The majority of the products in most companies are cash traps. They will absorb more money forever than they will generate. This is true even though they may show a profit according to the books of account. Continued investment sends good money after bad. Escape from the trap requires extreme measures. Either stop investing and manage solely to maximize cash withdrawal, or invest so heavily that a leading position is reached in the market.
…Prices could be lower to customers and profit could be higher at the same time if all competitors would recognize their cash traps and stop wasting money on them. Anytime there are more than two or three active competitors in a given product-market segment, then someone is making a mistake. The leader may be failing to compete by holding an umbrella over higher cost competition at his own expense. Or, it may be that competitors are caught in cash traps. Either way, there are major opportunities being lost.
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