Assessing the Impact of Competitive Entry on Market Expansion and Incumbent Sales

Abstract

The assessment of the impact of a new brand entry is an important issue for both practitioners and scholars of competitive strategy. A new entrant into a market may create additional demand for the product and/or share the existing market by drawing buyers away from incumbent brands. This paper suggests a diffusion modeling approach for assessing the impact of a new durable brand entry on market size and the sales of incumbent brands. The model is illustrated by applying it to the case involving Polaroid and Kodak in instant photography during the period 1976 to 1985. Limitations and possible extensions of the model are discussed.