WHEN ADVANTAGE IS SUSTAINABLE: WINNER-TAKE-ALL MARKETS

In business, no victory is permanentbut on occasion, a particular firm is capable of enjoying a dominant position within its industry for a decade or longer. When this happens, we can say that the company has maintained a sustained advantage. This happens most often in a winner-take-all market. This is a market in which specific forces conspire to encourage users to gravitate toward one platform and to abandon others. The four forces that most often characterize winner-take-all markets are supply economies of scale, strong network effects, high multihoming or switching costs, and lack of niche specialization. 1.supply economies of scale are an industrial-era source of market power driven by the massive fixed costs of production in such industries as railroads, oil and gas exploration, mining, pharmaceutical development, and auto and aircraft manufacture 2, network effects are the Internet-era source of market power. Thanks to positive network effects, the value created and the profit margins enjoyed by the company both increase as more users join the ecosystem.21 This is why firms with network effects can enjoy a 10x multiple in value relative to other firms that have comparable revenues but lack network effects.

3.A third factor driving the winner-take-all effect is high multihoming and switching costs. Multihoming takes place when users participate on more than one platform. Of course, multihoming enables users to take advantage of the benefits provided by multiple platformsbut it always comes with a cost, monetary (such as multiple subscription fees) or otherwise (such as the inconvenience of having to upload data to more than one platform website).

4.The fourth and final factor affecting demand-side scale is users' taste for niche specialization. When a particular set of users has distinctive needs or tastes, they can support a separate network, thereby weakening the winner-take-all effect. How about Paypal.What they do to make winner take all market. Can you explain based on this theory, and the refferences