Attacking leaders and industry structure

A final test for attacking a leader is to weigh the effect on overall industry structure. A challenger’s attack on a leader is unwise if it destroys industry structure. Challengers must find a new way of competing compared to the leader’s to succeed. However, the new way of competing, in some cases, may undercut possibilities for differentiation, lower entry barriers, or have other adverse structural effects as described in Chapter 1. A closely related risk is where a challenger gains market share but does not gain a clear advantage over the leader, and the leader and the challenger are thus relatively balanced in competitive position. This may guarantee a long period of instability in the industry. The resulting war can be protracted and expensive for both sides, creating a situation where no firm has any competitive advantage.

It is also important to recognize that some leaders are “good” leaders, as was discussed in Chapter 6. Attacking a good leader may worsen, not improve, a challenger’s profitability if the umbrella provided by the good leader is lost in the process. In such cases a challenger should refrain from attacking the leader at all. Instead, it should choose another industry as a vehicle for growth.

Source: Porter Michael E. (1998), Competitive Advantage: Creating and Sustaining Superior Performance, Free Press; Illustrated edition.

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