Competitive Strategy in Emerging Industries

Question 1

What is an Emerging Industry?

Answer 1

A newly formed or reformed Industry, created by some large-scale change or innovation that elevates a product to commercial viability.

Porter, Competitive Strategy — P. 265.

Strategically, Mature Industries face similar issues to Emerging ones when their competitive structure is fundamentally disrupted by change or innovation.

Question 2

What is the Unique Competitive Challenge of Emerging Industries?

Answer 2

Molding the malleable Industry structure to maximize profitability.

Porter, Competitive Strategy — P. 265.

Question 3

What are the common Structural Characteristics of Emerging Industries?

Answer 3

• Short time horizons.
• Information scarcity.
• Strategic uncertainty.
• Inexperienced Buyers.
• Information asymmetry.
• Steep Experience Curve.
• Technological uncertainty.
• Government subsidisation.
• Plenty of Startups and Spinoffs.
• Need for Market Encroachment.

Porter, Competitive Strategy — P. 265-270.

Question 4

What are the common Characteristics of Mobility Barriers in Emerging Inustries?

Answer 4

• Access to inputs.
• Requisite experience.
• Proprietary technology.
• Access to distribution channels.
• Risk, which increases effective capital costs.
• Cost advantages, often due to experience, subsidies, or other unique attributes.

Porter, Competitive Strategy — P. 270.

These Barriers stem from the need to bear risk and be strategically and technologically forward-thinking, so as to lay strong foundations ASAP. As an Industry develops, they are usually replaced by the more capital-intensive Barriers of Mature Industries.

Question 5

What are the common Problems of constraining the Development of Emerging Inustries?

Answer 5

• Lack of infrastructure.
• Lack of regulatory approval.
• Inconsistent product quality.
• Buyer confusion stifling demand.
• Lack of technical standardization.
• Adverse responses by threatened entities.
• Lack of credibility with the Financial Industry.
• Perceived likelihood of obsolesence by future product generations.
• Inability to access inputs, often due to weak supply chains and rapid price escalation.

Porter, Competitive Strategy — P. 272-276.

These issues stem from the Industry’s inexperience, dependence on external economic entities, and need to encroach on other markets.

Question 6

What are the Characteristics of valuable Buyer Segments in Emerging Industries?

Answer 6

• They are well-capitalised.
• They have a high risk tolerance.
• They do not require significant support services.
• They view technological innovation favourably, as an opportunity.
• They do not face legal or commercial barriers toward adoption.
• They derive a significant cost or performance improvement from the product, especially in its rudimentary form and without the need for regular upgrades.
• They face relatively low costs with respect to:
  * Obsolesence.
  * Product failure.
  * Switching and changeover.

Porter, Competitive Strategy — P. 276-282.

Question 7

What are the Major Strategic Issues a Firm must address in an Emerging Industry?

Answer 7

• Shaping Industry structure and practice in its favour.
• Accessing reliable supply and distribution channels.
• Capitalising on early Mobility Barriers and either building upon them or creating new ones.
• Promoting the Industry’s reputation through cooperation with Rivals and standardisation, although not at significant cost to itself, and less so as the Industry matures.

Porter, Competitive Strategy — P. 282-284.

Although it is hard to generalize, only rarely is it feasible and profitable to defend a near monopoly in an Emerging Industry; a Firm’s efforts are usually best spent developing its own strengths and allowing others to develop the Industry.

Question 8

How does an outside Firm gauge whether to enter an Emerging Industry?

Answer 8

The Firm can:
* Mitigate free-riding.
* Enter relatively cheaply.
* Avoid technological obsolesence.
* Accumulate experience relatively quickly.
* Avoid costly competition with Incumbents.
* Derive absolute cost advantages from early entry.
* Generate strong customer loyalty from early entry.
* Out-innovate Rivals and develop a reputation as a pioneer.
* Formulate a comprehensive strategy that addresses the Industry’s present and future obstacles and opportunities, and can execute it.

Porter, Competitive Strategy — P. 285.

Question 9

How can a Firm Forecast Industry Evolution?

Answer 9

By creating various scenarios that estimate:
* Product and technological development across various metrics (cost, performance, product variety, marketing, etc.);
* The structural and competitive implications thereof; and
* Their effects on different Strategic Groups.

Porter, Competitive Strategy — P. 287-289.