Final answer:
Defining an industry narrowly can lead to focused specialization but limit growth, while a broad definition can increase market share and strategic flexibility. Option b
Step-by-step explanation:
When determining how narrowly or broadly to define your industry, there are different pros and cons to each approach. A narrow definition allows for focused targeting and the development of specialized expertise, which can be beneficial for companies to establish themselves as leaders in a specific niche. However, this can potentially limit growth potential and market reach.
Conversely, a broad definition provides a comprehensive market understanding and opens up diverse opportunities across a wider array of customer needs and preferences, potentially increasing market share and providing strategic flexibility.
Using the example of Microsoft, if we define the market narrowly as just the computer operating system software, Microsoft appeared dominant in the early 2000s.
Broadening the definition to include all computer software and services, such as games and scientific programs, we see that their market share decreased significantly, to about 14% in 2014. This illustrates how market definition can drastically alter the perceived market power of a company.
In the context of globalization and advancements in information and communications technology, one might expect that market definitions used by antitrust authorities could become broader.
The reasoning is that improvements in communication technologies and the rise of the internet have expanded the competitive landscape globally, making local markets less insulated and more interconnected with international markets. This interconnectedness tends to encourage a broader view of market definitions as businesses are no longer confined to local or regional markets.