Being First - A mixed blessing!

1
Session 5 Industry analysis and competitive
dynamics
Knut Haanæs Associate Professor Norwegian School
of Management - BI
2
Timing and resources
Resources and industry
Dynal case discussion
3
Questions to think about when reading Dynal case

• How does Dynal create value?
• What are their most critical resources? How have
  they evolved over time (1986-1994)?
• How would you characterize Dynals way of
  competing -- their strategic posture?
• What are their most important innovations, and
  how have they attempted to commercialize these?
• What does the industry look like?

4
Timing and resources
Resources and industry
Dynal case discussion
5
Firm-specific resources
Allocated and Traded
Intellectual capital
Mobilized and built
RESOURCES
Tangible resources
Intangible resources
Physical Financial Property-rights
Relationship-based
Competence-based
Info. bases
Reputation
Image
Knowledge
Loyalty
Loyalty
Skills
Routines
Source Haanes and Løwendahl (1997)
Relations
Aptitudes
Culture
Relations
STRUCTURAL CAPITAL Controlled by organization
HUMAN CAPITAL Controlled by individuals
6
Competence

Knowledge
Competence (To know something that can be used
to do something)
Skills
7
3 criteria for sustained competitive advantage
NOT IMITABLE?
VALUE?
SCARCE?
Source Barney (1991)
8
2 strategic challenges
NOT IMITABLE?
VALUE?
MOBILIZED?
SCARCE?
APROPRIATED?
9
Core competencies

• Can give access to new markets
• Lead to perceived advantages for customers
• Integration of knowledge and skills
• Limited number (5-15)
• Take time to develop / built through doing
• Difficult to understand / socially complex

10
Being First - A mixed blessing!
First Mover Advantages - First Mover
Disadvantages (Late Mover Advantages)
11
To get first mover advantages

• Leadership in product and process technology
• Learning and experience curve
• RD and patents
• Possibility to set standards
• Pre-emption of scarce resources
• Natural resources
• Locations, product space or relationships
• Production capacity (or signalling of...)
• People or competences
• Development of buyer switching costs
• Investments in co-specialized resources
• Supllier-specific learning
• Buyer preferences (habits)

12
First mover disadvantages

• Free-rider problems
• Inertia by first mover
• Go directly to price competition
• New and better technologies may emerge

13
Free-rider problems
Hire people trained by first mover
Learn from first movers mistakes
Take advantage of first movers mistakes
Cheaper to copy than to innovate
14
First mover inertia
Reluctant to cannibalize own products
Locked to specific resources (Sunk cost)
Organiz- ationally inflexible
Attached to current products/ routines
15
Characteristics of early leaders
Resource leverage
Continuous innovation
Financial commitment
Managerial persistence
Vision of mass market
Source Tellis and Golder (1996)
16
Commercializers
See commercial opportunities
Ability to contract and mobilize unique
resources
17
Choice of timing depends on firm resources

• Innovation requires different competencies and
  relationships than following
• Innovators take a higher risk
• Initial innovators are generally not the
  companies to commercialize the market
• Commercialization requires relative low cost
  production and mass distribution

18
Timing and resources
Resources and industry
Dynal case discussion
19
Critical questions

• How does the industry work?
• Is this an attractive industry?
• How is the industry evolving?
• Who are the main firms?
• What kind of value is created?
• What are the main innovations in the industry?
• How do firms compete?
• Who are the customers?
• What affects entry?
• What limits the pricing of the firms in the
  industry?

20
Industry
New Entrants
Competitive Rivalry
Suppliers
Buyers
Substitutes
Source Porter (1980)
21
Defining an Industry
Product functionality
Product technology
Geography
Markets
22
Strategy as choice
Difficult path
High
INNOVATION
Low
High
Low
PRODUCTIVITY
23
High
Operational competition
Contractual competition
Mobility of critical resources
Entrepreneurial competition
Time
Low
Industry development over time