Everyone has had that experience of going into the local record shop where the old, off-colored paint is peeling off of the wall and it smells like musty beans. Or how about that coffee shop with decor that never left the seventies? Yet somehow people keep returning to these stores because it's worth it. The only thing that your favorite business needs to change is the awful furniture, sloppy employee uniforms and those annoying radio commercials.
One of the reasons free markets benefit society so much is because of specialization. When a person or group of people has the freedom to work in the field of his or her choice, great things happen. If a person enjoys his work, the long hours just don't seem as long and mastering work-related skills doesn't seem as difficult. People use their freedom to synergize with other like-minded enthusiasts and achieve incredible things.
Such strongly motivated groups work hard and compete with other such groups to sell products and services to the public. With the proliferation of so many companies (and their respective products) competition can become fierce. The best firms grow and the worst go by the wayside.
This competition causes other special benefits: innovation and specialization. One great way a company can separate itself from the pack is to fashion a product with a unique spin. For example, companies X, Y and Z all create widgets, but if company X can create widgets that are more user-friendly that companies Y and Z, then it will attract a steady following of customers. The user-friendly X company now has a specialization, and it will consistently attract customers that like that specialization. This is called a market niche.
Thousands of companies make money by creating a market niche in a very traditional industry. In other words, putting a unique, creative spin on an old product or service can work very successfully. Inn-N-Out Burger is a traditional American burger joint with a small, uncreative menu at normal prices. Why has it been such a hugely successful chain?
Because it creates fresh food in a particular way in a particular atmosphere. First, the food doesn't come out of a can or a freezer: it's cooked fresh right after you order it. However, its real market niche is that the restaurant takes you back to nineteen fifties Southern California with its furniture, wall pictures and signature palm trees. Although the chain has expanded to many other states, it still sells the same old thing: the feeling of prosperous, post-war Southern California.
Companies not only create a market niche by the products and services they design, but also through the feelings they inspire. The way employees dress and speak, the quality and details of the advertising and even the furniture of the business all contribute to the feelings a firm evokes. Can you imagine stepping inside a doctor's office where the bright, flashy furniture reminds you of a night club? Similarly, can you imagine a night club that has decor that reminds you of your grandmother's outdated home furnishings?
So whether a company makes hamburgers or provides medical services, its market niche and general atmosphere truly affect its success.
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