A monopoly is more than just a board game. Monopolies are dangerous to consumers and small businesses alike.
A monopoly occurs when one company has complete control over a market, and no one else can break into it. For instance, a marijuana company might have a monopoly if it’s the only company that can afford to raise and sell cannabis in a particular area. Keep reading to learn more about the issues with monopolies and how they can be prevented in the CBD business.
Benefits and Drawbacks of Monopolies
Monopolies are really only good for one group: the business with the monopoly. When there’s a monopoly in an industry, that company can charge whatever it wants for its goods or services. That means a monopolistic business can see dramatic profits for little work. The downsides of monopolies are as dramatic — but in a negative sense — for everyone else:
- Excessive prices: When there’s no competition, a business can charge much more than a product is worth. Customers are obliged to pay high prices or go without.
- Poor quality: Monopolies can cut corners on their goods and services, making the products they deliver steadily worse.
- Lack of innovation: Furthermore, without competition, a company has no reason to improve things, so innovation grinds to a halt.
For all these reasons, monopolies are bad for everyone except the monopolistic company. Preventing monopolies is integral to keeping industries strong, including the marijuana industry.
Growing a Marijuana Business Without Risking Monopolization
So why do monopolies matter in the marijuana business? It’s because of how the industry is currently set up. As cannabis is legalized around the country, companies that got their start early have a significant edge over other businesses and have the potential to form harmful monopolies nationwide.
There are two reasons for this: first, CBD businesses that were able to get started right away have had longer to build a customer base. Furthermore, many of these businesses were created by people with independent financing. This has made it easier for them to grow despite the complicated and sometimes expensive licensing process.
However, new businesses can play an essential role in preventing these companies from becoming a marijuana monopoly. If many companies are in a field, they can prevent any company from getting a chokehold on the market. Suggestions for avoiding marijuana monopolies include:
- Removing license caps and allowing more businesses to enter the field
- Prioritizing the issuing of licenses to small businesses
- Barring large companies from “vertically integrating” or taking part in multiple elements of the cannabis industry
If suggestions like these are picked up, new cannabis businesses will have a much easier time breaking into the industry. In combination with additional funding from marijuana lenders like Bespoke Financial, small cannabis companies will be able to get their foot in the door and reduce the risk of monopolization in the industry.
Make Your Mark and Prevent Monopolization in the Marijuana Industry
Monopolies could seriously hurt the marijuana industry in the long run. That’s why it’s so important that new businesses can enter the field. If you’re ready to start your new cannabis company, you can get funding help from Bespoke Financial and fight the risks of a marijuana monopoly.