New entrant firm’s survival and market niche creationwithin the mobile phone manufacturing industry

Cohlen, L.M. (3401804) & Orzanna, R. (4127919)Utrecht University / Course: Technology Related Venturing

________________________________________________________________________________Table of Content

1. Introduction2. Theory

2.1 External environment2.2 Internal environment2.3 Model3. Case study

3.1 Industry forces3.2 Appropriation regime3.3 Resource endowment3.4 Reconfiguration3.5 Partnerships and alliant firms

4. Discussion5. Conclusion6. References

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1. IntroductionWith worsening environmental pollution and resource scarcity, resource intensive industries ought tointegrate sustainable production processes and products into their business portfolios. However,incumbent firms seem to have a tendency to withstand radical innovations (Chandy & Tellis, 2000)and typically leave it up to small firms and new entrants to take upon the first steps within anindustry’s transformation towards more sustainable products and processes. These innovations havethe potential to disrupt existing markets, and create new market opportunities within existing regimesin which new entrant firms can successfully survive due to serving specific user demands whichcontribute towards reaching socio-environmental goals (e.g. CO2 emission reductions, energy ormaterial efficiency through product design improvements). In an attempt to adapt to changing marketdemand conditions and future customer needs, Hockerts & Wünstenhagen (2010) propose thatincumbent firms are likely to ultimately integrate sustainable business models of those new entrantsonce these new concepts have proven commercial viability.

From a socio-environmental perspective, it therefore poses the relevant question how a new entrantfirm can successfully create a new market niche within an existing regime, thereby proofingcommercial viability, with its innovation being ultimately adopted by incumbent firms within thesame industry. Taking this into consideration, the Dutch startup Fairphone B.V. is an interesting caseto analyse. The company’s mission is the inclusion of social welfare aspects and externalities - such asfair labour conditions and the avoidance of conflict materials into the supply chain of mobile phonemanufacturing. Ultimately, Fairphone B.V. envisions their supply chain improvements to ignite aprocess in which it becomes the industry’s standard, practically making its own existence obsolete ifits vision is integrated by incumbent phone manufacturing firms (Fairphone, 2014).

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We will base our analysis on the concept of a competitive advantage to understand a new entrantfirm’s survival and market niche creation. In business management literature, Porter’s (1979) notionof a ‘competitive advantage’ is frequently referred to as the determinant of a firm’s success, with anemphasis on industry forces. Means of gaining a competitive advantage has repeatedly been assessedby other scholars alike - e.g. by strengthening its appropriation regime (Teece, 1988; Cohen, 2000),building up valuable networks (Gulati, 1998), possessing a unique and inimitable resourceendowment (Barney, 1991) as well as the dynamic capabilities to adapt a firm’s resources to a rapidlychanging environment (Teece et al., 1997). The mobile phone manufacturing industry is a highlycompetitive industry, with large appropriation dynamics (e.g. through patent wars), and driven byrapid technological change (Lloyd et al., 2011). Hence, we see an importance of combining theaforementioned aspects of competitive advantage creation and propose a combined model to study thesurvival of Fairphone B.V. as a result of its competitive advantage within the mobile phonemanufacturing industry. The aim of this paper is summarised in the following research question:

How does a new entrant firm survive and create a market niche within the mobile phonemanufacturing industry?

The remainder of the paper is structured as followed. In the next section we perform a literaturereview on relevant theories highlighting different aspects that constitute a competitive advantage of afirm. In the second section we will combine these different aspects and propose a theoretical lense inresponse to our research question. Subsequently the theoretical lense will be applied to FairphoneB.V. to evaluate the firm’s successful survival and creation of a market niche as a result of itscompetitive advantage. We conclude with a discussion on the suitability of our proposed lense for theassessment of a new entrant firm’s competitive advantage for its survival in its created market nichewithin the mobile phone manufacturing industry, and discuss its applicability for new entrant firms inother industries.

2. TheoryIn this theory section we distinguish between the external and internal environment of the firm. Wesuggest a new entrant firm’s survival and market niche creation is accomplished by gaining asustained competitive advantage. Both the external and internal environment of the firm play adistinct role in gaining a competitive advantage - but the theories propose different methods to do so.In this section we will describe the theoretical foundation used for assessing both the external andinternal environment of the firm, and subsequently we describe how these factors are in effect in themodel, which is visualised in Fig. 1.

