Emerging industries, i.e. those in the nascent stages, include the industry of wireless Internet access devices, the production of high-resolution televisions, distance education, and electronic banking services. Most companies in emerging industries are just getting started: they are improving technology, recruiting and training staff, acquiring or building production facilities, expanding the scope of activities, establishing distribution channels and fighting for consumer commitment. The strategies of companies in emerging industries are experimental in nature – a seemingly promising business concept or strategy may fail without providing acceptable profits. Companies often have difficulties with product design or production technologies. Therefore, when developing a competitive strategy in emerging industries, it is necessary to take into account specific features [44 pp.216-223]:
Since the market is only being formed and its nature is not studied, it is impossible to predict its functioning in the future, growth rate and volume. Due to the lack of statistical data, it is impossible to accurately plan sales and profits. Only presumably it is possible to estimate how long it will take the product to gain popularity with consumers, and what price the latter will agree to pay for it. For example, digital video discs (DVDs) took significantly longer to conquer the market than predicted; Usually, the technologies and know-how of emerging industries are protected by patents and other means, since they are the developments of innovative companies; patents and unique technologies play a key role in gaining a competitive advantage. Sometimes different companies create several alternative technological approaches in parallel or in the process of joint activities; It is difficult to predict which of the technological approaches will be the most successful, or which consumer properties of the product will have a decisive impact on the purchase decision. Until the market clarifies these issues, there remain significant differences in the quality and consumer properties of different brands. Therefore, each company fights to ensure that its technologies, product design, distribution and marketing methods win wide recognition; Entry barriers to the industry are relatively low even for start-up companies. Large and well-known companies looking for new entrepreneurial opportunities and having a powerful resource base and competitive opportunities prefer to enter the industry when its growth prospects are obvious or if its development threatens their current business. For example, many telephone companies, seeing a potential threat in the development of wireless communications technology, are entering the mobile communications market; In the industry, the learning effect is pronounced, which allows you to reduce costs and prices as the volume of production increases; Since in the emerging industries consumers buy the proposed product for the first time, the task of marketing is to convince the consumer to make a decision on the first purchase, to dispel his doubts about the consumer properties of the product, to convince the superiority of the company’s product over similar products of competitors; Many potential buyers are counting on the improvement of innovative products in the near future, so they postpone the purchase until the appearance of updated versions; Sometimes companies seek to protect their sources of raw materials and components (until suppliers increase production volumes to a level that meets the needs of the entire industry); Companies that do not have significant capital face a lack of financial resources to complete R&D. They have to either wait for the product to gain popularity, or go for a merger or acquisition by competitors who intend to profitably invest in a growing market.
Companies in emerging industries face two important strategic objectives: finding the means to finance start-up operations before generating sufficient profits, and selecting segments and competitive advantages on which to fully realize the advantages of the first mover [33 pp.164-165]. Here you can use a leadership strategy both in terms of costs and through differentiation. Focused strategies are also applied if the competitive resources and capabilities of the company are limited or if there are too many innovative technological approaches (market segments) in the industry that do not allow to focus on everything at once. The lack of established “rules of the game” in the industry allows participants to freely experiment with different strategies. A company with a powerful resource base and a viable strategy gets a unique opportunity to set the rules of the game in the industry and seize the position of the leader.
One of the main tasks in developing a strategy is to identify threats and opportunities for the emerging industry, so companies are offered the following recommendations [37 p.366; 44 ch.10]:
try to seize leadership in the industry – non-standard and moderately risky initiatives combined with a creative strategy will help here; improve technology, product design, expand the set of its consumer properties; after the formation of industry standards and the identification of the most promising technology, implement them as quickly as possible; Create strategic alliances with key suppliers to gain access to expertise, technological capabilities, critical materials and components; Go for mergers or strategic partnerships with companies with complementary or complementary technologies, which will win competition on the basis of leadership in technology; try to realize the advantages of the pioneer; attract new segments of customers, offer new opportunities for using goods, develop new geographical regions; to help customers who purchase goods for the first time to get acquainted with its consumer properties, to fight for brand recognition; Use consistent price reductions to attract new segments of price-sensitive buyers.
Short-term achievements in the early stages of the struggle for market share and leadership in the industry should be combined with a long-term strategy of creating a sustainable competitive advantage and gaining a strong competitive position [33 pp.164-165]. Companies with significant financial resources, developing a new industry, move to offensive strategies immediately after reaching an acceptable volume of sales and reducing investment risk. Due to the influx of newcomers attracted by the rapid growth of the industry and profitability, there is an overflow of the market and the displacement of weak companies. Companies that enter the market last and have significant resources can achieve leadership in the industry through mergers or acquisitions of less powerful competitors, followed by active actions to expand market share and form a stable image of their brand. Strategies should be focused on long-term competition, and quite often this requires abandoning some part of the current profits and investing these funds in strengthening the resource base, competitive capabilities and brand recognition.
Young companies in fast-growing markets have three main tasks: developing a strategy for rapid business expansion; protection from competitors and the use of their findings for their benefit; creation of a long-term competition strategy. Companies pursuing a leader can strengthen their positions, including competent specialists in their boards of directors, hiring managers with experience in managing companies at the stage of emergence and recovery, focusing on new methods of competition, conducting mergers or acquisitions of companies with valuable technical knowledge, experience and resource base when necessary [15 pp.258–261].