Corner The Market (Explained: All You Need To Know)

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What does “Corner The Market” mean?

What’s important to know about this expression?

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What Is Corner The Market

The expression “corner the market” refers to a company, investor, or group of people acting in such a way as to dominate a specific niche or business segment to control prices.

Cornering the market is like a figure of speech where you are backing the market into a corner where it cannot escape.

Typically, companies that corner the market have a very large market share without necessarily being a monopoly.

A company can corner the market by acquiring a controlling interest in its main competitors in the same industry or niche.

By cornering the market, the company can set prices and impose various terms and conditions on buyers who have no other option but to accept them.

In stocks, an investor can corner the market by purchasing enough shares in a company or market to be able to influence the stock price.

Keep reading as I will further break down the meaning of cornering the market and tell you how it works.

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Why Corner The Market

Companies and investors who are looking to corner the market are mainly driven by the motivation to dominate the niche or industry.

A company that corners the market is able to manipulate and control supply in such a way as to impact the demand.

For example, a company that corners the market in the oil and gas sector can reduce production so it can drive prices up, allowing it to make more profits.

However, when a company becomes too dominant in an industry or niche, the government will intervene to assess the impact on the company’s actions in the market.

When a company dominates an industry and disrupts the healthy balance of supply and demand, the government will intervene and impose restrictions on the dominating company.

The most notable example is that of Microsoft when it dominated the personal computer space leading the government to take antitrust measures against it.

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Corner The Market Legally

The expression “corner the market” is generally associated with a company’s illegal conduct in wanting to dominate a niche.

However, many companies can corner the market in perfectly legal ways.

To corner the market means that a company dominates a particular niche with very few competitors, and the market has no choice but to deal with this one company.

For instance, in the electric car sector, at one point in time, Tesla had cornered the market as it had developed reliable electric vehicles that consumers absolutely wanted to buy.

Through innovation and revolutionary products, a company is able to corner the market for a period of time until competitors have time to enter the market and present competitive products.

Although a company may legally corner the market through innovation and competitive advantage, regulars will pay close attention to the niche to ensure that other competitors are able to enter the market freely.

If a company’s market dominance becomes unhealthy, the government antitrust division will assess the matter and potentially intervene.

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Corner The Market Illegally

The notion of “cornering the market” is generally associated with a company illegally acting to dominate a niche.

The reason this is the case is that a company may want to achieve market dominance to disrupt the healthy balance in supply and demand allowing it to profit.

For example, when Microsoft was scrutinized by the government for antitrust behaviors, the objective was to see if Microsoft was preventing competitors from entering the market in such a way that it controlled the “supply” side of the market.

Typically, the illegal cornering of the market is characterized by companies attempting to limit the number of willing buyers and sellers in a particular niche leading to the breakdown of healthy market forces.

For example, a company in the oil and gas sector may corner the market by buying out its main competitors.

After it acquires its competitors, the company can decide to reduce its prices so low in such a way as to financially destroy its competitors.

Ultimately, being the only market player, it can command unreasonably high prices forcing consumers to spend more than what they would have paid in a competitive landscape.

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Corner The Market Examples

Let’s look at a few examples of how investors or companies can corner the market.

Example 1:

In business, cornering the market refers to a company having the largest market share in such a way that it dominates the industry.

For example, when Apple launched the iPod, it created a brand new industry and instantly cornered the market.

However, as competitors began to enter into the niche, the supply and demand in the market reached a healthy balance.

Example 2:

An investor may control the market by buying as much float stock as possible.

Float stock refers to the number of shares that are available to the general public to buy and sell.

When an investor buys out the float, it corners the market as it will control the supply side of the stocks.

As a result, an investor looking to buy shares in the company must offer a much higher price to entice the cornerer to sell.

Example 3:

In the area of futures trading, an investor can corner the market by purchasing a large number of futures contracts for a particular commodity.

This way, the price for that commodity will inflate and buyers will need to pay a much higher price to have the cornerer sell.

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Takeaways 

So there you have it folks!

What does it mean to corner the market?

In a nutshell, to corner the market means that a company has a significant market share without necessarily being a monopoly.

In other words, when consumers have very few competitive options and can only do business with one company, we can say that the company has cornered the market.

For example, a software company with over 90% market share in the industry has cornered the market.

This is the case as 9 out of 10 clients purchase software from the same company making it very difficult for competitors to compete effectively.

The strategy to corner the market mainly consists of controlling the market’s supply side as much as possible so you can set prices.

Now that you know what the expression “corner the market” means and why it’s important, good luck with your research!

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