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9.strategy and Technology
9.strategy and Technology
High-Technology Industries
those in which the underlying scientific knowledge that companies
in the industry use is ad ancing rapidly !as" are the attributes of the products/services that result from its application are also advancing rapidly.#
Technology is$
Scientific knowledge used in production of goods or ser ices %ccounting for a larger share of economic acti ity &e olutioni'ing the product or production system in industries not thought of as high-tech
(ormat wars
*ne standard will come to dominate a market. +any ,attles in high-tech industries are companies competing to set standard.
on a technical standard.
Benefits of Standards
.uarantee compati,ility ,etween products / compliments &educe consumer confusion &educe production costs &educe risks associated with supplying complementary products
3.
5.
market demand.
1nsure supply of complement- Plus product itself 9iller applications- 6ew products so compelling customers adopt rapidly killing demand for competition
%ggressi ely price4market- Price product low to increase installed ,ase: price complements high for profits
-ooperate with competitors-Speed up adoption 7icense format- &educe incenti e for competitors to de elop own
7aw of ;iminishing &eturns To produce more of a good: a company hires more la,or in ests in more plant4machinery additional resources are not as producti e increasing marginal costs.#
Strategic Significance of High-Tech -ost Structure
(i<ed costs of de eloping product ery high: ,ut costs of producing additional units are low$
If can shift from cost structure with increasing marginal costs to high fi<ed costs ,ut low marginal costs- profita,ility may increase.
)hen company faces high fi<ed costs4low marginal costs: it should dri e prices down to dri e up olume.
Strategy of pricing low to dri e olume to reap wider profit margins is central to ,usiness model of some successful high-tech companies.
(irst-+o er %d antages
(irst to de elop4pioneer re olutionary products can lead
%,ility to esta,lish significant ,rand loyalty %,ility to ramp up sales olume early %,ility to create switching costs for customers %,ility to accumulate alua,le knowledge. Being first-mo er does not guarantee success. Success depends on first-mo er strategy pursued.
2.
0. 5.
Prone to mistakes- uncertainties in new market &isk ,uilding wrong resources / capa,ilitiesmass-market may differ from the needs of early adopters
=.
.oing it alone- de elop4market inno ation Strategic alliance4>oint enture- de elop4market inno ation with other companies 7icense inno ation- let them de elop the market
-hoosing strategy$
;oes company ha e complementary assets to e<ploit inno ation? How difficult for imitators to copy inno ation? %re there capa,le competitors who could rapidly imitate inno ation?
&e olutioni'e structure of industry ;ramatically alter nature of competition &e@uires firms adopt new strategies
6atural limits to technology- esta,lished technology is mature / approaching natural limit 6ew disrupti e technology- entered marketplace and taking root in niches poorly ser ed ,y firms using esta,lished technology
Technology S--ur e
;isrupti e Technology
new technology that gets its start away from
because they listen to customers who say they do not want it.
9nowledge a,out how disrupti e technologies can re olutioni'e markets is alua,le asset. Important for esta,lished firms to in est in newly emerging technologies that may ,ecome disrupti e. -ommerciali'ation may re@uire different alue chain / cost structure.
6o pressure to continue out-of-date ,usiness . 6o worry a,out esta,lished customer ,ase: distri,ution channels: or suppliers.
-hallenges:
-onstrained ,y lack of capital 6eed to manage organi'ational pro,lems from rapid growth (ind way to take technology from small niche to the mass-market .o it alone or partner with esta,lished company
and market dynamics will mark the winners and losers in this fast-changing Internet %ge.# +ichael ;ell