So we've talked about pre-entry strategies.

Now let's talk about post-entry strategies.

You've decided and executed on entering a market segment.

Other rivals are there.

Maybe they've just entered, as well.

The first obvious thing you could do is you could fight.

You could fight for your market position.

Now, in general, one might think, and I think is true,

that a fighting strategy can be counterproductive.

It can destroy value as you compete down prices and the like.

However, there are some scenarios where a fighting strategy might make sense.

For example, maybe it will raise your market share and it won't dissipate

rents because you can make up the lost prices by increased sales.

So, when does that tend to work?

Well, one thing to think about is when there are high network externalities.

This is the idea, again, that the value of a good or

service increases as others adopt that.

Lots of positions within the text sector have these network externalities in play.

They tend to lead to what they call these winner take all dynamics in markets, so

in the short-run, at least, price cutting can be

valuable if it helps build a user base and help you come to dominate the market.

Think about Facebook.

Early on in Facebook's history, they had some debates about to whether

monetize it right away as a way, of course, of increasing their profitability.

However, they recognized early that was most important was

getting the installed base of users.

And that once they've established themselves as the standard for

social media, then they could start to monetize it then.

So, a price cutting strategy, in this case, a zero price, was useful for

them to build up market share or dominate the market and then monetize later.

If you have a cost advantage, price cutting can work.

If you have an advantage that you can basically outlast the others,

that could be advantageous.

Maybe it's an advantage in scale that you have, so

you have economies of scale that give you lower cost.

Once again,

in the BSB Sky TV case here, Sky had a cost advantage that they could lever

that suggested in a fighting scenario, they would be the winner in that scenario.

Finally, you could find a niche position within the market here.

So, you're not provoking a response if you take an aggressive price cutting strategy.

And in some ways, you see this in lots of different industries where you have

a nascent, maybe an entrepreneurial, entrant into that market, where they'll

find a niche position that is sufficiently small in scale that they can engage in

price cutting and no one is going to react to that per se, allowing them

to gain some market share in the short-run and get a foothold within the industry.

Now we talked a lot about price cutting,

we should recognize that there's other types of ways that you can fight.

You can fight on the cost side, as well.

Think about, for example, a kind of intensive advertising.

Again, not all advertising is informative and telling you about the products and

the like, but some of it will help with differentiation,

help prevent commoditization of the product.

It could also just simply raise the cost of your rivals in a way,

and the same things that apply in price cutting apply here.

Can you sustain that longer?

It's interesting to note that in the early stages of a product,

a new product class, intensive advertising actually might provide a public good

to just increase all sales within the segment.

Boston Beer in their early entry into the microbrew

segment of beer in the United States was really doing a lot of advertising

to advance the concept of a microbrew beer and

that obviously had spill overs to other players within the industry.

So, let's switch gears now and talk about cooperation strategies.

So these are gonna be strategies that help structure the game,

such that you now have shared incentives to try to mute some of this competition.

One way to do this is to create a repeated gain.

And by doing so, you create incentives,

in which it is not paying to engage in aggressive, rivalrous behavior.

You can make commitments limiting your ability to compete aggressively

into the future here.

Again, various price costs, and the like.

Or you can simply impose costs on your rivals for non-cooperative action.

So one of the things that's been studied is these prisoners'

dilemma we've discussed before.

And the ability to pursue a strategy to penalize malfeasance

if you take the competitive outcome versus the cooperative outcome.

In particular, there's a strategy referred to as tit-for-tat.

The idea is we will cooperate with you until you are aggressive in pricing

at which point we will match you for a short period of time and

then gradually bring prices back up.

There's actually evidence of this when you look at various price wars.

For example, in the airline industry or

amongst gas stations that share the same corner.

What will typically happen is you'll see prices held steady,

a pricing war might be evoked, and then prices will come back up again.

Now one could argue the pricing war in of itself is a negative outcome for

the industry.

However, it might ultimately serve as a mechanism for

keeping these prices up because of the punishment side of it.

You realize it's futile to try to gain an advantage by cutting prices because

everyone is gonna immediately cut prices, as well.

This is in essence the tit-for-tat strategy, that has been shown,

can actually hold prices up higher over the long run.

So last but not least, you could try to simply restructure the industry.

And maybe I shouldn't say simply, cuz this could be very difficult to do.

But it could change the nature of the game in a way that is advantageous for you.

So here we're thinking about broad strategic actions

to initiate changes in the underlying game being played.

So I go back again to our BSB Sky TV case.

Sky TV pursued a restructuring strategy, which was basically to merge with BSB.

Here you're trying to capitalize on these transition points in the industry

evolution to take advantage of the new competitive environment.

To the extent you could recognize these opportunities ahead of rivals, and

move quickly, you might be able to, in essence, outperform your rivals.

And, to the extent such strategic actions are irreversible,

this also may preempt your rivals here, if you might be the first one to do this.

So, if, again,

examples might be rolling up an industry by acquiring some of your competitors

here, maybe making an investment in a new, innovative technology.

So again, some examples.

Consolidate market power through mergers and acquisition,

acquire certain limited resources and capabilities, maybe going out and

hiring a talented player or worker for your business.

Introduce new products or services.

We're gonna talk more about innovation in a later module here.

Diversification, again, entering into other lines of business that then

enhance your current line of business, entering or creating new markets,

again through innovation.

And then, there's a whole class of things that could restructure industries

through what I would call non-market strategies.

This is leveraging the public institutions, government, and the like,

to change laws and

policies that then favor a certain set of players in the industry versus others, and

I go back again to what Uber is dealing with in the taxi cab industry, and

the various attempts to, in essence, restructure that industry, as well.

So to end, again, we have these multiple strategies you could pursue

once you enter in the market, which other rivals enter into the market.

You could fight, you could cooperate, or

you could basically try to change the nature of the game.

Post-entry Strategies

Business Growth Strategy

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