Many might agree with me that part I was very boring and I thank you for daring to read the second part. I promise that part II will be racy and daring. Let us draw on the analogy we made on part I and draw some conclusions on Indian election based on similar oligopolistic competitions..
1. A customer audience with strong taste for variety is bound to become a differentiated product market with time (either with 100s of players or with few players having major powers) when the entry barrier are not too-high for niche markets. India is a large pluralistic electorate with many segments amongst voters (based on religion, language and culture). Taking into account the economy of scale in advertising benefits across India and similar homogeneous culture in a few states, it is likely that a few major players developed and many minor players also developed. And following competitive behavior, India grew into a market similar to cellphone market with few major players and many minor players. Irrespective of the performance of the early govts, this would have happened as a natural progression.
2. As the competitors increase and the offerings increase in a market typically it is for the good of the customer. There are more product choices and due to the competition, the quality improves or price decreases. Since there is no concept of price decrease in elections as cost of voting is constant, the only likelihood is the improving quality of the offering or customer fit improving with time. Or a dangerous likelihood is market ethics decreasing like election rigging to maximize share. This also means a very positive conclusion. If loop holes in election rigging are fixed, parties will be forced to offer better offerings due to competition as that will be the only way to compete.
3. Market niche players need to work harder to better serve their niche compared to generic players for their own survival. If there is no differentiation between them and the national players, their survival will be threatened. This is a good motivation for them to work harder. Because of the significant barriers to entry that big players enjoyed, new entrants would have to be radically different: ensuring fundamental improvement was achieved, not a mere difference of packaging. Therefore a segment which has a unique taste for variety is bound to be served by a local or niche party better. This can be translated to any state which has a unique culture or preferences are bound to be served by local parties in the long run. A key factor in the survival of the local party is how strongly the local electorate prefers its local preferences.
So parties like DMK, TDP and Akali Dal are expected to add more value to the regions/niches over time than a national party. Poor serving of their customer base can lead to someone else talking up their niche status. To answer the question in the title, Regional niche players represent unique niches more effectively. Party differentiation is very good for a healthy society/customer base as every one’s needs are better represented by a party. If all parties have very little differentiation in a pluralistic society like India it can lead to poor servings for individual customer segments.
4. Prediction: India still has a few distinct niches or segments with sustainable capacity for more niche players. Good examples are Karnataka and West Bengal. Although some semi-national players serve it, We can predict more niche or local players in the market in near future.
5. At the same time, if the market share of top players in a cellphone-like competition falls less than 40%, none of the players will get a major share of votes. Although this is good in consumer markets as prices drop for customers, it is not good in electoral market as there will be lot of uncertainty and instability. Our central government needs 368/552 to form a government. If the current majority players in central government like Cong, BJP and communists don’t pull up their socks and serve their constituencies well, the regional and marginal players will grow in strength more than 50% (currently 44%). As one or two major niche parties develop in each unique segment states, the likelihood of national parties power waning is very likely. Although the states might have Coke-Pepsi kind of two major players, the central assembly might have a cellphone like market or even more competition. This is definitely good for the regional and marginal constituencies represented by them but add a lot of instability in the central government as the government can be weakened by threats of pullout. Setting up safety controls to prevent such structural flaws in the system is achievable and a challenge facing our parliament in our foreseeable future.
6. Companies typically collude or consolidate with other companies in oligopolistic competition where market share is important and economy-of-scale exists. There are some clear economies of scale in politics. Advertising for Cong or BJP on a national newspaper is cheaper and has better returns from all over India. While advertising for a local party in TN or AP is not very cheap but can only buy votes in these two states. This kind of economy-of-scale and low individual market shares forces parties to form coalition. And this is not preventable unless the market share of the major parties increases.
7. On the negative side, Niche players benefit from enhancing the differences between their supporters and non-supporters. For example, a regional or caste or communal party gains to benefit from proving that their culture is under threat from the others. This helps them hold on to their constituency. Remember a mainstream party can easily capture niche voters once the differences reduce but it is harder for a niche player to cover non-niche voter.
8. As the cultural differences between states reduces with better communication and transportation, the difference in electoral preferences could be expected to decreases. This might mean the market niche players might give way for more large players with time. This does not mean that parties might look the same. They may still be divided on religious (BJP), communist (CPI) and caste platforms (BSP). A key question that arises is how is Congress differentiating itself from others, other than saying it is non-communal, non-communist and non-caste party or saying it is not something else. This is a branding dilemma that Congress needs to resolve quickly unless it wants to be not differentiated and lose market share due to arrival of multiple smaller parties. A very open market gap/segment is “progressive/Development” segment. In the long run, I think this platform holds the best winning platform unless communal or caste or regional divisions increase.
9. Premption and Proliferation: Large parties can prevent growth of smaller parties by offering niche/state based version of their parties. But it is a wasted exercise if its just a local office with a local leader. To be successful, it needs to be very different from the mainstream version and fit the local niche perfectly. But this brings up a dilemma for the party in terms of mainstream version vs. local version. In the long run, this is very good for the party and country as it improves democratic decision making within the party and serving local customers better. This also means that local branding has to be developed for the party with different set of promises than the mainstream one.
This is not as challenging as it seems to be. In US each political Party has a liberal flavor, moderate flavor and conservative flavor in different states. And party members vote on a bill based on their opinions and not based on central leadership.
10. As parties move from the traditional segments to serve other lucrative segments they alienate their current segments. A central political offering and individual state-wise offering is natural and not a contradiction in such systems. This is like Hondas making car, truck and motorcycles for different segments and thereby capturing the winner market share in automotives segment. After all, the entire motive in a competitive election is to win and form a government.
Tags: ADMK, Congress, DMK, India, Politics, Regional, Tamil, Tamil Nadu