Entry is pervasive in many industries and may take many forms
An entrant may be a new firm, that is, one did not exist before it entered a market.
An entrant may be a firm diversifying its product line; that is, the firm already exists but had not previously been in that market.
An entrant may be a firm diversifying geographically, that is, the firm sells the same product in other geographic markets.
The DRS findings have four important implications for strategy:
When planning for the future, the manager must account for an unknown competitor-the entrant. Fully one-third of a typical incumbent firm’s competition five years hence are not competitors today.
Not many diversifying competitors will build new plants, but the size of their plants can make them a threat to incumbents.
Managers should expect most ventures to fail quickly. However, survival and growth usually go hand in hand, so managers of new firms will have to find the capital to support expansion.
Managers should know the entry and exit conditions of their industry.
In December 1997, Hyundai announced that it would enter the steel business.
It would have a production capacity of 6 million tons per year.
The government had opposed the plan.
The dominant firm, POSCO, was once owned by the government.
The government still owns a major portion of the shares of POSCO.
POSCO had a production capacity of 26 million tons.
No other company has a mill approaching 6 million tons, the minimum efficient scale.
POSCO priced below the competition, and did not have enough capacity to meet industry demand.