2.1 External environmentFor the new entrant firms’ survival and creation of a market niche within the mobile phonemanufacturing industry we assess the firm's external environment through the 5 industry forces ofrivalry as proposed by Porter (1979). The five forces mentioned by Porter are: 1. threat of newentrants, 2. threat of substitute products, 3 & 4. bargaining power of buyers and suppliers, and 5.intensity of competitive rivalry.

The first industry force is the threat of new entrants. Incumbent firms particularly dominate themobile phone manufacturing industry, which causes the barriers to entry to be high. Barriers to entryare constituted of e.g. brand reputation, which plays a big role in attracting customers (Porter, 1979).Also, customers are often loyal to the incumbent’s products if satisfied. This specialised supplierindustry is characterised by high levels of product differentiation (Pavitt, 1984), which continuously

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reiterates interest of these customers while also lowering the likelihood of a new entrant to pursue aradical new idea (and thus successfully entering the market). Furthermore, this industry’s incumbentsoperate with economies of scale, which raises barriers to entry upwards by boosting the new entrantsfinancial requirements (Porter, 1979). The threat of new entrants is thus relatively low. The second industry force is the threat of substitute products. Lower number of alternative productsprovided by competitors within the technological regime is beneficial for creating a competitiveadvantage for the firm, since it creates a lower threat of losing your market position - hence beingsubstituted (Porter, 1979). Since the mobile phone manufacturing industry is a highly competitivemarket, aforementioned product differentiation causes new substitute mobile phone products to arisecontinuously. The tendency of the customers to actually buy these substitutes is also decisive incompiling this threat. If a product is well satisfactory to the customer, the risk of them switching to asubstitute product will be reduced. Concluding, although there are mechanisms to overcome beingsubstituted, the threat of substitute mobile phone products seems high. These customer issues are the most decisive in - and thus clearly apply to - the third industry force;the bargaining power of buyers – in our case referred to as customers. The satisfaction of customers ishighly important when substitutes are available, because when this factor is not sufficient thecollective bargaining power of the customers will be particularly high (Porter, 1979). Unique productdifferentiation can lower this power since satisfied customers have no substitutes to choose from.Logically, collective bargaining power of the customers will become higher when the firm isdependent on a relative small pool of customers compared to rival firms (Porter, 1979). Generally,since the degree of competition in this industry (mostly due to the continuous product differentiationby incumbents) is high, the bargaining power of buyers is high but may differ due to aforementionedfirm-specific aspects. High levels of continuous product differentiation also cause the fifth industryforce, the competitive intensity of rivals to be high (Porter, 1979). When the development of atechnological novelty of a firm provides a new product, process or service configuration for which thefirm might be the only supplier, a low degree of rivalry can be constituted until copycats come along.

The bargaining power of suppliers, the fourth industry force, is high when the resources the supplierprovides to the firm are rare and specific (Porter, 1979), which applies to rare earth metals used inmobile phone manufacturing. The dependency of the firm on its suppliers then greatly increases, andthe suppliers have the power to raise prices since they can easily sell their resources to another buyer.A low number of suppliers relative to buyer firms further increase the bargaining power of supplierssince it increases the firm’s supplier dependency (Porter, 1979). However, with certain suppliers theremight be temporal agreements, underlying the firm’s search for its most optimal suppliers for long-term contracting, which likely constitutes a low bargaining power of the supplier(s).

From Porter we thus derive that in order for a new entrant firm to survive and create a market nichewithin the mobile phone manufacturing industry, the firm should pursue a strategy that focuses on aparticular customer segment (strategic target) and the uniqueness perceived by the customer (strategicadvantage). The customer segment should be selected based on its proneness to choose substitutes andthe strength of the rivalry forces within the industry. By using a focus strategy, the firm can gain acompetitive advantage through product innovation or brand marketing as opposed to cost efficiency.

