ADMS 1000 Chapter Notes - Chapter 7: Dominant Design, Standards Organization, Market Power
24 Aug 2016
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Chapter 7:Competitive and Technological Forces
Industry Life-Cycle Model
• An inverted U shaped growth pattern that is seen in almost all industries given a long
enough period of observation. The number of organizations rises initially up to a peak,
then declines as the industry ages.
• Industry sales follows s-curve
•
• Introduction → Growth → Maturity → Decline
1. Introduction phase
• Where many entrepreneurial firms enter the industry, hoping to emerge as a market
leader.
• New industries are highly uncertain and risky and some never make it past the early
stage (e.g. satellite communications).
• New industries emerge as a result of changes (usually technological or regulatory) that
create opportunities for entrepreneurs to leverage novel combinations of resources to
develop innovative products, services or processes.
• 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), Research and development intensifies
• Other characteristics of the emergence phase:
- Low intra-industry rivalry - Slow growth - Organic structures
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• Large, established firms tend to lag behind smaller ones in entering new industriies for
2 reasons:
- A budding market is usually small and risky to justify the entry of large firms
burdened with high overhead costs and the need to generate more certain, even if
lower, financial returns.
- Older incumbent firms usually have bureaucratic organizational structures that
inhibit their ability to move quickly and flexibly into new markets.
• New industries seek legitimacy (sociopolitical and cognitive) through collective action
and institutional entrepreneurship
Socio-political legitimacy
• 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
The level of public knowledge about a new industry and its conformity to established norms
and methods reflected in the extent to which it is taken for granted as a desirable and
appropriate activity.
2. Growth phase
• occurs after the industry coalesces around a particular approach and the dominant
model.
• This leads to a shake out where many firms exit the industry
Dominant design
The dominant approach or design established in a product class
De jure Standard
A standard that is legally mandated and enforced by governments or standards
organization
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ADMS 1000 Full Course Notes
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Document Summary
Industry life-cycle model: an inverted u shaped growth pattern that is seen in almost all industries given a long enough period of observation. The number of organizations rises initially up to a peak, then declines as the industry ages. Low intra-industry rivalry - slow growth - organic structures. 1: large, established firms tend to lag behind smaller ones in entering new industriies for. A budding market is usually small and risky to justify the entry of large firms burdened with high overhead costs and the need to generate more certain, even if lower, financial returns. Older incumbent firms usually have bureaucratic organizational structures that inhibit their ability to move quickly and flexibly into new markets: new industries seek legitimacy (sociopolitical and cognitive) through collective action and institutional entrepreneurship. Socio-political legitimacy: 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.
