US spending on defence and barriers to entry

The graphic below from this article illustrates the sheer magnitude of US spending on defence in relation to other countries and the fact that its nearest rival in terms of military expenditure, China, spends almost seven times less is staggering. The UK spends thirteen times less. Under normal circumstances, in this business of warfare, how can anyone, or any other country “compete” with the US’ embarrassment of military riches – the barriers to entry to this particular market appear to be overwhelming. However, the US is fighting on two fronts, Afghanistan and Iraq, and is struggling to overcome opposition who I don’t doubt has even a fraction of the means available to the US military at its disposal. I am not a military expert but I imagine the tactics and knowledge of terrain amongst other things give the smaller forces a competitive advantage over their American rivals.

Can any parallels be drawn with markets where few dominant players with enormous financial resources are kept on their toes by smaller, more dynamic firms? Microsoft, for example before Google came along or perhaps more recently the arrival of Diaspora, a wannabe rival to the now all powerful Facebook (Four Nerds and a Cry to Arms Against Facebook). The web has provided a platform where anyone with a good idea and enthusiasm can make their voice be heard turning traditional business theory on its head, forcing the big players to take note as they lose market share. The internet seems to be a great leveller and its ability to remove or at least reduce barriers to entry in markets which previously appeared to be impenetrable is for many one of its most impressive impacts. Monopolies and governments ignore at your peril!