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MGMT 290: Industry Analysis > Week 9 / Chapter 9: Evolution of Industries > Flashcards

Week 9 / Chapter 9: Evolution of Industries Flashcards

1
Q

Grant, Robert ((2013). Contemporary strategy analysis

A

Grant, Robert ((2013). Contemporary strategy analysis

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2
Q

Change in the industry environment is driven by the forces of

A

Technology, consumer needs, politics, economic development, and a host of other influences

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3
Q

Life cycle of firms are much ______ than the life cycles of industries

A

Shorter

Changes at the industry level tend to occur through the death of existing firms and the birth of new firms

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4
Q

Product life cycle

A 
Products are born
Their sales grow
They reach maturity
They go into decline 
And then the product dies
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5
Q

Industry life cycle

A

1) Introduction (emergence)
2) Growth
3) Maturity
4) Decline

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6
Q

Two factors are fundemental:

A

1) Demand growth

2) Production and diffusion of knowledge

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7
Q

Demand Growth

A

The life cycle and the stages within it are defined primarily by changes in an industry’s growth rate over time

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8
Q

Introduction stage

A

Sales are small, and rate of market penetration is low:

  • products are little known
  • customers are few

High costs and low quality:

  • Novelty of technology
  • Small scale of production
  • Lack of Experince

Customer are:

  • Affluent
  • innovation-orientated
  • risk-tolerant
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9
Q

Growth stage

A

Characterized by accelerating market-penetration as technical improvements and increased efficiency opens up the mass market

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10
Q

Maturity stage

A

One saturation is reached, demand is wholly for replacement

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11
Q

Decline stage

A

Industry becomes challenged by new industries that produce technologically superior substitute products

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12
Q

Knowledge

A

Second industry driver
-new knowledge in the form of product innovation is responsible for industry birth, and duel processes of knowledge creation and knowledge diffusion exert a major influence on industry evolution

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13
Q

Dominant design

A

Product architecture that defines the look, functionality, and production method for the product and becomes accepted by the industry as a whole

examples: McDonald’s in 1955, limited menu, no waiter service, eat-in and takeout

The overall configuration of a product or system

May or may not embody a technical standard

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14
Q

Technical standard

A

technology or specification that is important for compatibility

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15
Q

Network effects

A

The need for user to connect in some way with one another

Example: Choosing an iPhone so they can facetime and use iMessage, don’t want to feel stranded

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16
Q

Product differentiation

A

Introduction stage typically features a wide variety of product types that reflect the diversity of technologies and designs - and the lack of consensus over customer requirements

Convergence around a dominant design is often followed by commoditization during the mature phase unless producers develop new dimensions for differentiation

17
Q

Examples of commodity items

A

Personal computers, credit cards, online financial services, wireless communication services

18
Q

Organizational ecology

A

Analyses the population of industries and the process of founding and selection that determine entry and exit

19
Q

Findings from Organizational ecology

A

1) Number of firms in an industry increases rapidly during the early stages of industry’s life
2) With the onset of maturity, the number of firms begin to fall

20
Q

Shakeout phase

A

The rate of firm failure increases sharply

21
Q

Implications for competition:

A

1) Shift from non-price competition to price competition

2) Margins shrink as the intensity of competition grows

22
Q

Rothaermel, Frank (2021). Strategic management (5th ed.).New York: McGrawHill

A

Rothaermel, Frank (2021). Strategic management (5th ed.).New York: McGrawHill

23
Q

Industry life cycle (definition #2)

A

The five different stages- introduction, growth, shakeout, maturity, and decline- that occur in the evolution of an industry over time

24
Q

Stylized industry life cycle

A

Horizontal axis = Time (in years)

Vertical axis = Market size

S shaped graph first going up and than down for decline

25
Q

Introduction stage

A

When an individual inventory or company launches a successful innovation, a new industry may emerge

Core competency is R&D

Usually high price for inventor and high price for buyer

Barriers to entry are high, generally only a few firms are active in the market

Growth is slow, market size is small

26
Q

Network effects

A

The positive effect (externality) that one user of a product or service has on the value of that product for other users

27
Q

Growth stage

A

Demand increases rapidly as first-time buyers rush to enter the market
-standard emerges (bottom up or top down[govt]
-Due to high demand both efficient and inefficient firms do well
production costs begin to fall
Distribution channels are expanded
-Moves from product innovation to process innovations

28
Q

Standard

A

An agreed-upon solution about a common set of engineering features and design choices

29
Q

Government / other standard setting agencies

A

Institute of Electrical and Electronics Engineers (IEEE)

30
Q

Process innovations

A

New ways to produce existing products or to deliver existing services

31
Q

Product innovations

A

New or recombined knowledge embodied in new products

Examples: Jet airplane, electric vehicle, smartphone, wearable computer

32
Q

Shakeout stage

A
  • Rate of growth declines
  • Firms begin to complete directly against each other for market share
  • Weaker firms are forced out at competition grows
  • Only the strongest survive as prices cut and more services are offered
  • Firms are either acquired or bankrupted
33
Q

Maturity stage

A

-Turns into a oligopoly with only a few large firms
-Demand consists of repeat or replacement purchases
-Market reached maximum size
-Process innovations maximizes, aiming for lowest cost possible
-

34
Q

Decline stage

A
  • Market contracts further as demand falls

- Leader have four strategic options

35
Q

Four strategic options for Decline

A

1) Exit
2 Harvest
3) Maintain
4) Consolidate

36
Q

Exit

A

Forced to exit due to bankruptcy or liquidation

example: US textile industry

37
Q

Harvest

A

Reduces investments in product support and allocates a minimum of human and other resources
(Examples: IBM, Olivetti offering typewriters)

38
Q

Maintain

A

Continuing to support marketing efforts at a given level despite consumption is declining

39
Q

Consolidate

A

Buying other firms to attain monopoly, albeit in an declining industry

MGMT 290: Industry Analysis (11 decks)

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