Discuss the areas of technological disruptive which create challenges for incumbent firms to develop in the market industry by shedding light on the ways incumbent firms will have to risk cannibalizing their strategies in order to provide premium business.
Competition drives modern organizations to constantly engage in self-protective and defensive marketing strategies. Market challenges and rivalry emerges because one of more competitors either develops the sense of the pressure or perceives certain areas of avenues in order to penetrate into an industry or to enhance its position within an industry (Christensen et al., 2015). However, in majority of the cases, competitive or aggressive approaches by a single business enterprise have undergone evident impacts on its competitors and as a result may encourage vengeance factors or efforts in order to encounter the progress. Modern business enterprises develop by taking market share from its competitors or generating new markets. Incumbents require to be organized for marketing attack by the existing firms seeking to expand their business as well as its new entrants (Lubik & Garnsey, 2016). The purpose of the incumbents is to support their vital market share and further reinforce the market level and position by further creating complex situations for new entrants or the existing enterprises to challenge them. As business attempt to develop their positions, they tend to engage in competitive conflicts and adopt odious strategies (Kim & Min, 2015). The following paper will discuss the areas of technological disruptive which create challenges for incumbent firms to develop in the market industry by shedding light on the ways incumbent firms will have to risk cannibalizing their strategies in order to provide premium business. In addition to this, the paper will evaluate several technical and business frameworks and the way it impacts the incumbent firms and the way enterprises strategize to compete with the increasing rate of market challengers.
Technological Discontinuities and Business Model Change
Technological disruptive have often been recognized as critical drivers of transition in the rapid-evolving industrial sector (Christensen et al., 2015). As the established industry stage is characterized by rivalry between incumbents and incremental innovations along with low firm access and egress rates, the development of technical discontinuities like the emergence of advanced technologies may either tend to increase the transition rate or may stimulate innovative and reinvigorating cycle, by taking the business sector back to the developing stage (Bergek et al., 2013). However, during these stages, firms who strategize to create and regulate emerging market incumbents must circumvent resource and routine inflexibilities (Christensen, 2013). In addition, it can further be anticipated that potentials require to be improved and that several fundamentals of the incumbent’s production model have to be refurbished in order to effectively adapt to the disruptive situations.
While it may be identified as natural factor to anticipate incumbents to react to the disruptive situations by industry model adjustments, it reveals that exclusive of the renowned organizations of Dell and IBM, it has been evaluated in very rare occasions (Maula et al., 2013). However, certain studies have claimed that incumbents often tend to demonstrate greater degree of incompetence to respond to the rising competition within the market. Furthermore, it has been noted that such incompetence points out to the asymmetric of skills and motivation in relation to the new emerging entrants developing due to the procedures, development, resources and values which in general are developed in incumbents through ongoing increasing and regulating existing business (Demary, 2015). Incumbents such as Research in Motion Limited, the manufacturer of the Blackberry may have been recognized as an incumbent of the Smartphone market sector in 2008. Furthermore during the fourth quarter of 2013, Apple, the primary manufacturer of the iPhone would likely have been recognized as the incumbent based on worldwide sales. Furthermore, observed more significantly in the Smartphone industry in recent times or more prominently challenging organizations namely Pepsi Vs Coca-Cola conflict since ages. However, such a frontal attack is perceived when a competitor attacks are based on the strengths of the market competitors.
However, incumbents as a result will have to pose risk cannibalizing the vital business strategies for the aim in order to develop a competitive advantage in the low end of the industrial market which further exhibits a tendency to be immensely challenging to proportionate with the internal standards, values and KPIs of mature organizations (Christensen, 2013). It has been observed that in an immensely challenging market, incumbents might:
Defensive Strategies and Approaches
Due to continuing competition, well-established firms need to involve in defensive strategies to obviate increasing rate of challengers within the market. Incumbents intend to alter the alter the challengers’ expectations related to the profitability level of the industry and further influence them that the return on their investments will be at a lower degree that it does not warrant further in making any investment in the industry (Augenstein & Palzkill, 2015). As defensive approaches and tactics tend to reveal improved efficiency during their occurrences prior the challenger firms makes a venture and investments in the trade industry or if they make the entry in the business before exit obstacles are developed, further operating highly challenging for the incumbents to exit the industry (Kim, 2013). However, for these vital causes, an incumbent requires to execute suitable actions and responses in order to circumvent a challenger from making further substantial commitment (Bergek et al., 2013). It is because, as there lays any vital obligatory situations, certain complex situations tend to discourage the challenger from adhering to the barriers specifically during high degree of exit barriers.
Furthermore, it is important to note that over the past years, a major section of marketing proficient and business strategists have effectively developed a range of marketing approaches in order to defend their market position and further maintain the growth of sales and revenues (Markman & Waldron, 2014). There can be identified two types of defensive marketing strategies whereby the pre-entry strategies are regarded as the actions executed by incumbents prior to the attack by challengers (Demary, 2015). The second one being the defensive marketing strategies which may show a propensity to develop the variety of post-entry proceedings which are commenced after the challenger has made an entry into the market.
