Business Strategy Notes
Week 4. Business Strategy
Chapter 5: A Dynamic Model of Industry Structuring.
Objectives:
• Introduce a dynamic model of industry competition and evolution.
• Offer several propositions about the way industries will evolve based on this dynamic model, focusing specifically on the likely actions of new entrants to an industry and the responses of incumbent firms.
• Illustrate how this dynamic model can be used to analyze industries.
• Emphasize the managerial implications of this dynamic model of industry structuring.
Industries change: New entrants→ Existing industry → Market created
(Exhibit 5.1. p101).
The Nature of Industry Change
• Abell: An industry is a group of firms that serves the same customers, meets similar customer needs, and employs common technologies. o His three dimensional “competitive space”, delineated by customers (who), products and/or services (what) and technologies (how). o Exhibit 5.2. p102. Industry as a Three-Dimensional Competitive Space Consisting of Customers, Products and Technologies.
• Industries do not remain in equilibrium, customer demographics change, new technologies emerge, and new products and services are constantly being developed--> Industry dimensions are constantly changing.
• Many forces are sources to change.
• Expand the competitive space, any way – either customers, technology or the offering.
• Transformation throughout the three industry dimension, e.g. Apple Computer – the personal computer.
• “Outsider” firms generally have an advantage. --> the most entrepreneurial firm can create new competitive spaces, first by proactively exploiting technology and developing products/services and later by creating desire for these products/services. (Shaping rather than getting shaped).
The Role of Managerial Thinking in Industry Evolution
Limitations and Inertia in Managerial Thinking
• Why do incumbent firms fail to anticipate changes in their industry or to notice the
Chapter 5: A Dynamic Model of Industry Structuring.
Objectives:
• Introduce a dynamic model of industry competition and evolution.
• Offer several propositions about the way industries will evolve based on this dynamic model, focusing specifically on the likely actions of new entrants to an industry and the responses of incumbent firms.
• Illustrate how this dynamic model can be used to analyze industries.
• Emphasize the managerial implications of this dynamic model of industry structuring.
Industries change: New entrants→ Existing industry → Market created
(Exhibit 5.1. p101).
The Nature of Industry Change
• Abell: An industry is a group of firms that serves the same customers, meets similar customer needs, and employs common technologies. o His three dimensional “competitive space”, delineated by customers (who), products and/or services (what) and technologies (how). o Exhibit 5.2. p102. Industry as a Three-Dimensional Competitive Space Consisting of Customers, Products and Technologies.
• Industries do not remain in equilibrium, customer demographics change, new technologies emerge, and new products and services are constantly being developed--> Industry dimensions are constantly changing.
• Many forces are sources to change.
• Expand the competitive space, any way – either customers, technology or the offering.
• Transformation throughout the three industry dimension, e.g. Apple Computer – the personal computer.
• “Outsider” firms generally have an advantage. --> the most entrepreneurial firm can create new competitive spaces, first by proactively exploiting technology and developing products/services and later by creating desire for these products/services. (Shaping rather than getting shaped).
The Role of Managerial Thinking in Industry Evolution
Limitations and Inertia in Managerial Thinking
• Why do incumbent firms fail to anticipate changes in their industry or to notice the