Project topics and materials
Get Complete Project Material File(s) Now! »
Industry convergence
There seems to be a consensus about the definition of the convergence phenomenon amongst authors (Kim, Namil, Lee, Hyeokseong, Kim, Wonjoon, Lee, Hyunjong, & Suh, Jong Hwan. 2015). As was stated in the introduction, Oxford dictionary defines convergence as: “the process of moving together from different directions and meeting; the point where this happens”. Key words from this definition can be seen as “process”, “moving together from different directions” and “the point where this happens”. Management literature defines industry convergence as when strategies, value propositions and technologies meet in either separate (inter) industries or within (intra) a certain industry Bröring, S., & Leker, J. (2007). One takeaway from this definition is that there are two available streams within convergence that can be focused on in the form of inter-industry and intra-industry convergence.
There are a diverse range of causes and drivers that can lead to a converging industry that appear in convergence literature. A first set of causes relates to regulatory factors such as increased or decreased regulation, standardization, licensing, government funding or funding (Bally, 2005; Choi and Valikangas, 2001; Choi et al., 2007; Nystroem, 2007; Nystroem, 2008; Yoffie, 1997). Broering (2005) gives an example of how regulation can affect the food industry in regard to functional foods, conventional foods and pharmaceutical products. Should regulation change, these three industries could start competing more directly and cause inter-industry convergence as it becomes harder consumers to distinguish between functionalities.
A second set of causes for convergence is identified to be customer behavior and changing market environments. Pennings and Puranam, (2001) describe a phenomenon of “one stop shopping” where customers wish to receive several services or product functionalities in one purchase. A third set of causes which also appears to have been covered the most in convergence literature is technological development. Technological change and diffusion have had a major convergence impact mainly in R&D and ICT industries through “generic technologies” (Bierly and Chakrabarti, 1999; Bierly and Chakrabarti, 2001). Generic technology can be applied to various products and services across different industry sectors, causing an intrusion into specialized industries. One example is that of airlines and travel agents, where airlines enable customers to book their flights directly through apps and websites causing the demise of a large portion of travel agents (Prahalad & Hamel 1994; Preschitschek, N., Niemann, H., Leker, J., & Moehrle, M. G. 2013).
The three identified causes pertain mostly to macro-economic or socio-economic developments influencing industry development which forces firms to adjust their policies and strategies. From further examining literature, the effect of convergence on firms takes root in different perspectives. As stated before, the largest cluster of convergence literature is related to technology, ICT, media and entertainment sectors from an inter-industry perspective. Although there is a body of literature that covers convergence in general, it is still considered and emerging field, meaning the topic is relatively uncharted in terms of theoretical and empirical research (Walsh and Lodorfors, 2002; Pennings and Puranam, 2001; Stieglitz, 2003). In terms of intra-industry convergence, there is a larger body of literature across different academic disciplines that focuses on the development of one particular industry. Economics, geography and history, technology and entrepreneurship are fields that discuss industry life cycles and designs that can cover convergence. Regardless, it appears studies take an increasing stance on how firms react to the phenomenon of convergence by relating to strategic management. Existing literature can broadly be divided into several categories: 1) studies that use convergence as a context 2) literature that focuses on technology aspects of convergence and 3) studies that cover the convergence phenomenon itself (Weaver, 2007).
This thesis will align itself as part of the third category which attempts to further increase understanding of the convergence phenomenon form a strategic management perspective. While current literature on industry convergence is limited, there seems to be a consensus amongst strategic management authors on the characteristics and definition of the phenomenon. This makes for an efficient literature study but can also indicate a lack of criticism on the current paradigm of trying to understand and articulate convergence. Current shortcomings further express themselves in either highly specific nature of current convergence research of individual industries or a more general approach in trying to outline the phenomenon.
