Assessment of Performance Measurement in - St Clements University

In some industry, the threat of substitute products triggered
consolidation by shifting buyer’s needs, and thereby stimulating changes
in services that are increasingly subject to economies of scale. In other
industries, changes in buyer’s taste, changes in the structure of
distributions channels, and innumerable industry trends may operate,
directly or indirectly, on the causes of fragmentation.
Government or regulatory changes: This can force consolidation by
raising standards in the products manufacturing process beyond the
reach of small firms through the creation of economies of scale.
Recognizing the ultimate effects of such trends, and positioning the
company to take advantage of them, can be an important way of
overcoming fragmentation.
Porter (1980) further stated that industry can be fragmented not only
because of fundamental economic reasons, but because they are “stuck’
in a fragmented state. According to Porter industries become stuck due
to the following reasons:
Existing Firms Lack Resources: Sometimes the steps required to
overcome fragmentation are evident, but existing firms lack the
resources to make the necessary strategic investments. For example,
there may be potential economies of scale in production, but firms lack
the capital or expertise to construct large-scale facilities or to make
required investments in vertical integration. Firm may also lack the
resources or skills to develop in house distribution channels, in house
34