The New Economy in East Asia and the Pacific

By Peter Drysdale | Go to book overview

7

Corporate strategies in information technology firms

Yasunori Baba and F. Ted Tschang


INTRODUCTION

In information technology (IT) industries, the managerial strategies and behaviour of firms have three main characteristics. The first is the substantial degree of uncertainty and risk stemming from the incredible change in the business model used in these industries. The corporate risks include those of acting as well as of not acting; this leads to tremendous shake-ups in the industrial structure over time, with winners in one year becoming losers one or two years afterwards. Firms that hope to survive the transitions have had to reinvent themselves and create their core competencies anew.

The second characteristic is the rapidity of technological change and its critical impact on the firm's business revenue. Change occurs with the advent of a new technology (such as the internet) or a new mode of using technology (such as modular production), either of which can create a new market for a new entrant. Even if such change is expected, it may be disruptive.

The third characteristic follows from the changing nature of product life-cycles. In developed countries, there is a trend toward market saturation and post mass-production. We are witnessing a new product cycle in IT industries: standardised consumer electronics, audiovisual and even advanced IT products that were produced in Japan are now being produced in other Asian countries, particularly China. China is now the world's largest producer of digital video disk (DVD) players (38.3 per cent of the world market), colour televisions (CTVs) (24.6 per cent), video tape recorders (VTRs) (23.2 per cent), mobile telephones (12.9 per cent) and desktop personal computers (11.9 per cent) (Nikkei 27 July 2001).

In this paper, we will discuss how Asian IT firms cope with the emerging changes. On one hand, they must face new market opportunities developed by ITs; on the other, they must face imminent industrial uncertainty and possible decreasing returns. We seek to identify the experience of corporate transformation in markets characterised by the introduction of new ITs, illustrating the impact on business organisation and strategies in particular firms and industries. We examine this experience within borders and also

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