The number of settings, contexts and perspectives is limited allowing for a further enrichment of the theory. When considering the strategic management approach, it can be interpreted to be that this body of literature increases the understanding between firm behavior in relation to convergence. The problem is that most strategic management literature focuses on technological aspects while industry structures, strategy development and operational aspects receive less attention in relation to convergence. Therefore, there is a need to focus on these aspects and build on the frameworks that previous convergence research has produced. Another shortcoming is limited empirical research that relates to convergence. Few studies such as Bröring (2006) who studied R&D activity combining competencies of two industries examine an inter-industry phenomenon can be identified. Hence, prior attempts to understand convergence have, once again, led to broad inter-industry frameworks and context analysis or very specific intra-industry analysis indicating the need for both a broader and deeper understanding of the definition and the concept of industry convergence (Greenstein and Khanna, 1997; Pennings and Puranam, 2001; Stieglitz, 2003; Hacklin et al., 2004). We will attempt to further contribute to convergence literature by focusing on intra-industry convergence to further explore the relation between strategic management literature and convergence besides the current focus on technology development. Analyzing intra-industry convergence
Intra-industry and inter-industry convergence are two separate sub-streams within convergence literature (Bergendahl, 1995; Cummins, 2005; Hamel and Prahalad, 1996; Prahalad, 1998. Because intra-industry convergence focuses on convergence between firms, a potential framework must facilitate a comparative analysis between them. To better understand the convergence phenomenon, its causes and its effects, measuring firm aspects is a key issue. Greenstein and Khanna (1997) and Wirtz, (2001) argue that value chain configuration is a possible driver for convergence as firms attempt to strive for optimum efficiency. In addition, value chain analysis can be used to compare firms and analyze which elements have been changed, added or removed over time. The downside of using a value chain analysis is that company values and strategic reasoning are not connected enough to fully understand why convergence has taken place.
Another point of view rooted in strategic management theory is that of competitive advantage as companies can adopt strategies of cost focus, cost leadership and differentiation (Porter 1980; Miller & Roth 1994) which can be compared between companies. A company’s competitive strategy is derived from several internal and external factors which can be related to resources, competition, value proposition and macro-economic factors. These strategic management fundamentals can help explain strategic reasoning of firms and why convergence can exist in a particular industry but provide limited operationalization. Within supply chain strategy it is specified how a firm will achieve its competitive strategy through supply chain capabilities like, service level, asset management, reaction speed and network design (Handfield & Nichols, 2002). Further specification regarding manufacturing, purchasing, marketing and logistics are supportive functions that help to obtain a competitive advantage. Thus, combining company competitive strategy and supply chain strategy can be an effective way of answering the why and how questions of intra-industry convergence. Strategic management and industry convergence
The theories on competitive advantage relate to convergence by examining how and why companies react to the environment within an industry (Bröring, S., & Leker, J. 2007). Convergence is a phenomenon that appears as a result from external influences from a macro-economic, socio-economic or regulatory nature as well as internal influences like resources, core competence and positioning. Understanding why companies adapt their strategies in order to strive for superior performance, helps to answer why convergence occurs within an industry. As became clear from examining business imitation and similarity literature, the blurring of lines within an industry can be explained by companies attempting to comply to certain norms. Redirecting activities to comply with these norms is done by adapting strategies which are then operationalized by reconfiguring the supply chain (Beamon, B. 1999). In order to be able to measure and compare businesses to analyze intra-industry convergence, competitive strategy and supply chain strategy are deemed effective dimensions as these capture firm reasoning and translation to operational processes in relation to internal and external challenges. In this section, competitive strategy literature is examined in order to feed the proposed convergence framework with the required parameters in this dimension. Competitive strategy and its relation to intra-industry convergence
Competitive strategy is a key dimension that offers techniques to analyze businesses and competitors within industries (Prahalad 1994). This research body that has been developed comprehensively by Porter (1980) and provides several tools that help to analyze and compare firms based on their strategy and position in the market. From an industry level (intra-industry) perspective, convergence follows according to several elements that relate to competitive strategy theory. These
1 Introduction
2 Literature review
3 Methods
Research approach
Thematic analysis approach
Research strategy..
Single embedded case study
Case criteri
Case: European airline industry
Four European airlines
Airline overview
Data collection
Data analysis
Quality Criteria.
Credibility
Transferability
Dependability
Confirmability
4 Intra-industry analysis of converging and differentiating characteristics of European airlines
Competitive strategy analysis
Strategic vision, mission and objectives
Resource allocation
Core competence
Corporate and business strategy
Service Supply Chain Strategy
Capacity and resource management
Aircrew management .
Summary of capacity and resource managemen
