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Session 5:Industry analysis and competitive dynamics
Knut Haanæs
Associate Professor
Norwegian School of Management - BI
Dynal case discussion
Resources and industry
Timing and resources
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 Dynal’s 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?
Dynal case discussion
Resources and industry
Timing and resources
Firm-specific resources
RESOURCES
Intangible resourcesTangible resources
Competence-based Relationship-based
STRUCTURAL CAPITALControlled by organization
HUMAN CAPITALControlled by individuals
ReputationLoyaltyRelations
ImageLoyaltyRelations
KnowledgeSkillsAptitudes
Info. basesRoutines Culture
PhysicalFinancial
Property-rights
Sour
ce:
Haa
nes
and
Løw
enda
hl (
1997
)
Intellectual capital
Competence
Knowledge
Skills
Competence(“To know something that can be used to do something”)
NO
T
IMIT
AB
LE
?
SC
AR
CE
?
VA
LU
E?
3 criteria for sustained competitive advantage
Source: Barney (1991)
M
OB
ILIZ
ED
?
VA
LU
E?
SC
AR
CE
?
NO
T
IMIT
AB
LE
?
AP
RO
PR
IAT
ED
?
2 strategic challenges
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
Being First - A mixed blessing!
+ First Mover Advantages
- First Mover Disadvantages
(Late Mover Advantages)
To get first mover advantages
• Leadership in product and process technology– Learning and experience curve
– R&D 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)
First mover disadvantages
• Free-rider problems
• Inertia by first mover
• Go directly to price competition
• New and better technologies may emerge
Free-rider problems
Cheaper to copy than to
innovate
Hire people trained by first mover
Learn from first movers
mistakes
Take advantage
of first movers mistakes
Take advantage
of first movers mistakes
First mover inertia
Locked to specific
resources (“Sunk cost”)
Reluctant to
“cannibalize” own
productsOrganiz-ationally inflexible
Attached to
current products/routines
Vision of mass market
Managerial persistence
Financial commitment
Continuous innovation
Resource leverage
Characteristics of “early leaders”
Source: Tellis and Golder (1996)
Commercializers
See commercial opportunities
Ability to contract and mobilize unique
resources
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
Dynal case discussion
Resources and industry
Timing and resources
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?
CompetitiveRivalry
Source: Porter (1980)
Suppliers Buyers
New Entrants
Substitutes
Industry
Product functionality Product technology
Geography Markets
Defining an Industry
INN
OV
AT
ION
PRODUCTIVITYHighLow
Low
Hig
h
Strategy as choice
Difficult path
Operational competition
Contractual competition
Entrepreneurial competition
Mob
ility
of
crit
ical
re
sou
rces
Industry development over time
High
LowTime
