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ADMS 1000


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Nov. 22, 2014

Chapter 7: Competitive and Technological Forces
RECALL: What is an Industry?
- Businesses that may have similar resources, technology or consumers.
- Can be defined broadly or narrowly (eg. airline industry vs. transportation industry)

The Industry Life-Cycle Model
- Given a long enough period of observation, almost all industries exhibit an inverted U-shaped
growth pattern, with the number of organization rising initially up to a peak, then declining as the
industry ages.
- The pace of an industry’s evolution along its life cycle is closely related to the evolution of
technology within the industry.
- Describes the evolution of the entire product category and its associated industry, not a single
product or firm.
- The life cycle phase affects the degree of the
competition firm’s face, the type of organization
structure, the kind of strategy used, and the
appropriate management approaches needed to
survive and grow.
- Industry sales follow an S-curve. This pattern
shows how sales volume grows, stabilizes, and
declines as an industry develops.
- The industry life-cycle model divides industry
evolution into four distinct phases: Introduction,
growth, maturity, and decline.
The Introduction Phase: Industry Emergence and Creation
- New industries emerge as the result of changes (usually technological or regularity) that create
opportunities for entrepreneurs to level new combinations of resources to develop innovating
products, services, or processes.
- New industries are highly uncertain and risky and some never make it past the early stage.
- Early entrants into an industry tend to be small entrepreneurial firms excited by the prospect
and potential growth of a new market.
- Large focus on R&D
- Early adopters: Customers that purchase in the introductory phase of the life cycle.
- New industries seek legitimacy through collective action and institutional entrepreneurship
- Slow growth
- Organic Structures

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Nov. 22, 2014

The Growth Phase: Dominant Designs and Shakeouts
- Occurs after the industry coalesces (unites) around a particular approach and a dominant model.
- Focus is on sales and market share.
- Dominant design: A single architecture that establishes dominance in a product class. For
example, Apple’s iPad is expected to dominate the tablet industry until at least 2016.
- De jure standard: A standard that is legally enforced by a government or standards
- De facto standard: A standard that arises by virtue of common usage and is not officially
sanction by any authority.
- As the standard or dominant model spreads across the industry, the produces that persist with a
different approach usually exit the industry and a shakeout occurs defined as a large number of
exits from the market at the same time as the aggregate output of the industry increases.
(Eliminates weaker competitors)
- Another important cause of industry shakeouts is when output grows further; economies of
scale allow producers to generate more cost savings that drive prices even lower. As produce
prices fall, inefficient producers come under significant competitive pressures and exit.
- High growth and reduction in uncertainty attracts many new entrants to the industry.
- Rivalry is much more intense and firms try to build brand recognition.
The Maturity Phase: A Critical Transition
- The market stabilizes (can be very profitable for surviving firms) and sales grow more slowly.
- Firms must become more efficient.
- Competition intensifies even more.
- Firms spend large amounts of money on advertising.
- Focus is on incremental improvements to products.
- Little, if any, entry at this stage.
- Organizations that adopt a cost leadership strategy in mature markets tend to outperform their
The Decline Phase: Difficult Choices
- Sales begin to drop and rivalry further heats up.
- Industry sales decline as a result of one of the following:
(1) Changes in demographics
(2) Shifting consumer tastes and needs
(3) Technological substitution
- Organizations have five basis alternatives in the decline phase:
(1) Maintain a leadership stance: Requires firms to continue investing in marketing, support,
and product development, hoping that competitors will eventually exit the market.
(2) Pursue a niche strategy: Focus on a specific segment of the industry that may not decline as

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Nov. 22, 2014

rapidly as the rest and where it can expect to posses some form of competitive advantage.
(3) Harvest profits: Requires squeezing as much remaining profit as possible from the industry
by drastically reducing costs. Ultimately followed by the firm’s exit from the industry.
(4) Exit early: Allows firms to recover some of their prior investments in the industry by selling
off assets to others and exiting the market. There are also exit barriers.
(5) Consolidate: A firm acquires the best of the remaining firms in the market to enhance its
market power, to generate economies of scale, and to allow for synergies.

Innovation and Technology
Types of Innovation:
Radical innovations: When a new technical process of advancement marks a significant
departure from existing practices; they often create a whole new industry. There innovations are
often referred to as discontinuous because they do not continue to build on the previous
technological regime, but instead mark a shift to a completely new technology for example jet
engines to aircrafts.
Incremental innovations: Making relatively minor improvements or modifications to an existing
product or practice in the hopes of differentiating it from the competition. It is also a way to
extend the life cycle of the product, delaying the inevitable onset of the decline stage.
Innovations that involve changes to the product’s components but leave the overall configuration
of the system relatively intact are called component or modular innovations.
An innovation that alters the system’s architecture or how the components interact and are linked
with each other is an architectural innovation.
Creative destruction: A term that explains how innovations sweep away old technologies,
skills, products, ideas, and industries and replace them with new ones.

