Creative Destruction in the PC Industry Flashcards
What factors allowed for creative destruction in the PC industry?
→ Ex. IBM displaced Apple, but got bought by Lenovo
→ This happened because the evolution of the PC was matched by the evolution of it’s consumer base
→ There was a growth in the range of users
→ The market for PC’S grew as the PC had more uses
→ Another factor was an increase in easiness to use, computers were originally geared towards hobbyists but then had office uses
→ Ex. Graphical User Interface (GUI)
→ This is important because new firms that would enter the industry wouldn’t clash with existing ones
→ The industry provides a general purpose technology which means that new uses can be developed by subsequent innovators
→ The constant introduction of new uses for the computer led to a growth in the market
→ Also, the industry was vertically disintegrated
→ Personal computers are assembled from many different components
→ Different firms built different components
→ This meant that new firms entering the market had the same access to components than already existing firms did, which lowered barriers to entry
→ Patent protection was generally weak which made it easier for innovators to take a product and improve it
Lowers costs of entry
Conclusions
→ The computer was a general purpose technology. This allowed for rapid growth in market size as firms invented and people discovered new uses for the technology.
→ Improvements in accessibility, including GUI, led to further market expansion.
→ Vertical disintegration meant that new producers could enter the industry without much difficulty.
→ Patent protection was generally weak which allowed for new entries
Creative destruction is only likely to happen in specific circumstances such as those in the PC industry
Displacement of office applications
Originally these apps had network effects, which created a barrier for competitors
But the rapid growth of the market led to the introduction of new software which made network effects less constraining
The introduction of the GUI simplified computer use and further expanded the market
