II – ANALYZIS OF THE INNOVATION MARKET

In that second part, we are going to analyze Fnac’s chances of success on the French e-reader distribution market. Indeed, in order to assess the profitability of that choice, it is important to focus on the business strategy decision. That’s why we are first going to wonder if Fnac can get any advantage of being an “innovator”. Then, we will conduct a strategic diagnosis to see if Fnac masters the KSF required in this industry. Eventually, we will focus more specifically on the incumbents’ position to be as precise as possible on the evaluation of this strategic choice in terms of business strategy.

A) Later-mover advantage?

It is not wrong to consider the e-reader as an innovation on the French market. As a matter of fact, this is a product that has not been spread by many companies yet in that part of the world. Still, Fnac is not the first one: in such a case, we can wonder about the later-mover advantage.

In theory, Fnac would benefit from two advantages. The first one is called “free-riding” and refers to the economies realized by a later-moving company: indeed, a pioneer always has huge costs of R&D whereas a later-moving one can save around 65 % of such costs in average, simply because it is easier to copy than to create. The second advantage, which is linked, is the learning from the pioneers: Fnac can avoid the mistakes of the innovators and then respond better to the market. So Fnac could benefit from theses advantages by launching its e-reader. (source: Exploring Corporate Strategy, G. Johnson, K. Scholes, R. Whittington)

But when it comes to being a later-mover, the main question to wonder in terms of business strategy is whether it makes sense or not to follow: in other terms, isn’t it too late? To answer that question, the strategic researchers defined three criteria. First, the capacity for capture profit. In our case, this capacity is low since the innovation is easy to replicate and that