harrkev,

I know what you mean. Success through crushing small competitors is not my idea of good business, at least not from a consumer's point of view. Some companies fear competition though. I've read that they have been biding their time on the LED market, waiting for the technology to improve, and maybe that's true. Maybe. <img src="/images/graemlins/wink.gif" alt="" />

It's a classic problem in business. Mag is dominant in incandescent lights, where one set of attributes are valued. A niche market appears using an inferior technology. Gradually the technology gets better, to the point that it is adopted for the main market as well.

So seeing as how you're dominant in the field, in the early stages of the transition you position your technology favorably against the new tech. Later, when the new tech has advanced enough you enter the market yourself.

When? Well you'd think that making the jump early (or alternatively Mag having a separate line of LED lights) makes sense. But in my business classes I'm learning that it isn't necessarily the case.

If you use your dominance in the profit-generating cash cow, you can build a nice amount of capital that wil finance the transition. A new product line is expensive, and in a rapidly developing tech your investment in people and equipment may have to be thrown out anyway.

So you wait for the market to develop to just past the early adopter phase, then leap in with a product that learns from the mistakes of the early entrants in the field, without wasting capital and brand equity on making your own mistakes (though obviously you'll do that too). You also get to lead the vast majority of the market into the new sector at a time when they're starting to consider switching technologies also.

If the technology is complicated or "sticky" enough that you can't quickly produce your own, you can also acquire the top or second player in the field. They'll have already sunk most of the costs of designing the product, setting up production, and learning from their mistakes. But they haven't seen much revenue at this point and their capital is probably running out. So you buy them out just when their investors are at their most nervous, then pump marketing dollars into the product, which now has your brand and is earning cash for your company, then ride the growth.

"Getting in on the ground floor" has its advantages, but it isn't as strong as it seems. The risk with the above is that you wait too long or squander the profits you make during the transition, but Mag isn't necessarily being shortsighted at all.