Response of Threatened Entities Framework
Threatened entities' response
The Response of Threatened Entities Framework describes how entities threatened by emerging industries can respond to the threat. This response can take the form of pricing below cost, investing in cost reduction, or lobbying against the emerging industry. The framework highlights the importance of exit barriers in determining the threatened industry's response.
- Threatened entities will respond to emerging industries based on their exit barriers.
- The response of threatened entities can take various forms, including pricing below cost and investing in cost reduction.
- The framework highlights the importance of understanding the exit barriers in an industry to anticipate the response of threatened entities.
- Assess Exit BarriersAssess the exit barriers in the threatened industry, including specialized assets, high perceived strategic importance, and emotional ties.Pro tipHigh exit barriers can lead to more aggressive responses from threatened entities.WarningIgnoring exit barriers can lead to underestimating the response of threatened entities.
- Determine ResponseDetermine the response of the threatened entity based on the exit barriers, including pricing below cost, investing in cost reduction, or lobbying against the emerging industry.Pro tipThe response should be tailored to the specific exit barriers and industry characteristics.WarningA poorly chosen response can lead to ineffective efforts to stem the growth of the emerging industry.
Electric utilities have lobbied against solar energy subsidies, demonstrating a response to an emerging industry.
The framework is based on the concept of exit barriers, which are factors that make it difficult for firms to leave an industry. High exit barriers can lead to determined efforts by threatened industries to stem the growth of emerging industries.