Challenges in entrepreneurial/nascent markets - Essay Example

Challenges in Entrepreneurial/Nascent Markets Nascent industries are in their initial stages of development. These industries are different from established industries in various ways. However, the main difference between nascent and developed industries is that the latter has well established boundaries unlike the former. Nascent industries are in infant stages where the industry boundaries are yet to be well-established. This creates one of the greatest challenges for firms and entrepreneurs venturing into such industries.

Nascent industries are ambiguous where there are no product definitions, undefined industry structure, and unclear relationships (Santos & Eisenhardt, 2009).Entrepreneurs entering into nascent industries adopt various strategies to overcome these challenges. One of the common models used by entrepreneurs in such infant industries is the claiming, demarcating, and controlling model. According to this model, an entrepreneur first claims a nascentindustry by establishing a unique identity or presence.

After claiming the industry, they then focus on creating competitive advantages through demarcation. Finally, the entrepreneurs establish control over the industry to avoid being overtaken by competitors or new entrants (Chawla, 2011).One of the standard challenges in nascent industries is limited information. Unlike in established industries, information about customers, competitors, partners, and technologies is usually unavailable or incomplete in nascent industries (Zuzul & Edmondson, 2013).

This is evident in the US electronic vehicles industry, which is still in its early stages. When Tesla Motors joined this industry in 2003, it had limited knowledge about the industry and relied on external experts from Silicon Valley to come up with its EV models Tesla Roadster and Model S (Steen, 2012).In overcoming the information/knowledge gap problem in nascent industries, social networks can provide an effective solution. According to Ozgen (2009), social networks provide a great platform for entrepreneurs seeking opportunities because it allows for greater social interaction and sharing of information.

Through social network platforms, firms operating in nascent industries can establish linkages with various stakeholders including suppliers, customers, and partners. These linkages will form the necessary sources of information/knowledge that is crucial to establishing success and competitiveness in such industries. With regard to the Tesla Motors’ case, the company would have benefitted a lot by using social networks to link with partners from the Silicon Valley where social networking is widely used.

Apart from information/knowledge problem, another standard problem in nascent markets is market creation. It is one thing to enter into a nascent industry but another to establish market. Tesla successfully entered the EV industry in the US. However, it is now grappling with the problem of establishing a mass market for its mass-produced EV models. The firm has plans of introducing Gen 3 models that will be cheaper and more affordable for the mass market (Steen, 2012). This may be a difficult task for the company considering that EVs are still not widely popular among the general public.

However, Tesla can use the power of social networks to overcome this burden. Social networks provide a great opportunity for firms in nascent industries to form the much needed customer relationships. Through social networks, a firm can form a community of potential customers. With the interactive element of social networks, it is easy for the firm to learn about the needs and expectations of the customers and develop products and solutions that address them (Smith, 2014). Social networks help in eliminating the boundaries between the firm and potential stakeholders, including customers, in nascent industries.

With the growing popularity and usage of social networks, firms such as Tesla can benefit a lot from the large database of potential customers to actualize its mass EV production strategy. ReferencesChawla, N. (2011). Dominating nascent markets. Retrieved from https://beyondheadlines.wordpress.com/2011/01/06/dominating-nascent-markets/Ozgen, E. (2009). The collaborative frontiers of social networks and opportunity recognition in convergent technologies. Academy of Entrepreneurship Journal, 15(1-2).

Retrieved from http://www.freepatentsonline.com/article/Academy-Entrepreneurship-Journal/219062907.htmlSantos, F., M., & Eisenhardt, K., M. (2009). Constructing markets and shaping boundaries: Entrepreneurial power in nascent fields. Academy of Management Journal, 52(1), 643-671.Smith, J. (2014). How to use social media to make sales. Forbes. Retrieved from http://www.forbes.com/sites/jacquelynsmith/2014/01/10/how-to-use-social-media-to-make-sales-2014/Steen, E. (2014). Tesla Motors. Harvard Business School. Zuzul, T., & Edmondson, A., C. (2013).

The downside of legitimacy building for a new firm in a nascent industry. Working Paper 11-099. Harvard Business Review.