Potential Competition and the United States Chlorine-Alkali Industry

Abstract

WE are indebted to Professor Bain for a well-developed theory setting out the character and significance of potential new competition as it resides in the conditions surrounding entry into particular industries and markets.' We are thus provided with additional tools with which to explain and assess certain important aspects of business conduct and performance. Accordingly, we have chosen to employ Bain's model as a basis for exploring the structural stability of the chlorinealkali industry in the United States over the past thirty years. In industrial chemicals generally a rapid expansion of the market for a particular product, often combined with a change in the pattern of end uses to which the product is put, is attended by a change in structure as the various chemical firms and others invade the developing market. The market for chlorine has grown very rapidly over the past three decades, yet the roster of firms and their relative positions in the industry have remained much the same since the early I930S. The question of immediate interest is why this field should have remained immune to invasion in a general industrial setting characterized by extension of product lines on the part of established firms. After briefly describing the industry we shall examine those characteristics of the industry which appear to be relevant to the issue of entry. It will be discovered that entry barriers to the production of chlorine are relatively moderate. It is in this context that comparison of observed behavior and performance with the theoretical model becomes pertinent. It is our contention that Bain's model is useful in explaining an apparently aberrant feature of the chlorine-alkali industry in the United States.