How can late entrants survive when the increased competition they bring to an industry leads to consolidation and shake-out? This article surveys the explosive growth of the Korean mobile phone industry after digital overtook analogue technology.

A system dynamics simulation case analysis confirms previous research: birthright is the most important element of firm attractiveness, and reputation is the most important element of birthright. So are latecomers lacking a strong birthright doomed to fail in an industry shakeout? Not necessarily.

Noting that all the Korean latecomers chose incentives (in the form of handset subsidies) in their efforts to increase brand attractiveness, the authors use their model to conduct a ‘what-if’ analysis of one of the firms that eventually failed. They conclude that targeted investment in reputation-building would have been a better course, and, at the right level, could have led to firm survival.

They also offer two alternative trajectories for such investment – balanced and penetration – according to the firm situation, with the latter costing more but yielding better financial results. But either strategy would have been preferable to just giving the phones away!

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