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Beware of those who say, “I T doesn’t matter” or refer to the “myth” of the first mover. This
thinking is overly simplistic. I t’s not a time or technology lead that provides sustainable
competitive advantage; it’s what a firm does with its time and technology lead. I f a firm can use
a time and technology lead to create valuable assets that others cannot match, it may be able
to sustain its advantage. But if the work done in this time and technology lead can be easily
matched, then no advantage can be achieved, and a firm may be threatened by new entrants QU E S TI ONS AND E XE RC I S E S
1. Does technology lower barriers to entry or raise them? Do low entry barriers necessarily mean
that a firm is threatened?
2. I s there such a thing as the first‐mover advantage? Why or why not?
3. Why did Google beat Yahoo! in search?
4. A former editor of the Harvard Business Review, Nick Carr, once published an article in that
same magaz ine with the title “I T Doesn’t Matter. ” I n the article he also offered firms the
advice: “Follow, Don’t Lead. ” What would you tell Carr to help him improve the way he thinks
about the relationship between time, technology, and competitive advantage?
5. Name an early mover that has successfully defended its position. Name another that had been
superseded by the competition. What factors contributed to its success or failure?
6. You have just written a word processing package far superior in features to Microsoft Word. You
now wish to form a company to market it. List and discuss the barriers your start‐up faces.
7. What kinds of strategic assets are Google’s Android and Apple’s iOS seeking to create and
exploit? Do you think these firms will be more successful than rivals? Why or why not? 2.4 Key Framework: The Five Forces of Industry Competitive Advantage
L E A RN I N G OBJ E C T I V E S
1. Diagram the five forces of competitive advantage.
2. Apply the framework to an industry, assessing the competitive landscape and the role of
technology in influencing the relative power of buyers, suppliers, competitors, and alternatives. P ro f esso r and strategy co nsultant Gary Hamel o nce wro te in a Fo rtune co ver sto ry that “the dirty
little secret o f the strategy industry is that it do esn’t have any theo ry o f strategy creatio n.”G.
Hamel, “Killer Strategies that Make Shareho lders Rich,” Fo rtune, June 23, 1997. While there is no
silver bullet f o r strategy creatio n, strategic f ramewo rks help managers describe the co mpetitive
enviro nment a f irm is f acing. Framewo rks can also be used as brainsto rming to o ls to generate new
ideas f o r respo nding to industry co mpetitio n. If yo u have a mo del f o r thinking abo ut co mpetitio n,
it’s easier to understand what’s happening and to think creatively abo ut po ssible so lutio ns. One o f the mo st po pular f ramewo rks f o r examining a f irm’s co mpetitive enviro nment is Port er’s
f ive f orces, also kno wn as the Industry and Co mpetitiv e Analysis. As P o rter puts it, “analyzing
[these] f o rces illuminates an industry’s f undamental attractiveness, expo ses the underlying drivers
o f average industry pro f itability, and pro vides insight into ho w pro f itability will evo lve in the
f uture.” The f ive f o rces this f ramewo rk co nsiders are (1) the intensity o f rivalry amo ng existing
co mpetito rs, (2) the threat o f new entrants, (3) the threat o f substitute go o ds o r services, (4) the
bargaining po wer o f buyers, and (5) the bargaining po wer o f suppliers (see Figure 2.6 "The Five
Fo rces o f Industry and Co mpetitive Analysis"). Figure 2. 6 The Five Forces of Indus t ry and Comp et it ive Analys is New techno lo gies can create jarring sho cks in an industry. Co nsider ho w the rise o f the Internet has
impacted the f ive f o rces f o r music retailers. Traditio nal music retailers like To wer and Virgin f o und
that custo mers were seeking music o nline. These f irms scrambled to invest in the new channel o ut
o f what is perceived to be a necessity. Their intensity o f riv alry increases because they no t o nly
co mpete based o n the geo graphy o f where brick-and-mo rtar sto res are physically lo cated, they no w
co mpete o nline as well. Investments o nline are expensive and uncertain, pro mpting so me f irms to
partner with new entrants such as Amazo n. Free f ro m brick-and-mo rtar sto res, Amazo n, the
do minant new entrant, has a highly scalable co st structure. And in many ways the o nline buying
experience is superio r to what custo mers saw in sto res. Custo mers can hear samples o f almo st all
tracks, selectio n is seemingly limitless (the lo ng tail pheno meno n—see this co ncept illuminated in
Chapter 4 "Netf lix in Two Acts: The Making o f an E-co mmerce Giant and the Uncertain Future o f
Ato ms to Bits"), and data is leveraged using co llabo rativ e filtering so f tware to make pro duct
reco mmendatio ns and assist in music disco very.Fo r mo re o n the lo ng tail and co llabo rative
f iltering, se...
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- Winter '14