David Vs. Goliath – How Incumbents fight New entrants

Executive Summary

Asymmetries allow disruptive attackers to enter a market, grow without incumbent interference, and mitigate the incumbent’s response when it is finally motivated to counterattack. The result of asymmetric battles often is the seemingly sudden end of a great firm. From the incumbent’s perspective, every action it takes is rational. But the outcome is devastating. Disruption is the strategy that creates and capitalizes on asymmetries of motivation and skills.

Market leaders / incumbents ward off competition from new entrants in three levels. The first level is to set high barriers to entry that disincentivizes smaller players from entering the market. But market asymmetries may shield new entrants from such barriers and they get a foothold into what appears to be a different market.

The second level involves scouting the boundaries of the business and identifying potential threats before they become significant. Here the incumbents identify new entrants who do not currently appear to be direct competitors but can have a large impact on the industry in the future.

The third level involves competing on a level playing field. Here firms have an option of competing in the same segment as the new entrant or conceding a particular segment while fortifying itself in others or as in some rare cases, buying out the opposition.

 

 

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The tones of the virtual world…

Crap

Today’s economic times carried an article about the online digital music industry. Apart from predicting explosive growth for online distribution of digital music it also spelled doom for physical media distribution using CDs and the likes. First of all, what is included as a part of this online/mobile music? In a classic demonstration of the long tail effect, the article clubs monotones, polyphonic tones, small music snippets all as digital music. It is also not surprising that India is leading the pack in terms of mobile music. For the traditional online music bandwidth will no longer remain the constraint in India. Does this mean that the big music publishing houses in india are in danger of becoming extinct? A.R. Rehman has already started talking about creators being given copyright over their music rather than the monopoly of the publishers.A more pertitent question, therefore, is whether the structure of the music industry itself going to change? Do creators – especially the popular ones like Rehman – become their own distributors and publishers?

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Dreaming on…

Media is converging. Excuse me If you have been a victim of this cliched phrase but i just cant imagine the different dimensions trying to remain exclusive and rebelious for long. Take news papers for example. First, the major pulishers contended that hard prints would still remain competitive inspite of all the digitization going on around them and then they came and launched digital versions of their own papers. There is a whole new way of dissemination information waiting to be explored and they are slowly realising that. Information is no longer collected from standard and fixed sources. People search for it. Organizations that define themselves as news publishers would soon be thrown out of the game. The new paradigm is ‘Information enablers’. The phenomenon may be exhibited in varying degrees in different regions. In a country like india where the internet is still catching up and extensive last mile connectivity is still a distant dream, the older business models may still persist. Consider an international news publisher like Times. Their competitors are no longer just the other news paper publishers but tens of thousands of other little information sources availabe through the web. So the new model is to enable the availability of these thousands of snippets of information to the people. Soon, it would be a futile attempt to try and gather information, package it and provide it to people as news papers and television channels attempt to do. The organizations that help take people to where the information is, helps them access it quickly, easily and meaningfully are those that will be successful. Google is a great example of one such organization. By labelling themselves as ‘information enablers’ they have set the ball rolling for this new kind of business model. Labelling them as just a search engine just reeks of ignorance.

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