Comments on: Transparency – too much of a good thing? http://jamesfarrar.wordpress.com/2008/02/07/transparency-too-much-of-a-good-thing/ Sustainability, technology and corporate responsibility Sun, 26 Jul 2009 23:37:16 +0000 http://wordpress.com/ hourly 1 By: Dorje http://jamesfarrar.wordpress.com/2008/02/07/transparency-too-much-of-a-good-thing/#comment-75 Dorje Fri, 29 Feb 2008 13:47:40 +0000 http://jamesfarrar.wordpress.com/2008/02/07/transparency-too-much-of-a-good-thing/#comment-75 Increased transparency certainly does place a downward pressure on margins - price-comparison websites are a great example of the way retail consumers are benefitting from this trend. But the notion that "perfect information leading to perfect competition will destroy margins" is in many cases pure baloney! For a start, perfect information is a concept rather than a reality that will ever be achieved in anything more than small corners of the international markets. This is especially true for non-financial parameters that are tricky to measure and compare. Farrar correctly points to two other issues which weaken this argument - barriers to entry and differentiation. While highly commoditised product classes are more vulnerable to margin erosion through transparency, other product classes are not. And the moment a customer bases their purchasing decision on cost AND other differentiators like quality, reliability, trust etc. the notion of perfect info and zero margins recedes into the distance! Increased transparency certainly does place a downward pressure on margins – price-comparison websites are a great example of the way retail consumers are benefitting from this trend. But the notion that “perfect information leading to perfect competition will destroy margins” is in many cases pure baloney!

For a start, perfect information is a concept rather than a reality that will ever be achieved in anything more than small corners of the international markets. This is especially true for non-financial parameters that are tricky to measure and compare.

Farrar correctly points to two other issues which weaken this argument – barriers to entry and differentiation. While highly commoditised product classes are more vulnerable to margin erosion through transparency, other product classes are not. And the moment a customer bases their purchasing decision on cost AND other differentiators like quality, reliability, trust etc. the notion of perfect info and zero margins recedes into the distance!

]]> By: Technology News & Reviews | Business Technology News and Comparison at IT PRO http://jamesfarrar.wordpress.com/2008/02/07/transparency-too-much-of-a-good-thing/#comment-74 Technology News & Reviews | Business Technology News and Comparison at IT PRO Mon, 18 Feb 2008 12:29:25 +0000 http://jamesfarrar.wordpress.com/2008/02/07/transparency-too-much-of-a-good-thing/#comment-74 [...] Farrar, who runs CSR for SAP recently wrote about the value of transparency. Quoting Frank Buytendijk of Oracle (and previously Hyperion), he said: Transparency is a [...] [...] Farrar, who runs CSR for SAP recently wrote about the value of transparency. Quoting Frank Buytendijk of Oracle (and previously Hyperion), he said: Transparency is a [...]

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