Technology strategy: Licensing of Technology

The third broad issue in technology strategy is technology licensing, a form of coalition with other firms.6 Firms with a unique technology are often asked for licenses, or are forced to license by government regulations. Licensing is also a way to gain access to technology. Where technology is an important source of competitive advantage,

Technological evolution

Since technological change has such a powerful role in competition, forecasting the path of technological evolution is extremely important to allow a firm to anticipate technological changes and thereby improve its position. Most research on how technology evolves in an industry has grown out of the product life cycle concept. According to the life

Formulating technological strategy of the firm

The concepts in this chapter suggest a number of analytical steps in formulating technological strategy in order to turn technology into a competitive weapon rather than a scientific curiosity. Identify all the distinct technologies and subtechnologies in the value chain. Every value activity involves one or more technologies. The starting point in formulating technological

The strategic benefits of competitors

The presence of the right competitors can yield a variety of strategic benefits that fall into four general categories: increasing competitive advantage, improving current industry structure, aiding market development, and deterring entry. The particular benefits achieved will differ by industry and the strategy a firm is pursuing. 1. Increasing Competitive Advantage The existence of

What makes a “good” competitor?

Competitors are not all equally attractive or unattractive. A good competitor is one that can perform the beneficial functions described above without representing too severe a long-term threat. A good competitor is one that challenges the firm not to be complacent but is a competitor with which the firm can achieve a stable and

Influencing the pattern of competitors

The benefits of good competitors suggest that it may be desirable for a firm to attack some current competitors and not others, and to encourage the entry of new competitors provided they meet the tests of a good competitor. Since it is usually desirable to have more competitors early in an industry’s development than

The optimal market configuration for the firm

The principles of competitor selection imply that holding a 100 percent market share is rarely, if ever, optimal.54 It is sometimes more sensible for firms to yield position and allow good competitors to occupy it than to maintain or increase share. While this is contrary to managers’ beliefs in some firms and almost heretical

Pitfalls in competitor selection

The principles of competitor selection are not always followed. The following pitfalls seem to be among the most common: Failure to Distinguish Good and Bad Competitors. Many companies do not recognize which of their competitors are good competitors and which are not. This leads them to pursue across-the-board moves, or worse yet, to attack

Bases for industry segmentation

An industry is a market in which similar or closely related products are sold to buyers, as shown schematically in Figure 7-1.2 In some industries a single product variety is sold to all buyers. More typically, however, there are many existing or potential items in an industry’s product line, distinguished by such characteristics as

The industry segmentation matrix for the firm

Having identified the relevant segmentation variables with structural or value chain implications, the next task is to combine them into an overall segmentation of the industry. The task is usually difficult because there are many relevant segmentation variables—in some industries there can be dozens. The challenge is to distill these variables into the most

Industry segmentation and competitive strategy of the firm

Industry segments differ in their attractiveness and the sources of competitive advantage for competing in them. The key strategic questions that arise out of segmentation are: where in the industry a firm should compete (segment scope ) how its strategy should reflect this segmentation A firm can adopt a broadly-targeted strategy that addresses many

Segment Attractiveness and Interrelationships

1. The Attractiveness of a Segment The first issue in deciding where to compete in an industry is the attractiveness of the various segments. The attractiveness of a segment is a function of its structural attractiveness, its size and growth, and the match between a firm’s capabilities and the segment’s needs. STRUCTURAL ATTRACTIVENESS The

Choice of Focus strategy

1. The Choice of Focus Focus strategies rest on differences among segments, either differences in the firm’s optimal value chain or differences in the buyer value chain that lead to differing purchase criteria. The existence of costs of coordination, compromise, or inflexibility in serving multiple segments is the strategic underpinning of sustainable focus strategies.

Industry segmentation and industry definition

Drawing industry boundaries is always a matter of degree. Structural and value chain differences among product varieties and buyers work towards a narrower industry definition. Industry segmentation is thus a tool to probe for narrower industry definitions by exposing structural heterogeneity within an industry. Interrelationships among segments and business units (Chapter 9) create possibilities

Identifying substitutes of firm’s product-service

The first step in substitution analysis is to identify the substitutes an industry faces. This seemingly straightforward task is often not easy in practice. Identifying substitutes requires searching for products or services that perform the same generic function or functions as an industry’s product, rather than products that have the same form. A truck

The economics of substitution

One product substitutes for another if it offers buyers an inducement to switch that exceeds the cost or overcomes the resistance to doing so. A substitute offers an inducement to switch if the substitute provides the buyer with more value relative to its price than the product currently being used. There is always some

Changes in the substitution threat for firm’s product-service

The threat of a substitute often changes over time, with a corresponding impact on the pattern of substitution. Many of the sources of change in the substitution threat are predictable and can often be influenced through a firm’s offensive or defensive substitution strategy. Changes in the threat of substitution occur in five broadly defined

The path of substitution of firm’s product-service

The path of substitution in an industry is a function of how RVP, the perception of RVP, switching costs, and the propensity of buyers to switch evolve over time. The rate of penetration of substitutes differs widely from industry to industry. Some substitutes gain quick acceptance, while others penetrate slowly or not at all

Substitution and competitive strategy of the firm

The economics of substitution carry a variety of strategic implications for firms attempting to promote substitution, as well as for firms attempting to defend against it. Defenses against substitution are, by and large, the reverse of offensive strategies that promote substitution. I will first describe some principles of promoting substitution and then turn to

The growing importance of horizontal strategy of the firm

Horizontal strategy is something that few firms today can afford to ignore. Interrelationships among business units and the ability to exploit them have been increasing in the last decade, and powerful and interconnected forces are likely to accelerate the trend in the 1980s and 1990s. Diversification philosophy is changing. The philosophy guiding many firm’s