The magazine industry has become unique because of using gifts to attract customers and increase readership. The advent of providing gifts to customers seemed an effective way of gaining competitive edge. However, the cost of the gifts has weighed down heavily on magazines. They feel the gifts are no longer necessary, but cannot eliminate them for fear of losing customers. This essay will explore competition and cooperation elements in the industry and whether the cover gifts’ war is a prisoner’s dilemma of win-win game. Moreover, it will identify differences of the elements across the segments, and determine whether the magazines would benefit from not offering the gifts.
The first competition element in the magazine industry is the variation of gifts offered to the customers by magazines. Although the majority of magazines provide gifts, their type is different, therefore, it has cost implications. The variation in the nature of gifts is one of the competition elements because it attracts customers differently. Therefore, the ability of a business to identify the gift that suits its clients is a competitive advantage (Kurtz & Louis, 2010). A cost reduction mechanism is a competitive advantage that competitors exploit. Therefore, when a magazine has identified a meaningful gift that does not cost much, it can increase profitability. The second competition element is the fear of losing market share in case the magazines eliminate the gifts. Despite the gifts increasing costs for the businesses, the companies continue offering gifts to the clients because they fear losing their market share. Such a scenario indicates that there is high competition in the industry where market share can be snatched by competitors easily.
One of the cooperation elements in the industry is shown by the magazines and suppliers of computers, video games and music working together to satisfy the customers. The suppliers have acknowledged the importance of the gifts and the role they play in customer satisfaction. They have realized that their input in satisfying the customers with the gifts would help them, because the magazines’ readership would increase. When the magazines have a large audience, their products are exposed to many prospective customers, who are likely to purchase their products. The constraints that the magazines face in providing the gifts to the clients are counterproductive. The suppliers have no obligation to support the gift system because it is the preserve of the magazine. However, the loss of readership would also reduce the exposure to their products (Czinkota, Bob & Ronkainen, 2011). The common problem that both the suppliers and the magazine would encounter for not offering gifts is reduced business and market share. Cooperation, therefore, is a win-win strategy, which benefits would be enjoyed by both parties. Therefore, the identification of a common goal between the two businesses is the second element of cooperation. The acknowledgement of the common interests does not occur in the computers, music and video games’ segment.
The cover gifts war is a prisoner’s dilemma because of the personal reward that some magazines might gain by not cooperating with the others to scrap off the gifts from their businesses. In a prisoner’s dilemma, two rational people are unlikely to cooperate even when they would gain by working together (Chan & Mauborgne, 2005). Cooperation would lead to a win-win scenario, where everyone benefits from the combined effort. The cover gifts war is a prisoner’s dilemma because the majority of the magazines have expressed their displeasure with the losses they incur through the gifts. Their discontent shows that eliminating them would benefit all parties. The only way these collective gains would be realized is through cooperation. The customers would not have another option but to buy the magazines without the gifts in case of cooperation, since there would be no alternatives. However, some magazines that chose not cooperate would betray the others by continuing to offer gifts. According to Porter (2008), in highly competitive markets where some players perceive an opportunity for a large market share, they may not enter joint ventures for mutual benefits. The appeal for personal reward is huge and provides a platform for differentiation. When some companies continue to offer the gifts while others have halted the offers, their individual gains are massive. The customers would shift to those with the gifts because they have attractive deals. The cover gifts war is a prisoner’s dilemma because those who refuse to cooperate are likely to attract a lucrative individual reward. However, those segments whose gifts are provided by suppliers cannot consider cooperation because it does not benefit them. Those who bear the cost of the gifts would benefit most in case the entire industry cooperated. However, segments with no gift-related costs would lose.
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The competition and cooperation elements differ across segments. For instance, the nature of gifts offered to the customers depends on the segment and the characteristics of the customers. In segments which clients are women, the gifts may be customized to fit the unique needs. Additionally, geographical segments differ in the magnitude of gifts they provide to their clients, with markets such as the United Kingdom having more offers than the United States. Additionally, cooperation is different in the various market segments. It is the highest in segments that experience high gift costs. In segments that do not bear the costs of the gifts, there is limited need for cooperation because there is no motivation to do away with the gifts. Moreover, the fear of losing market share is different in various market segments. The segments with high gift costs fear losing market share compared to the low gift-cost segments. Magazines in the segments that do not incur gift costs have a competitive advantage over other segments. The advantage arises from their ability to offer increased value at a reduced cost (Porter, 2008).
In conclusion, the competition elements in the industry include different cover gifts and fight for market share. Cooperation elements include suppliers offering gifts on behalf of the magazines and identification of common goals that can be realized through cooperation. The cover gifts represent a prisoner’s dilemma because organizations in the industry may not cooperate even when it is in their best interest. The cooperation and competition elements differ across segments on the basis of customer characteristics, nature of gifts and geographical location of the market. The magazines would be better off without the cover gifts because their cost of operations would reduce and the quality of their products would be improved.
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