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Administrative Studies
ADMS 1000
Eytan Lasry

Chapter 3 ▯ The Competitive Context The Industry Lifecycle Model▯ -all industries evolve along particular trajectories and through specific phases from their early emergence and growth to their eventual maturity and decline▯ -the pace of an industry’s evolution along its lifecycle is closely related to the evolution of technology within the industry▯ -lifecycle model divides industry evolution into 4 distinct phases▯ 1.Introduction ▯ 2.Growth▯ 3.Maturity▯ 4.Decline▯ • Introduction - sees many entrepreneurial firms enter the industry hoping to emerge as a market leader ▯ • Growth - widespread diffusion of an industry standard or dominant design in a critical step in facilitating an industry’s transition to the growth phase▯ • Mature - market stabilizes and sales grow more slowly▯ Decline - aggregate sales drop and rivalry further heats up as the industry undergoes greater • consolidation through more merges and the exit of inefficient firms▯ ▯ The Introduction Phase : Industry emergence and creation▯ -new industries emerge as a result of changes that create opportunities for entrepreneurs to leverage novel combinations of resources to develop innovate products, services or processes▯ -early years of an industry are generally uncertain about future of the market▯ -firms are intensely focused on research and development at this stage▯ -objective is to find the new industry’s dominant model and get it accepted and institutionalized ▯ ▯ The Quest for Legitimacy▯ -one of the most important contributions to emerge concerns that concept of the legitimacy of new industries and organizational forms▯ -Sociopolitical Legitimacy - refers to the endorsement of an industry, activity or organizational form by key stakeholders and institutions such as the state and government officials, opinion leaders or the general public▯ -Cognitive Legitimacy - refers to the level of public knowledge of a new industry and its conformity to establish norms and methods reflected in the extent to which it is taken for granted as a desirable and appropriate activity▯ ▯ The Growth Phase : Dominant Designs and Shakeouts▯ -all about sales and market shares▯ -begins when the market converges around a single dominant design or approach▯ -Dominant Design - single architecture that establishes dominance in a products class▯ -De Jure Standard - standard is legally mandated and enforced by a government or standards organization i.e Light bulb sockets▯ -De Facto Standard - arises by virtue of common usage and is not officially sanctioned by any authority▯ -Shakeout - an industry is defined as a large number of exits from the market at the same time as the aggregate output of the industry increases▯ -large number of failures in a declining market is not a shakeout▯ ▯ The Maturity Phase ▯ -in maturity phase, the third of the lifecycle, growth in aggregate demand begins to slow▯ -markets start to become saturated as there are fewer new adopters to attract (competition intensifies)▯ -despite high degree of concentration in mature markets, rivalry is fierce▯ -Commoditization - the process by which goods that have economic value and are distinguishable in terms of
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