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2.2 Internal environmentIn the previous section it has been sketched how the external environment plays a role for firms optingto gain a competitive advantage. However, the internal environment of a firm plays a crucial role aswell. In this section we shall assess theories addressing the internal environment, which we propose tocontribute to a new entrant firms’ survival and creation of a market niche within the mobile phonemanufacturing industry - through strengthening firm’s appropriation regime, the value of its partnersand alliances, its resource base and dynamic capabilities to reconfigure its resources.

For industries that focus on product innovations such as mobile phone manufacturing industry, Cohen(2000) heralds the main protection mechanisms of a firm to strengthen its appropriation regime to belead time, secrecy, possession of complementary resources and patenting, respectively. For a newentrant firm high litigation costs and other fuzzy boundaries regarding patenting assembled productscreate a low incentive to do, and makes patenting the least used appropriation method for suchinnovations (Bessen & Meurer, 2007). Since mobile phone manufacturers are specialised suppliers(Pavitt, 1984), they often make use of already patented products themselves. Therefore, contractingprovides avid means for a firm to still acquire and safeguard their resource supply (Teece, 1986). Inthe mobile phone manufacturing industry however, there are many patent wars going on amongincumbent firms (Lloyd et al., 2011). Secrecy during the first developmental phases of a productprevents imitators to profit from the firms concepts when the firm does not yet have thecomplementary resources to develop its product (Cohen, 2000). Secrecy also increases the lead time afirm has. By an increased lead time a firm strengthens its appropriation regime because the firm hasthe option to already market its product, in our case forming a successful market niche, while rivalfirms are still developing (Cohen, 2000).

For possession of complementary resources to develop a product we shall assess the new entrantfirm’s resource endowment. The application of tangible and tacit resources that are at a firm’s disposalform the basis of a competitive advantage if these resources are heterogeneous in nature and notperfectly mobile (Barney, 1991). Heterogeneity and mobility of resources can be assessed by applyingthe VRIO framework (value, rarity, inimitability, and organisation). It is argued that new entrant firmsurvival requires the organisation of a novelty, that (a) allows exploiting a new opportunity that issupportive to its novelty, (b) that is not available in sufficient quantities on the market, and (c) that isonly imitable at a large cost disadvantage by other firms.

Following the Dynamic Capabilities theory’s propositions of Teece et al. (1997), for a firm to surviveand create a market niche within the mobile phone manufacturing industry by conforming acomplementary resource base is not yet enough for sustaining its competitive advantage. With theestablishment of its newly created market niche, a sustained competitive advantage requires a newentrant firm to possess adaptive capabilities that include the effective search and balancing ofexploration and exploitation strategies. In rapidly fluctuating environments a firm should thusconstantly integrate, build and reconfigure their tangible and tacit in- and external assets over time(Teece et al., 1997). As aforementioned, the mobile phone manufacturing industry is indeedcharacterised rapidly fluctuating environment. For such reiteration processes a firm must therefore bewell able to learn from, and react to, its environment (Teece et al, 1997). A new entrant firm shouldthus possess tangible and tacit resources that are hardly imitable by other firms, and be wellstrategically flexible to be integrated under different circumstances, as well as be rebuilt andreconfigured over time. Hence, dynamic capabilities will be used to assess whether the firm haschanged it strategy over time to pertain its competitive advantage.

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Since mobile phone manufacturers are specialised suppliers, the performance quality of their relationsand alliances is of utmost importance, since it helps acquiring the assets necessary to develop theirproduct. Gulati’s social network perspective provides the means to assess this firm aspect based ontheir position in networks of relationships (Gulati, 1998). Gulati notes that the entirety of a company’ssocial network can be examined by isolating the several networks a firm belongs to. Subsequently, heargues, this allows analysing whether certain networks are mutually more beneficial than others(Gulati, 1998, p. 310). This duality between a firm’s relation to the overall network of relations and itseffect on economic action is referred to as embeddedness (Gulati, 1998). Gulati distinguishes twoforms of embeddedness to assess the impact of the alliance firm’s position on the decisions in thealliance formation process: related and structural embeddedness.