Innovation Inhibitors
As business enterprises emerge, they develop a propensity to exhibit common behaviours which can safeguard them from being adaptive to new environments and therefore maximize their aptitude to effectively sustain their innovation drive (Christensen, 2013). Thus several critical inhibitors are often being encountered by incumbents in order to establish sustainable innovation initiatives. Organizations aim to create formal structures which are generally based on Taylor’s principles (Prieger & Heil, 2014). The ‘silo structure’ that is recognized categorizing individuals on the basis of their expertise and the specialist ability ensures greater levels of proficiency (Kim, 2013). Furthermore, institutionalized mechanism such as evaluation, appraisal and incentive procedures associated to the allocation of individual segments of work tend to reinforce stability.
Inhibitors to Sustainable Innovation
Source: (Boons & Lüdeke-Freund, 2013)
Modern organizations also have been encountering the astounding pace of advanced technical emergences. However, for the originators, factors related to disruptive technologies tend to provide greater degree of gains, but when it comes to the incumbents; they tend to establish major disruptions within the business environment which further require them to react at a rapid pace (Bohnsack et al., 2014). Furthermore, it has been observed that several other established business firms reveal immense rate of ineptitude in order to proficiently recognize technological advances which compete for their target markets and are regarded as unawares when these innovative mechanisms alter the market scenario or other vital environmental factors (Wesseling, 2015). Certain reports reveal that telecom sector have neglected the development of voice-over-Internet protocols (VOIP) technologies and the other purposely tend to neglect as they could perceive essential revenues to get reduced significantly (Markman & Waldron, 2014). Leaders involved with the incumbent firms often observe disruptive innovative mechanisms as threats or critical factors whereby the challengers perceive them as opportunities. However, these differences in identifying these factors are vital as they result to a debatable matter of the most proficient course of action to pursue.
Samsung, one of the most renowned electronics manufacturers intend to reduce this course of action by creating a ‘hothouse’ that is “The Value Innovation Program (VIP) Centre (Wiechoczek, 2016). This VIP Centre is identified as a physical unit of observation, whereby engineers, managers along with scientists possessing various vertical capacities are united in order to establish a working environment and ideology which gives immense importance to the rapid speed of innovation. However, this segment of experts stays at the VIP centre to bring a complete resolution of the issue.
Constrained by experience
In an organizational context, it has been noted that the maxim “success breeds success” is applicable where the environment whereby the initial achievements of the organization emerged sustained at a considerable degree. However, in established industrial sector, business enterprises are noted to be developing their awareness from patterns of past achievements as well as prospective success which tends to be incremental to the organizations (Prieger & Heil, 2014). Though such notions get falsified in environments where disruptive technologies cause alterations and proficient incumbents reveal a greater degree of inclination towards past achievements and thus become incompetent to accomplish new challenges (Bohnsack et al., 2014). Being limited by restricted prudence which tends to constrain the extent to which they are able to develop new routines and mechanisms and further change their perceptive, they sustain onto core aptitudes which no longer have proper significance (Grayson, 2016). Thus such capacities which created success on the first place develop as core severities and instability which prevent the organization to become competitively advantageous as solutions in the past may not reveal equal proficiency in future as well.
As incumbent business firms often exhibit high degree of reluctance to aim for advanced technologies, they tend to possess greater degree of inclination on tacit knowledge which is accumulated over several years (Wesseling, 2015). Tacit knowledge is identified as the range of practices and behaviours that organizations establish from their experiences and perceive these factors as vital source of competitive advantage (Lauber & Sarasini, 2014). However, it has been observed that unless organizations bring transitions to the profoundly sustained implicit knowledge which acts as a vital driving factor for current behaviours, these organizations will remain constrained by their previously developed knowledge and experiences.
Implications of Challengers and Incumbents
It has been observed till a past few years, that a number of Rapidly Developing Economy (RDE) based organizations have been signified as vital developing challengers (Grayson, 2016). However in recent times it has noted that these challengers have increased rapidly in over hundreds and among them the RDE 100 tends to play a decisive role in shaping the global industrial sector (Kim, 2013). As a significant portion of these companies have already attained a well-established position of relative strength, several others have been aiming to initiate major global growth campaigns (Prieger & Heil, 2014). As these challengers have been emerging to be immensely affluent, they obtain this awareness of their advantages and comprehend the way they are proficiently working in order to surmount their traditional weaknesses.
Conclusion
It has thus been observed that incumbents often tend to preserve their superseded mission statements. However, at the outset it has been noted that such mission statements signify initial organizational goals and abilities which effectively regulate the level of competence, aptitude, passion and resources of employee base to attain such significant goals. The paper explicitly observed that as globalized firms are emerging into the market, they tend to become fixated on the traditional origins of their organizational aims and targets and thus does not require any timeframe for resolution. For instance, Woolworths because of the increasing competitive demand have developed their mission to be supreme quality customer service through e-commerce system that permitted the company to effectively as well as successfully pursue wide ranging product categories.
References
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