Peter Schiff

What is Business Growth?

Growth is directly tied to the demand in the market.

Growth doesn't happen out of thin air. It's directly tied to what people buy. If they buy more, that's growth. If they buy less, then they are not growing. But that's all tied to the consumer demand in the market. That's the only way growth can come, from the buyer.

How does a business grow?

Businesses serve a market. The business offers services and products that a market wants. A market is composed of demand, or people who want stuff, and supply, people (or firms) who sell stuff. So what does it mean when the business grows? It means that the business is serving a larger section of the market. That's it.

People are consuming more of the product. As they consume more, the business grows to meet the new demand.

How to grow your business?

You have to meet the demands of the market. Every business offers a product to the market, whether it's flowers, toys, labor, etc., and that product has to be tied to the what people want, the demand. However, demand changes, peoples' wants change, so your product has to meet the change, or it dies.

Businesses can either meet the demand with their product, or they die. It's not morbid, it's simply because no one is buying what the business is offering, and so without any new customers, they're dead in the water.

Why do some businesses grow and some do not?

It's all about the market. If the businesses can meet the demands of the new market, they'll grow. If they have a really cool product, but no one wants it, it doesn't matter how cool the product is, it won't be bought.

If a business grows, it's simply because their product or service is being bought more and more.

What's important to remember that growth in business isn't magic. It's really simple: does the businesses' products meet what people want? If so, it will grow, if not, it will die.

Meet the demand, and you'll always have life in the business. Find new places of demand, and you'll have growth.

Two ways to find growth

1. A business finds a new market, and entering that market means there are many buyers without their product. They sell their new product in the market, and that's growth.

2. There are untapped wells of demand that exist in a current market, but no one is able to get to them. If you can find the demand and put your product there, then you'll have growth.

For instance, it may be the case that people really, really want a $4,000 car. But all the firms in the auto market don't offer a car at that price. Almost all cars are above $10,000. There is a well of demand that can be tapped for a firm if they can offer a car at that price, even if it's not as good a product as the higher priced cars, some people still want it.

If you can create a firm to meet that demand, your firm will grow.

Why is Music so cheap?

Why is music free?

Well, it's not free (at least not legally), but you can get brand new songs on itunes for .99 cents. Amazon is even cheaper. Recently, many bands started giving away their music for free. These are some amazing artists, like Radiohead, Nine inch nails, etc.,

So how could this be? How could these songs, which have value, be worth zero dollars, or only one dollar?

The answer is in the market. It's simple economics.

There are too many competitors.

In any market, there are suppliers (competitors) and buyers. People supply the buyers with products. Buyers buy the products. What happens if there are very few products and a lot of buyers? The buyers will compete with one another for the product. The more people want the product, the higher the price will go; the buyers are in a bidding war to see who will have the product.

The other side of that is if there are many people supplying the buyers with a product and not many buyers, the price of the product will go down. The shoe is on the other foot, and now the suppliers will compete with each other to get a buyer. If they offer the same product, the supplier will lower it's price to get the consumer.

What does this have to do with music?

Music is in a market, too. The musicians offer a product, the song, and the buyers buy the product. In any market, there is a limited number of buyers. If there are many places for the buyer to go to buy the product, the price will be lowered so the supplier can attract the buyer to their store instead of their competitor's store.

This is what's happening in the music market. There are too many suppliers and not enough buyers. Additionally, the suppliers are giving away the product for $0 dollars. If you are supplying the same product to the market, and someone else is offering the same product you are for free, you are not going to survive very long if you sell your product for $15.

That's why the price of music has gone down. There are too many music stores offering the exact same product for free. In order to attract buyers, musicians have to give away their product for free, too. Then they hope the buyers will also buy a t-shirt.

There are too many music stores

A music store can be anyone offering a product to the market. So if you've ever offered your songs on your hard drive to a p2p file sharing site, you've entered the market, and you're giving away your product for free.

If enough people do this, then no one who offers their product for $15 can survive. They will have to lower their prices.

That's the problem. There are too many music stores in the market. There are too many suppliers offering the same product for free.

What's the solution?

How do you save the music industry? You have to go after the suppliers. You have to go after anyone offering the product for free. If you can stop the flow of supply, the price will go up. It's that simple. It's just a market problem, and the answer is a market solution. Decrease supply, and the price of the product will rise.

Inflation

Here are some thoughts on inflation:

Hello

Welcome to my blog. I'll be discussing and writing about things that interest me in the world of business.