Related embeddedness assesses the role of direct links of the firms involved as mechanisms to acquireknowledge. By having more direct links, the knowledge overlap and social cohesion increases, whichcreates a reliable environment for keen cooperation and learning within partnerships and alliances(Gulati, 1998). In the mobile phone manufacturing industry such a firm could be another new entrantor larger firm which have the similar innovative ideas, for which cooperation could provide the meansnecessary to continue venturing. Structural embeddedness assesses the role of (informational) valuegained from a firm holding a structural position in markets (Gulati, 1998). Such firms are usually wellknown within the industry and can thus provide a solid (distribution) network for linking up withmore related firms - while also holding a structural financial position which offers a kick-start for thenew entrant. In the mobile phone manufacturing industry this could be cooperating with large ITproduction firms, which have backwardly integrated certain supply chains. For the survival andsubsequent creation of a new market niche within the mobile phone manufacturing industry, wetherefore argue that a new entrant firm should foster its embeddedness within its network to enhancefurther partnership and alliance formation and thus gain industry and customer acceptance throughcommon understanding at the network level.

2.3 ModelIn our proposed model, which is visualised in Fig. 1, the theories assessed for the external and internalenvironment as previously described together determine a new entrant’s firm survival and marketniche creation within the mobile phone industry. The external environment consists out of the industryforces by Porter - number of manufacturers, bargaining power of customers and suppliers, threat ofsubstitute products and threat of imitating new entrants - which all have a negative impact on thecompetitive advantage of a firm, and hence a negative impact on a new entrant firm’s survival andmarket niche creation. Through adjusting its internal environment, a firm can shield itself against theexternal environment through creating a strong appropriation regime. Strengthening and/or increasingsecrecy, lead time, contracting and patenting - which all have a positive impact for a firms shieldingmeasures – contribute to this competitive advantage measure. A firm can further strengthen itscompetitive advantage through resource endowment with unique, rare, valuable and organisationalresources, and by conducting partnerships and alliances having high structural- and relatedembeddedness. Dynamic capabilities strengthen the former two aspects over time through learningand reconfiguration. An increasing number of positive outcomes of this model’s determinants willincrease the likelihood a new entrant firm survives and creates a market niche within the mobilephone manufacturing industry.

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Figure 1. Determinants for survival and market niche formation within the mobile phonemanufacturing industry.

3. Case studyWe selected Fairphone B.V. to analyse new entrant firm survival and market niche creation as a resultof its competitive advantage within the mobile phone manufacturing industry. Fairphone B.V. wasfounded in January 2013 as an independent social enterprise after having been existing as a campaignsince 2010 to raise awareness amongst customers and the mobile phone manufacturing industry,focusing on the socio-environmental issues of conflict materials for mobile phone production. Sincethen the company aimed at opening up the supply chain for transparency creation, using commercialstrategies to maximise social impact by the manufacturing of a ‘fair-trade’ smartphone.

Between June and November 2013, the company raised sufficient capital through a crowdfundingcampaign for the first production batch of 25,000 mobile phones. In May 2014, a second productionbatch followed, releasing 35,000 phones. In the same year, the company announced severalpartnerships - such as with iFixit to provide owners with self-repair guides - 3D Hubs to offer locallyproduced 3D printed cases, and The Phone Co-op as the company’s exclusive stockist on the UKmarket. 52,337 sold units1 and a quadrupling of its staff size2 in 2014 in comparison to 2013, can betaken as indications that the company has successfully managed to create a distinct market niche forfair-trade mobile phone, securing its survival, within the mobile phone manufacturing industry.

1 http://www.fairphone.com/

2 http://www.fairphone.com/2014/02/03/fairphone-the-next-steps-from-2013-to-2014/

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In the next sections of this chapter, we will use our model to analyse what determinants constitutedFairphone B.V.’s competitive advantage which resulted in the companies creation of a distinct marketniche, safeguarding its survival in a highly competitive environment containing large-scale industryincumbents such as Samsung, Apple, Lenovo or LG Electronics (IDC, 2014).

3.1 Industry forcesMany empirical studies assess a firm’s survival, and address its performance, from a perspective ofPorter’s (1979) five industry forces. In the case of Fairphone B.V., the mobile manufacturing industryis highly competitive (Lloyd, 2011) with the overall number of manufacturing firms totalling 120manufacturers (Phonearena, 2014), and with 5 large incumbents dominating the market (IDC, 2014).Despite this large degree of rivalry, Fairphone B.V. was able to successfully survive in its marketsegment.

