By Denise Harrison, Vice President
“First, the bad news, the market for buggy-whips has disappeared; but the good news is, that we have cornered the market for 8-Track tape players.”
Who makes the screens that go into electronic readers – you know the screens on Amazon’s KindleTM and Sony’s ReaderTM? Prime View dominates this market; how did Prime View become the leader? Is this a new company? Well yes and no. Prime View was started by a Taiwanese paper company who saw that paper was being replaced by other media, in this case liquid crystal display (LCD) screens. Prime View was born from this view of the future.
The Importance of Market Analysis
The senior management team of the paper company correctly identified what the market really needed; the market did not need paper, the market needed something to display the written word. Correctly identifying the true market need enabled the company to see electronic readers (e.g., KindleTM) as a substitute for using paper to publish books and other media. Once this alternative technology was identified, the team developed a strategy to enter into the electronic reader market. The electronic reader market is a very small segment of the overall LCD display market. The larger segments of the LCD display market are dominated by large electronics companies, which are often competing on price. Prime View selected the electronic reader market, a market that was still being driven by technological advances rather than lower cost.
Once they identified the electronic reader market, they decided that it would be easier to buy/partner to obtain the technology required, rather than develop it in-house. They acquired several companies including Philip Electronics, NV’s e-reader division who was providing screens for Sony’s ReaderTM. They licensed E-Ink’s technology to further enhance the product and subsequently became Amazon’s e-screen supplier for the KindleTM product. Finally, in order to control the technology the company purchased E-Ink. Now they dominate the e-reader screen market, and all the key providers (Amazon, Barnes & Noble, and Sony) of e-readers use Prime View screens in their products.
Keys to Success
- Truly understand what the market needs – this is not necessarily what the market is already buying from you. If you correctly identify what the market really wants, you will be able to see indirect competition and substitutes on the horizon. Prime View realized that the market did not need paper, but an alternative medium to display the written word. They realized that LCD screens would be used in place of paper.
- Select a market where your company will be successful and develop a strategy to enter that new market. Prime View selected the electronic reader market where technology was key to market differentiation, rather than lower cost.
- When entering a new market, make the “make/buy” decision early; can you grow the competencies needed to compete in this market in-house or is it faster and more cost-effective to buy a company with the required competencies?
What is next for Prime View?
Now that Prime View has the dominate position in this market, it cannot rest on its laurels. The good news is that the market is growing quickly; the bad news is that this market growth has attracted many competitors. How long will this market be technology driven? What does Prime View need to do in order to continue to be the market leader? When will the transition come that will move this market from a specialty market to a commodity market where low cost defines the winner? How does it go about looking for the next emerging segment in the LCD industry – a new segment where technology is driving success rather than low cost? As the market- dominate player, you cannot kick back and enjoy success, you must plot the next move on the chess board so that you are positioned for success for years to come.
Denise Harrison is Vice President of the Center for Simplified Strategic Planning, Inc. She can be reached at firstname.lastname@example.org.