SECTION A

The New Barriers to Entry: Why Strategy Assumptions Need to Change in the Era of Ecosystems by Rita Gunther McGrath

A cherished idea in traditional strategy is that a company that has found a repeatable, reliable business model then needs to erect barriers to entrysome kind of obstacle that prevents others from simply copying or matching their offerings. Barriers can take many forms, including regulatory hurdles, high investment in assets, patents and strong brand names. What we are witnessing today is a weakening of many traditional barriers and simultaneously the emergence of very powerful new barriers that institutions are struggling to figure out.

The emergence of new barriers to entry has revealed a number of twists on the conventional understanding of strategy. In light of the distinctly new barriers to entry emerging from the unfolding era of ecosystems, strategy assumptions need to change (McGrath, 2019).

Consider the barrier represented by high costs of entry. Once upon a time, a startup would have needed to raise funds to buy computer servers, hire people, get office space, perhaps invest in plant and equipment and otherwise set up a functioning company. Today, in the access-to-assets rather than ownership-of-assets that is part of the transient advantage economy, none of that is necessary. Computing power can be purchased on demand, as needed. Freelancers are readily available. Office space may not even be needed, and if it is, can be accessed on demand through firms such as WeWork or IWG (formerly Regus). Digitally intermediated marketplaces match supply and demand with great efficiency, reducing the need for investment dramatically.

A twist on the conventional wisdom is that today, strategic advantage is often determined by complementary relationships rather than by product or service benefits. A music player with no music, a computer without an operating system or a streaming service with no content has no value to anyone. And yet, complements don't figure very much in conventional strategy frameworks. Moreover, establishing an ecosystem of complementary relationships means that today, ecosystems compete with ecosystems rather than firms competing with one another independently.

Relatedly, today's most effective competitors are leveraging network effects to their advantage. Network effects refer to the increased value a firm captures when it has more users or customers than other firms. This is typically the strategy pursued by platform companies, which make their profits by bridging different sides of a two-sided market. Thus, Airbnb intermediates between owners of homes and potential renters of homes, benefitting both sides and making a profit in the exchange.

All of this leads to an urgent need to rethink what "monopoly" really means. Traditionally, the presence of entry barriers would raise regulatory eyebrows as firms able to prevent competitive entry could raise prices since other competitors couldn't enter the market and challenge them. Today, market domination is gained by firms such as Facebook, Alibaba, Google and Amazon because of their extensive networks, desirable platforms and ability to deliver enormous value to customers without traditional barriers to entry. Rather than monopoly, we have monopsony conditions, in which firms do not so much raise prices for consumers as use low prices as a barrier to entry in themselves.

While consumers often actually benefit in price terms from monopsony conditions, they suffer in other ways. Perhaps most egregiously, they find they must give up significant information about themselves to avail of the benefits offered by the large tech ecosystems. Institutions are only slowly figuring out how to regulate such conditions in the face of new barriers to entry. Source: https://www.druckerforum.org/blog/the-new-barriers-to-entry-why-strategy-assumptions-need-to-change-in-an-eraof-ecosystems-by-rita-gunther-mcgrath/

Motivation for the proposed study

As a business strategist who advises businesses on how to create sustainable competitive strategies, you are grappling with the implications of the rapidly changing world of competition. You suspect that the ability to make sense of the evolving strategic scene in itself constitutes a significant competitive advantage.

With a privilege access to the top management teams of four major South African major technology companies, you are embarking on a study with the aim of gaining new insights from upper echelons perspective on how the major South African technology companies leverage network effects for competitive advantage. Your proposed study will explore the deeper perspectives of the issue under investigation, captured through face-to-face interactions with the top management teams (TMTs) of the companies in an attempt to understand their thoughts, feelings, beliefs and assumptive worlds they operate in relations to how they make sense of the involving reality of network effect within the broader South African technology sector.

In this regard, the focus of the proposed study will be on obtaining and analysing a rich, in-depth account from twenty technology experts drawn from the TMTs of the four companies.

With an exploratory focus in mind, you have formulated the following research objectives for your study:

To understand how the top management teams (TMTs) of the four major technology companies in South Africa makes sense of network effects

To explore how the TMTs of the four major technology companies in South Africa lead their companies' efforts at leveraging network effects for competitive advantage and

To make recommendations to the TMTs of the four major technology companies on the best practices in terms of leveraging network effects for competitive advantage within the broader South African technology sector.

Please outline how you would go about conducting the proposed study with reference to the following:

Answer ALL the questions in this section.

QUESTION

1.1 Suggest a suitable title for the proposed study. (2 marks)

1.2 State THREE (3) research questions that the proposed study will attempt to answer. (3 marks)

1.3 Briefly discuss the essential ontological and epistemological elements of the research philosophy that would underpin your study. (4 marks)

1.4 Briefly elaborate on the research design that you would use in the study and the process you would follow to operationalise this particular design. (4 marks)

1.5 Based on your proposed research design, discuss the methodology you would follow with regard to:

1.5.1 Sampling Methodology: (8 marks)

1.5.1.1 Provide any TWO (2) reasons why you would undertake a sampling rather than a census of the population in your study. [2 Marks]

1.5.1.2 Specify the target population of your study. [1 Marks]

1.5.1.3 State whether your sampling will be probability or nonprobability [1 Marks]

1.5.1.4 Specify and elaborate on a method of sampling for your study, explaining why it is appropriate for the study. [4 Marks]

1.5.2 Methods of Data Collection: (5 marks) What data collection instrument(s) and or method(s) would you use to collect your data?

1.5.2.1 Provide a rationale for, and justify the appropriateness of, the proposed data collection method. 1.5.2.1 [3 Marks]

1.5.2.2 What would inform your approach to data collection and the content of your proposed data collection instrument [2 Marks]

1.5.3 Methods of Data Analysis: (4 marks)

1.5.3.1Briefly discuss the method of data analysis you would use in this study (Please note: you are to specify and justify the method of analysis you would employ for the first two research questions formulated in 1.2). (4 marks)