Critique the view that a focus strategy based on an essentially ‘captive’ clientele is simply lazy and creates no sustainable differentiation.

Question

What will be an ideal response?

Answer 1

A different way of expressing this is to note that an essentially ‘captive’ clientele is a quasi
monopoly; monopolists are not noted for their dynamism and innovativeness. However, the
existence of a captive clientele is very often characterised as being a franchise operation licensed by
an overarching body (e.g. the UK energy regulator that allows energy companies to supply gas and
electricity) or by external circumstances that deter competition (e.g. taxi firms that offer long
distance and late night services when few buses run). Many franchisees (whether formal or
circumstantial) are actually obliged to work very hard to sustain their (right to) trade, securing
customer loyalty and satisfaction. However, consider the motives for franchisees to expend efforts to
innovate, especially when innovation might risk eliminating the basis of their sustainability. Thus,
the major UK retail suppliers of electricity are also generators; if they encourage households and
local businesses to generate electricity locally (by installing solar panels; ground heat pumps;
windmills) it could ultimately destroy their control of supply. One can appreciate why it required
government to legislate to stimulate support for local generation. Similarly, late-night taxi firms
might offer more imaginative services if local authorities offered all-night bus services on more
routes.