CHAPTER ELEVEN Industry Analysis 375 opportunities available may attract a

number of companies, as well as venture capital. Considerable jockeying for

position occurs as the compa- nies battle each other for survival, with the
weaker firms failing and drop- ping out. Investor risk in an unproved
company is high, but so are ex pected returns if the company succeeds. At
the pioneering stage of an industry it can be difficult for security analysts to
identify the likely survi- vors, just when the ability to identify the future
strong performers is most valuable. By the time it becomes apparent who
the real winners are, their prices may have been bid up considerably beyond
what they were in the earlier stages of development. In the early 1980s, the
miaocomputer business-both hardware and software-offered a good example
of companies in the pioneering stage. Given the explosion in expected
demand for these products, many new firms entered the business hoping to
capture some share of the total mar ket. By 1983, there were an estimated
150 manufacturers of home comput- ers, a clearly unsustainable number
over the longer run.