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Chapter 3

ADMS 1000 Chapter Notes - Chapter 3: Product Differentiation, Outsourcing, Word Processor


Department
Administrative Studies
Course Code
ADMS 1000
Professor
Anton Petrenko
Chapter
3

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Chapter 3-Reading Notes
Industry Lifecycle Model
4 different phases: Introduction, growth, maturity, and decline
Introductory phase: Industry Emergence and Creation
New industry emerges s a result of change (usually technology)
Industries spring up as a result of technological, regulatory, or social changes which create new
opportunities for business to satisfy an emerging demand.
During the introduction phase, many firms enter the emerging industry attracted by the
opportunity to become industry leader. Product innovation is rapid, but rivalry is low.
The Introduction Phase: Legitimacy
Organizations generally require legitimacy in order to acquire from external stakeholders
resources necessary for growth (labour, raw resources, capital, finances, sales, etc..). Being
new and unfamiliar, the new industries are characterized by low legitimacy, which they aim to
change.
2 tyoes of legitimacy
Sociopolitical legitimacy is the endorsement of the industry by key stakeholders, such as state,
opinion leaders, and general public
Cognitive legitimacy refers to the level of public knowledge of the industry, its conformity to
established norms, and recognition of it as desirable and appropriate.
New industries need to gain legitimacy. Therefore, while there is intense technological
competition among the firms, there is also a great degree of collaboration for the common goal:
attempt to define standards, establish associations, gain public endorsement through activism of
“social entrepreneurs” (e.g. Drexler, Kurzweil)
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