence on price forces competitors to resort to alternative tactics to compete, such as through differentiating their offerings or aggressive marketing tactics.
- The term "gorilla" refers to a dominant company in some sector that does not have a monopoly but nonetheless enjoys a great deal of market power.
- While not an actual monopoly, because of its size and influence, a gorilla may be considered a de facto monopoly since competitors are sidelined.
- Although they are watched carefully by anti-trust regulators, gorillas are able to attract top talent and capital at favorable rates.
- A classic example of an industry gorilla was Microsoft, which dominated the operating systems market in the 1990s.
A gorilla is a company whose market share and size allow it to set the terms for other companies in the same industry. In economic terms, a gorilla is large enough to act as a price maker.
A gorilla does not need to have an official monopoly to dominate its competitors; however, its broad dominance in the industry may lead many people to view the situation as a de facto monopoly. The use of the gorilla term is a reference to the fact that an 800-pound gorilla can do whatever it wants.
However, other firms still have an incentive to compete with an industry gorilla. A careful price cut or increase in production may attract the gorilla's customers, or bring new customers into the market. These price adjustments can be subtle, including better credit terms, faster delivery, or other free services.
Gorillas are most effective when demand for the gorilla's product is not price sensitive. This is why gorillas are more effective in the short term. Over the long term, prices often become elastic as consumers find cheaper substitutes for the product.
Although industry gorillas do not have a true monopoly, they may attract unwanted attention from antitrust regulators.
Benefits of Being a Gorilla
Being a gorilla carries many benefits. Due to economies of scale, gorilla companies can earn higher margins, allowing them to reinvest more in their business and increase their advantages over the competition. The dominant position provides a larger marketing platform, allowing the market leader to set the bar for what customers expect from their suppliers.
Corporate partners prefer to work with gorillas, which can provide enormous endorsement and distribution benefits. Gorillas are also able to attract the top talent in their industry, due to their size and prestige. They are also able to raise money more easily and cheaply than their competitors.
Due to economies of scale, gorillas enjoy higher profit margins than smaller companies, allowing them to increase their lead against competitors.
Example of a Gorilla
One classic example of an industry gorilla is Microsoft's dominance over the operating systems market during the 1990s. Although it was not the only provider, Microsoft's competitors were very small, had tiny market shares, and generally avoided facing Microsoft head-on. Microsoft was able to drastically outspend these smaller companies on innovation and marketing, and it used that power to squeeze these competitors on price and distribution. In 1998, Microsoft faced antitrust lawsuits for anticompetitive behavior.