Question

An enterprise has distinctive resources and capabilities according to V-R-I-O-S. It competes in an attractive industry sector where its economic performance is outstanding. It considers entering a related sector where its resource base would be equally distinctive. However, the new sector has many more competitors than its present sector and its growth prospects are less attractive. Realistically, would the enterprise achieve its accustomed level of economic performance in the new sector, or would it worsen?

Answer 1

In my view , this new sector will worsen the economic performance of the enterprise. It will happen so because prospects are less attractive and it will not provide the sustainable performance in the long run.

when business has its own strengths but industry is less attractive then enterprise will loose its Capabilities because of unsuccessful effort to increase the market share and earn abnormal profits. In many case, firms don't able to even cover their cost . It is because of the fact that after heavy investment few customers turned up to the enterprise. This enterprise will face challenges due to cut throat competition and its less experience to this sector. Its operational expenses will be higher than other enterprises.