Strategy Dynamics Briefing 58: Varying Customer Characteristics

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Customers usually differ from each other on many factors – purchase rates, price sensitivity, switching costs, rationality, time to respond etc. – and these differences affect the dynamics of competition. The table below gives some illustrative characteristics for two distinct customer groups in the electricity market discussed in Briefing 57.

Low users High users
Fraction of customers in each group 0.7 0.3
Quarterly usage $400 $600
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Why so many Tablet makers?

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This LinkedIn exchange asks why so many new entrants start up in growth industries when it’s obvious that most will fail. Another big case : during 2000-09 Europe added about 12 low-fare airlines – maybe 20 started and 8 failed? No – 60 started and 48 failed!

But I guess the industry dynamics make some kind of sense. In early years, the profit opportunity looks great (early airlines made ...

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Limits to growth

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I see that icon of ‘not even the sky is the limit’, Ryanair, is finding gravity still exists. In a curious ‘threat’ to curtail growth, lively CEO O’Leary says it’s not as easy to pick up dirt-cheap aircraft as he did in 2002. He’s not quite so open about the company’s experience of opening hundreds of routes between city-pairs. I’ve tried reconciling their statements of routes opened, operated and closed, and it’s not easy – lots of hype about huge ...

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Profiting from the downturn – e.g. airlines

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Nice example of what looks like a strategically sound business [Lufthansa] pouncing on valuable resources shaken loose when a feeble competitor [Alitalia] stumbles. The Economist reports they will be offering new services to eight other European cities from under-served Milan.  

With the downturn accelerating, there will be many more examples of weak firms forced to surrender potentially valuable resources – especially capacity and people – to those whose sound strategic management avoided getting into trouble. In the extreme, this will involve ...

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