03/08/2014 1

Competitive Strategy in Emerging

Industries.
Competitive Strategy in
Emerging Industries
03/08/2014
Competitive Strategy in Emerging
Industries. 2
Competitive Strategy in Emerging
Industries
The Structural Environment
Problems Constraining Industry
Development
Early And Late Markets
Strategic Choices
Techniques For Forecasting
Which Emerging Industries To Enter

03/08/2014
Competitive Strategy in Emerging
Industries. 3
The Structural Environment
Common Structural
Characteristics
Early Mobility Barriers
03/08/2014
Competitive Strategy in Emerging
Industries. 4
The Structural Environment -
Common Structural Characteristics
Technological Uncertainty
Strategic Uncertainty
High Initial Costs But Steep Cost
Reduction
Embryonic Companies And Spin-
offs
03/08/2014
Competitive Strategy in Emerging
Industries. 5
The Structural Environment -
Common Structural Characteristics
First-time Buyers
Short Time Horizon
Subsidy
03/08/2014
Competitive Strategy in Emerging
Industries. 6
The Structural Environment Early
Mobility Barriers
Predictably Different Common
Early Barriers:
Proprietary Technology
Access To Distribution Channels
Access To Raw Materials And
Trained Manpower
03/08/2014
Competitive Strategy in Emerging
Industries. 7
The Structural Environment Early
Mobility Barriers
Cost Advantages Due To
Experience, Made More
Significant By Technological And
Competitive Uncertainties
Risk, Which Raises Effective
Opportunity Cost Of Capital And
Thereby Effective Capital Barriers
03/08/2014
Competitive Strategy in Emerging
Industries. 8
Problems Constraining Industry
Development
Inability To Obtain Raw Materials Or
Components.
Period Of Rapid Escalation Of Raw
Materials Prices.
Absence Of Infrastructure.
Absence Of Product Or Technology
Standardisation.
Perceived Likelihood Of Obsolescence.
03/08/2014
Competitive Strategy in Emerging
Industries. 9
Problems Constraining Industry
Development
Customers Confusion.
Erratic Product Quality.
Image And Credibility With Financial
Community.
Regulatory Approval.
High Costs
Response Of Threatened Entities.

03/08/2014
Competitive Strategy in Emerging
Industries. 10
Early and Late Markets
A crucial question of strategic
importance in an emerging industry is
the assessment of which markets will
open up early and which will come
later. This assessment not only has
bearing on product development and
marketing efforts but also on
forecasting strategic evolution.
03/08/2014
Competitive Strategy in Emerging
Industries. 11
Early and Late Markets
Markets, market segments and even
particular buyers within market
segments may have greatly different
receptivity to a new product. A number
of criteria seem to be crucial in
determining this receptivity, some of
which can be influenced or overcome
by firms in the emerging industry.
03/08/2014
Competitive Strategy in Emerging
Industries. 12
Early and Late Markets Criteria
for Determining Receptivity
Nature Of Benefit:
Performance Advantage
Cost Advantage
State Of The Art Required To Yield
Significant Benefits
Cost Of Product Failure
Introduction Or Switching Costs
Support Services
03/08/2014
Competitive Strategy in Emerging
Industries. 13
Early and Late Markets Criteria
for Determining Receptivity
Cost Of Obsolescence.
Asymmetric Government, Regulatory Or
Labour Barriers.
Resources To Change.
Perception Of Technological Change.
Personal Risk To The Decision Maker.

03/08/2014
Competitive Strategy in Emerging
Industries. 14
Strategic Choices
Formulation of strategy in emerging
industries must cope with the
uncertainty and risk of this period of
an industrys development. The rules
of the competitive game are largely
undefined, the industry structure
unsettled and probably changing and
competitors not defined.
03/08/2014
Competitive Strategy in Emerging
Industries. 15
Strategic Choices Strategic
Freedom and Leverages
Shaping Industry Structure
Externalities in Industry Development
Clash of Interest with others.
Changing Role of Suppliers and
Channels.
Shifting Mobility Barriers early
mobility barrier may erode with time.
03/08/2014
Competitive Strategy in Emerging
Industries. 16
Strategic Choices Timing Entry:
Appropriate Conditions for Early
Entry
Good Image And Reputation
Where Experience Curve Is Important
Experience Difficult To Imitate
Customer Loyalty Will Be Great
First Firm Will Benefit.
Cost Advantage Through Early
Commitments To Suppliers and
Dealers.
03/08/2014
Competitive Strategy in Emerging
Industries. 17
Strategic Choices Timing Entry:
Early Entry is Risky when :
Early competition and market
segmentation are likely to be different to
that which will be important later.
Cost of opening up the market is great
including customer education.
Small early competitors likely to be
replaced later by formidable ones.
Technology change will make early
investments obsolete.
03/08/2014
Competitive Strategy in Emerging
Industries. 18
Strategic Choices Coping With
Competitors
Newly formed entrants and spin-offs may cause
resentment.
External factors make a firm dependent on
competitors for development of industry.
Pioneers expend excessive resources in
defending high market shares.
Monopoly or near monopoly cannot be defended
and it may be wiser to encourage sensible
known competitors than unknown small players.
03/08/2014
Competitive Strategy in Emerging
Industries. 19
Forecasting appropriate Strategy
The device of SCENARIOS is a
particularly useful tool in emerging
industries. Scenarios are discrete,
internally consistent views of how the
world will look in the future, which can
be selected to bound the probable
range of outcomes that might feasibly
occur.
03/08/2014
Competitive Strategy in Emerging
Industries. 20
Forecasting appropriate Strategy
The starting point for forecasting is
estimating the future evolution of
product and technology in terms of
costs, product variety and performance.
Thereafter the analyst chooses a small
number of internally consistent
product/technology scenarios that
encompasses the range of possible
outcomes.
03/08/2014
Competitive Strategy in Emerging
Industries. 21
Forecasting appropriate Strategy
For each of the scenarios, the analyst
then creates a scenario of which
markets will open up and what their
characteristics will be. Here the first
feedback loop occurs , since the nature
of the markets that open up early can
shape the way in which products and
technology evolve.
03/08/2014
Competitive Strategy in Emerging
Industries. 22
Forecasting appropriate Strategy
The next step is to develop the
implications for the competition for each
product/technology/market scenario and
then forecast the probable success of
different competitors.
The firm can examine its own position
vis--vis competitors for each scenario
and decide to bet on A SCENARIO.
03/08/2014
Competitive Strategy in Emerging
Industries. 23
Which Emerging Industry to Enter
The choice of which emerging industry
to enter is dependent on the outcome of
a predictive exercise done by the firm.
An emerging industry is attractive if its
ultimate structure ( not its initial
structure) is one that is consistent with
above average returns and if the firm
can create a defendable position in the
long run.