Make your own free website on Tripod.com

Niche


Niche is .a position from which an entrepreneur is able to exploit a gap in the market which is profitable・.  Population ecology argues that there may be excess capital and labour in certain phases of economic cycle.  As a result of unexpected events and experiments, entrepreneurs quickly seek to fill them using these excess resources.  This is like a gamble as entrepreneurs need to act fast, yet most of the cases there is wide variation and unclear niche during its early stage.  Bertelsmann always found the niche in the changing environment.

1.      Keep up with the environment change

The corporate ethos of the company encouraged entrepreneurship.  The management was used to pay attention to external environment to identify any opportunities.  Bertelsmann・s origin was already focused on a niche, theological publishing.  In its second generation, it tried to break the traditional way of running book shops.  Although the idea of book clubs got powerful opposition, one of the entrepreneur spirits was risk-taking and experiments which path the way of the company・s success.  The success encouraged the company to move to international business to meet the environment changes. 

Bertelsmann found another niche in its third generation, which was the German deregulation and fall of the Berlin Wall, so as the entertainment sector.  The management understood that there was evolvement at the species level.  If the company did not co-evolve or act fast, it would eventually be the loser from the environment selection.  So it moved fast to seize the opportunities and carved out strong positions in the new markets. 

Except risk-taking and experiments, entrepreneur was also aggressive.  This was shown in the purchase of AOL stake.  As Middelhoff recalled, he wanted Bertelsmann to take a 20 percent stake, while finally the company only sank 5 percent.  The technology advancement like Internet offered a niche opportunity, but at the same, the niche was wide variation and unclear.  Many entrepreneurs were easily got lost and failed as they could not concentrate their resources on the activities that meet the market・s needs.  For example, who were the competitors of the company?  With the boundaries among industry became blurred, all the related or unrelated businesses wanted to share the opportunities of the fashion and fad.  There only those firms who could react fast and fill the gap quickly won from the selection process.

2.      Encourage entrepreneurship and variations

Bertelsmann encouraged entrepreneurship.  It adopted the .leadership from the centre・ approach which benefited the company for innovative and creative ideas.  The managers were encouraged for a certain degree of experimentation and variation, which was the most important part of finding and responding niches.  Niche did not mean that it happened and you filled it.  As argued by population ecology, it required the firms・ continual investments for new ideas and innovation so that the firms could build up specific skills and mechanisms to respond fast, or as first mover.

3.      Early standing down of CEO

The management of Bertelsmann understood that entrepreneur needed to stand down when necessary.  The CEO then worked as consultants for the company, rather than influencing the strategies of the company.  On the other hand, the company gave great attention to the development of young managers and closely observed their growth with a view to top Bertelsmann positions.  This way could maintain the corporate ethos to carry forward to the successors.  Also CEO at their older ages would be easily suffered from old practice inertia and were afraid of changes, while young managers were usually more creative, aggressive and willing to take risks.

4.      Set-up new company

Bertelsmann were used to use merge and acquisition to enter a niche as a result of various shifts in environment such as technology, consumer demand and governmental deregulation, etc.  It was effective as it could avoid being trapped by structural inertia from its existing company which made it difficult to shift niches.  In contrast, the redistribution of resources to a new business model could have a better chance to fit the new circumstances.

As a conclusion, Bertelsmann found the niche by understanding the environments and identifying the opportunities, encouraged entrepreneurship and variations, early standing down of CEO and being willing to take risks by setting up new company to fit the environments.


Back to Management of Change Article Lists