From a perspective of Porter’s industry forces, the company managed to focus on a particularcustomer segment seeking for a socially responsible smartphone. This focus by the firm increased itscustomer satisfaction as well as the company’s uniqueness perceived by the customer. As shown byFig. 2, the company’s brand sustainability is perceived highest in comparison to its largest incumbentcompetitors.

Figure 2. Brand sustainability of Fairphone B.V. in comparison to its largest competitors (Rank aBrand, 2014)

This significantly impacts the bargaining power of its customers in that no other competitor canprovide the same utility gained from owning a sustainably-branded smartphone. The bargainingpower of its suppliers, however, is considerably strong and there is a high potential risk of supplierswitch. This is due to Fairphone B.V.’s dependency on conflict-free minerals and manufacturers thatcommitted to employee welfare. Thus, with a new entrant imitating the company’s product focus on aconflict-free and socially responsible smartphone, Fairphone B.V.’s supply are potentially incentivisedto move their supply for the new competitor, or to use the existence of the new competitor to exertpressure on the contractual conditions. Lastly, the threat of smartphone substitutes can be consideredmoderate for the upcoming years. As shown by Fig. 3, the relative share of the smartphone devicemarket will continue to grow until the year 2017, with a declining marginal rate.

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Figure 3. Global Internet Device Installed Base Forecast (BI Intelligence, 2014).

3.2 Appropriation regimeBased on a survey amongst US firms, Cohen et al. (2000) showed that, out of the range ofmechanisms to protect profits from an innovation, across many industries firms tend to more heavilyemploy lead time advantages over others such as patenting or secrecy. In the case of Fairphone B.V.the main appropriation mechanisms used are a lead time advantage and a strong contracting regime.The lead time of Fairphone compared to its strongest competitor Motorola Ara has shown to haveprofound effects, as visualised in Fig. 4.

Figure 4. Lead time advantage of Fairphone in comparison to its strongest competitor Motorola Arabased on a Google Trend search.

The company selected its mining and manufacturing partners based on their willingness to invest inemployee well-being and the provision of conflict-free minerals3. It is suggested that the strongcontracting regime is due to the company’s constant reinvestment into these relationships, both

3 http://www.fairphone.com/wp-content/uploads/2014/07/Fairphone-fact-sheet.pdf

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financially and timely. As such the company created a dedicated Worker Welfare Fund4 for theemployees of its manufacturing partner Chongqing Guohong Technology Development Co inGuohong, China. For every sold Fairphone, the company contributes $2.50 to the fund. For theprovision of conflict-free minerals, the company is reinforcing the relationship with the localcommunities mining the minerals through field visits, research and extensive communication of thesevisits to the public via their online channels5. Concerning patent ownership, the used technologywithin the Fairphone has not been developed internally and thus not patentable. The most surprisingresult is related to secrecy. The literature suggests that secrecy and less public information leakageenhances a company’s appropriation and thus positively stimulates its performance. Fairphone B.V.voluntarily decided on the opposite and provides transparency on its core business processes. Wetherefore conclude that, either the lead time advantage and a strong contracting regime is offsetting aweakening from complete transparency, or an entirely transparent information processing isreinforcing appropriation of a social enterprise.

3.2 Resource endowmentAt its core of a constituted competitive advantage, we as well assess Fairphone B.V.’s resourceendowment. Following Barney (1991), a firm can gain a competitive advantage by possessing a set ofunique, rare, valuable and organisational resources. For Fairphone B.V., four resource assets areparticularly noteworthy. Firstly, while there are a number of relevant social and ecological standardsfor the electronics industry, such as the Eco-Management and Audit Scheme (EMAS), Fairphone B.V.has been the first company being capable of defining interventions to gradually address thosestandards relevant for the production of smartphones. Secondly, the company employs skilleddesigners with extensive knowledge on the design of a device that focusses on longevity andrepairability, to extend the phone’s usable life. This guaranteed the Fairphone a score of 7 out of 10 atthe iFixit repairability test (IFixit, 2014). Thirdly, the company has been proven to have a neweconomy grounded on social values and transparency at the core of its business. This genuity wassupportive to attracting a large community of early adopters with more than 50,000 units sold and alarge community of more than 120,000 supporters on popular social-media channels, such asFacebook, Twitter and newsletter subscribers. Fourthly, Fairphone B.V. is 100% independentlyfinanced6, with the operational business being solely funded from the sales of the units. Financialindependence secures the company’s trustworthiness of its early adopters who seek for its socialenterprise model.

