The Path Dependency of former monopolists A case study of Scandinavian Airlines System

Abstract: Abstract Title: The Path Dependency of former monopolists Seminar date: 2013-05-30 Course: FEKN90 Företagsekonomi: Examensarbete på Civilekonomprogrammet (30 ECTS) Authors: Niklas Sandberg and Henrik Karlsson Advisor: Matts Kärreman Five key words: Monopolist, Path dependency, Strategy, Competition and Deregulation Purpose: To explain how path dependency is affecting the strategies of former monopolists after that their markets are deregulated. Methodology: For this thesis research we have mainly applied an inductive approach based on a qualitative research method including unstructured interviews. Theoretical Framework: To analyze path dependency from a strategic and industrial perspective Porter’s Diamond, the Path dependency theory, SWOT-analysis and Porter’s Generic Strategies have been selected. These models and theories have been chosen because of their explanatory advantages and inbound relations. Empirical material: The Empirical data primarily comes from five interviews and 20 annual reports. These sources have been presented together in order to provide a covering background for the analysis. Conclusions: This thesis suggests that former monopolists continue to be affected by path dependency after that their markets are deregulated. The structures and strategies of monopolists operating in a regulated market are built on the belief that they are not facing competition. Therefore overall efficiency particularly in terms of cost structure is not emphasized during regulation. Once the market is deregulated new entrants enter with cost structures based on markets with free competition. The new entrants, not being strategically path dependent, may also implement new business models. The former monopolist is challenged by limited strategic space because of its path dependent structure. This limited strategic space caused by path dependency negatively affects its relative competitiveness.