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Chapter 3

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Department
Administrative Studies
Course
ADMS 1000
Professor
Eytan Lasry
Semester
Fall

Description
The Competitive Context 1 Day 4 (Chap3)  Industrial Evolution o Number of competitors follows an inverted U shaped curve    The number of organization rising initially up to a peak, and then declining as the industry ages  The pace of an industry’s evolution along its lifecycle is closely related to the evolution of technology within the industry o Industry lifecycle o o o o o o o o o Introduction Growth Maturity Decline o o o o Each stage affects competition, organizational structure, strategy… so that different types of firms tend to be leaders at different stages  Introduction: Industry Emergence and Creation o New industries emerge following innovations:  Technological (e.g. biotechnology)  Regulatory (e.g. satellite radio) o Nascent industries are highly uncertain and risky and some never make it past the early stage (e.g. satellite communications) o Early entrants are small, entrepreneurial firms with a high degree of technological innovation as competitors search for the industry’s dominant design and standard (e.g. automobiles) o New industries seek legitimacy (sociopolitical and cognitive) through collective action and institutional entrepreneurship o Despite the increased competition, the entry of large incumbent firms into new markets helps legitimize the new industry o Characteristics of the emergence phase:  Low intra-industry rivalry  Intense R&D  Slow growth  Organic structures  Growth and Shakeout o The growth stage begins once there is convergence around a dominant design or technical standard o Organizations whose approach does not conform to the dominant model either change or exit during a shakeout e.g. Wintel standard (MS + Intel) in PCs o High growth and reduced uncertainty of the market attracts larger, established firms into the industry o Standardization of products and processes leads to economies of scale and less innovation as firms focus on sales and marketing to capture the share The Competitive Context 2  Industry Maturity o Market growth begins to slow down; very little entry and rivalry becomes fierce among remaining firms o Market concentration increases with more exits and acquisitions o Products become commoditized and undifferentiated and innovations are incremental and process improvements o Successful firms are efficient and mechanistic o Shift in successful strategy and structure explains why few firms survive as industry leaders  The Decline Phase o Industries begin to decline as a result of changes in:  Demographics (e.g. baby food in the
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