3.3 ReconfigurationTeece (1997) highlights the importance that for a company to retain its competitive advantage, itneeds to reconfigure and adapt its resources over time to account for dynamic changes within itsenvironment. With Fairphone B.V. being a fairly new entrant to the rapidly changing mobile phonemanufacturing industry, its undergoing changes to its business are manifold. From a perspective onresource reconfiguration, the company intentionally decided not to introduce significant changes to itscore production process yet. Instead, the focus lies on organic growth7 with all the company’sresources being currently used to retain a small production batch of 25,000 units. It gives the companythe advantage to keep the production operationally manageable, independent from investors, that

4 http://www.fairphone.com/2014/09/12/first-worker-welfare-fund-proposal-approved/

5 http://www.fairphone.com/2014/10/02/research-trip-visiting-tin-tantalum-and-tungsten-mines/

6 http://www.fairphone.com/wp-content/uploads/2014/07/Fairphone-fact-sheet.pdf

7 http://www.fairphone.com/2014/02/03/fairphone-the-next-steps-from-2013-to-2014/

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would be required for rapid up scaling, and keeping the sale on the company’s own online channelswhich allows Fairphone B.V. to maintain the integration of the technical service and repair in-house.

Furthermore, Fairphone B.V. provided an online discussion platform, which opt to involve theircustomers in the design differentiation process, asking for the community’s feedback and insights.This strengthens Fairphone B.V.’s dynamic capabilities by offering an atmosphere for learning andadaptation processes.

3.4 Partnerships and alliant firmsFollowing the notions in our theory sections, ‘’Gulati notes that the entirety of a company’s socialnetwork can be examined by isolating the several networks a firm belongs to. Subsequently, heargues, this allows to analyse whether certain networks are mutually more beneficial than others(Gulati, 1998, p. 310).’’ we have provided a social network analysis for Fairphone B.V. with itspublicly communicated alliances and partnerships8, which is visualised in Fig. 5.

We performed a Google keyword search9 to approximate relevancy of a network relationship for bothFairphone B.V. and its partner by the number of search hits that a certain relationship performed. Itcan be suggested that the company’s market niche survival is at least partly attributed to its strongrelationship with large incumbent firms from complementary industry, such as ASN from the financialsector or Vodafone from the telecommunication sector. We thus suggest these firms have a highstructural embeddedness since they are capable of providing a broad useful network and financialbackup. We suggest Waag Society, Stichting Doen and Bethnal Green Ventures, which thoroughlyaided in the successful launch of their business, and GSM Loket, which helped assemble necessaryproduction parts, to have a high related embeddedness; since these firms are likeminded(sustainability oriented, promoting entrepreneurship: Waag Society, Stichting Doen and Bethnal GreenVentures) or active in the same type of industry (GSM Loket).

8 http://www.fairphone.com/wp-content/uploads/2014/07/Fairphone-fact-sheet.pdf

9 The following search term has been used: ”<partnerName>” AND “Fairphone”

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Figure 5. Social network analysis assessed by public relevance using a Google keyword search.

4. DiscussionBy shaping a theoretical lense assessing competitive advantage and firm performance, we were able tohighlight a number of aspects that can potentially explain Fairphone B.V.’s successful survival andmarket niche creation. This assessment of the external and internal environment has shown to producenoteworthy accomplishments and pitfalls on both levels of analysis. The results from analysingFairphone B.V. reveal the high importance of assessing industry forces and appropriation measures toincrease brand reputation in the mobile phone manufacturing industry. Furthermore, the firm hasshown to encourage sustainable resource endowment granting them unique complementary assetsstrengthening its competitive advantage. Fairphone B.V. furthermore had a competitive advantagecompared to its main competitor due to lead time, which relates to literature suggesting how lead timepositively affects a firm's shielding mechanisms by increasing its appropriation regime.

