Case. Five Forces and niche markets

The Five Forces help provide a basis for analysing sectors in terms of forces that might influence the returns that a firm might expect from investing in that sector. However, the Five Forces are not necessarily static but can be influenced by technological trends in a sector.

An example of this is given by recent trends in some sectors of manufacturing. In- creased complexity of technology means that many larger companies find difficulty in developing in-house the range and quality of competences associated with their core technology. This may help create market room and opportunities for smaller, specialist firms.

For example, Tokyo-based Disco Corporation claimed up to an 80 per cent world market share and up to a 90 per cent Japanese market share in some years for high- precision equipment for cutting and grinding silicon wafers into semiconductors. Discos systems are used by most of the worlds semiconductor manufacturers. This is a highly complex and skilled area, with high barriers to entry, few other firms having the requisite skills and interest. Although Disco has had several rivals, rivalry and buyer power have been muted due to Discos dominance and the lack of interest on the part of bigger firms in moving into this area.

The case of Disco demonstrates how technological change may influence and change the Five Forces in a sector by creating sustainable and defensible niche markets.

Analyse Discos competitive environment from a Five Forces perspective!

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