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Sept. 21, 2014

Chapter 2: The Employee-Employer Relationship (Labour Relationship)
Distinguishing “Work” from “Employment”
- Employment is a form of work in which a person (an ‘employee’) is dependent upon, and
mostly subservient to, an ‘employer’.
- The employment relationship is governed by an employment contract, which may set out
specific rules, obligations, and rights applicable to the employer and employee, and is usually
enforceable in a court of law, like other contracts.
- Employees sell their labour in exchange for compensation usually in the form of wages and
perhaps benefits of some sort.
- Many people work but are not employees.
 Independent contractors: Run their own business rather than serving as an employee for
another business/person.
What distinguishes an employee from an independent contractor?
1) Degree of control - IC’s can set their own schedules, change their charges from project to
project, have latitude on how to perform work.
2) Degree of economic risk - IC’s take on risk of whether they get work or not versus employee
who earns a consistent salary.
3) Degree to which the worker performs an essential service for an organization - core functions
of the business tend NOT to be made up of IC’s (versus clerical staff, sometimes HR staff,
4) Degree to which the organization provides the necessary tools - IC’s generally bring their
own tools/equipment to project (eg. Plumbers, electricians, window cleaners, many groups/crews
in film production…)
Independent Contractor
 Pros: “independence” - ie, freedom from employer constraints – can move from job to

job, can create more flexible hours… ?
 Cons: lack of employment security and regular wage; contractor assumes success of

project, and risk of financial loss if it fails. Often lower income, more vulnerability

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Sept. 21, 2014

For the business
 Pros: temporary arrangement so much flexibility; ‘contracting out’ of services as

strategy to reduce business’s overheads/fixed costs; Saves office space/full-time
wage/termination costs etc.; don’t need to pay minimum wage; don’t need to pay
 Cons: ?

Standard Employment Relationships (SER)
- The SER is characterized by regular, full-time hours at a single employer, often spanning an
entire working career.
- 1930s to the 1980s was the golden age for the employment relationship in Canada. (the SER
dominated the economic landscape)
- People had long term contracts that provided them with benefits, pay increases and they were
secured for the most part.
Non-Standard Employment Relationship (NSE)
- NSE became the dominant form since the 1980s.
- Less stable and is characterized by part time, temporary, or variable working hours; lower pay;
fewer employer-provided benefits; shorter job tenure; and mo access to collective bargaining.
- 32% of Canadian workforce (graduates today are less likely to experience the stable
employment patterns that were the norm for earlier generations)
- Vulnerable or precarious workers – jobs are at risk
Perspectives on Work and Government Policy
How to balance the interests of business in maximizing profits and shareholder dividends, on the
one hand, with the interests of workers in securing a decent level of income and security, on the
other hand, has been a subject of debate since the beginning of large-scale economic activity.
Four perspectives have shaped debates about the governance of work in Canada:
1) Neoclassical Perspective:
- Argues that competitive markets are the best means of organizing complex economies and
- The invisible hand of the market will guide actors towards economic and social prosperity
(pursuing their own self-interests which promotes greater public interest)
- Not in favour on minimum wage.
for ex. The minimum wage law would negatively affect the low wage workers which the law
was intended to help (employers may fire workers due to increased wages..)

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Sept. 21, 2014

- Not concerned about working conditions being driven down too low in the absence of worker
protection legislation.
2) Managerial Perspective:
- Managerialists put their faith in enlightened management practises rather than the invisible
hand of the marketplace.
- Employers and employees both want the business to be successful.
- Theory Y workers.
- Minimize government employment standards and regulations.
3) Industrial Pluralist Perspective:
- Imbalance of power - need balance between the efficiency concerns of employers and the
equity concerns of workers.
- Pluralists support an activist government that intervenes in the work relationship to promote
decent working conditions.
- Most effective way to give worker a voice is to promote collective bargaining and
- Collective bargaining/unionization is considered good way to protect rights/interests of
individual workers. (right to strike etc).
Collective bargaining: A process of negotiation measures between a group of employees
(through a union) and an employer(s) leading to a collective agreement that applies to the entire
group of employees.
4) Critical Perspective:
- Draws its inspiration from Marxist theory i.e. the interests of labour and the owners and
managers of economic organizations are irreconcilably in conflict.
-The Critical perspective posits that government employment regulation and collective
bargaining are at best only marginally useful in protecting workers from this exploitation.

The Labour Context in Canada: Where are we Now?
 Governments supported strong labour laws that facilitated and workers to join unions and

engage in collective bargaining.
 The Ontario Labour Relations Act prohibits discrimination against employees who try to

organize a union or who support unions.
 Unions get certified depending on the majority.
 Union Density measure the membership of trade unions, calculated as the number of

employees currently enrolled as members, as a proportion of all those employees
potentially eligible to be members.

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