Since the threat of imitating rivals into this newly created market niche - particularly from financiallysuperior, well positioned large incumbent firms - is severe, Fairphone B.V. needed thoroughmechanisms to create a convincing image affecting the customer's firm perception. This uniqueness issuccessfully addressed by developing socio-environmentally responsible supply chains, providingbusiness transparency and the integration of the technical service and repair in-house. Surveysperformed by other actors confirmed these high levels of customer satisfaction. Furthermore, thelaunch of the online discussion platform contributed to this manner, which illuminated a strongemphasis on feedback mechanisms strengthening customer satisfaction - by highlighting their role inco-developing the products future trajectory. From these model results it can thus be concluded thatFairphone B.V. manoeuvres strategically in the mobile phone manufacturing industry through itsdynamic capabilities. Such a highly dynamic market characterised by high levels of productiondifferentiation requires Fairphone B.V.’s constant adaptive flexibility to learn, as well as reconfigureits resources, in order to successfully prolong the firm’s core business activities.

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It should be noted that the proposed model is prone to various limitations. Several theories have beensubjectively chosen to conjunctionally form a comprehensive model describing a new entrants firmsurvival and market niche creation within the mobile phone manufacturing industry. We havespecified and applied these theories onto a single market and tested its applicability. Although, asabove mentioned, this model well describes the competitive gains of Fairphone B.V., a longer term in-depth research on the applicability of theories might show a more comprehensive view of the industryand the firm’s competitive aspects by providing the most applicable theories for social enterprises.Sound peer reviewing by qualified researchers active in this field of science, as well as applying themodel to multiple test cases, would offer a trial-and-error methodology likely resulting in theimproved quality of the proposed model.

Furthermore, since the choice for included model theories is subjective, using additional theoriesmight strengthen the quality of the model. For example, inclusion of Boschma’s theory (2005) couldprovide a more detailed assessment of the partnerships and alliant firms through evaluating the impactof proximity on interactive- and innovation learning. Such an addition might provide useful insightssince this model has revealed the pivotal role partnerships play in Fairphone B.V.’s survival andmarket niche creation. Our results also showed that secrecy as a traditional appropriation mechanismdid not show any relevant addition for Fairphone B.V.’s survival and market niche creation. The roleof patenting did not become entirely clear assessing Fairphone B.V., while patenting does play atremendous role in this market according to Lloyd (2011). Future research is necessary whether thesefindings hold for other social enterprise alike, and specifically how transparency contributes to asocial enterprise’s appropriation regime. It can be suggested whether classical firm theories properlyshed light upon competitive advantage measures conducted by social enterprises.

Although our network analysis provided a good indication on the structural and related embeddednessof Fairphone B.V.’s partnerships and alliances, such an assessment has shown to be difficult to beoperationalised solely based on publicly available data. The results of this research might thus furtherbe prone to incorrectness due to the quality - and quantity - of data assessed. This notion is taken intoaccount, since the majority of data was derived through Fairphone B.V.’s website and annual reports.Consulting independent data sources (e.g. from consultancy firms or business analysts) could sketch adifferent image than presented. We would therefore sincerely like to advise that an extended time-scope of this research could offer a more accurate assessment atmosphere, e.g. due to arranged semi-structured interviews filling data gaps and provide complementary in-depth firm data.

5. ConclusionIn this report we have first presented several firm theories, which describe how a venturing firm’scompetitive advantage can be achieved. We then proposed a model assessing how new entrant firmssurvive and create a distinct market niche within the mobile phone manufacturing industry, throughgaining a competitive advantage. The model has shown the ability to well describe how FairphoneB.V. manoeuvred itself, opting to ignite a process transforming its regime market towardssustainability - notably through customer satisfaction and lead time. We have discussed severallimitations potentially affecting and skewing our model and its outcomes. Although the model resultsseem sound, the applicability for revealing true strategy of a social enterprises remains unclear - sinceit’s success can be derived from the theories used but have shown to only hold under certaincircumstances (e.g. by pursuing customer satisfaction). For future research we advise to deeply lookinto the applicability of the assessed theories for social enterprises, test the inclusion of additional

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