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Strategy to Fit
Specific
Industry and
Company
Situations
McGraw-Hill/Irwin
Matching Strategy to
a Companys Situation
Most
important
drivers
shaping a
firms strategic
options fall
into two
categories
Nature of
industry and
competitive
conditions
Firms
competitive
capabilities,
market
position, best
Industry
Transformation
Porter & Rivkin, HBSP 7-102000
Industry Transformation
System change occurs in two modes:
Evolution
Revolution
Industry Transformation
Structural analysis is an important
tool in setting strategy.
New emphasis on:
Substitution
Shaping competition
Addressing uncertainty
Developing a posture
The Leaders
Disadvantage
Coughlin, HBSP, 2-11-2002
The Leaders
(Dis)advantage
Size Advantages
Scale economies
Scope
economies
Network effects
Learning effects
Timing Advantages
Preemption
Reputation effects
Buyer switching
costs
Patents or
institutional
barriers
The Leaders
(Dis)advantage
Pioneering costs
Demand uncertainty
Technology uncertainty
Only the paranoid survive Andy
Grove
Characteristics of an
Emerging Industry
Little historical data for projections
Competing and/or proprietary
technology
Desired product attributes are
unknown
Buyers need a great deal of
information to purchase
Relatively low entry barriers
Experience curve effects
Characteristics of Rapidly
Growing Markets
Increase in the number of
competitors
Increase in price sensitivity
Importance of distribution networks
Creation of buyer loyalty
Characteristics of a Mature
Industry
Strategic Pitfalls in a
Maturing Industry
Employing a ho-hum strategy with no
distinctive features thus leaving firm stuck in
the middle
Being slow to mount a defense against
stiffening competitive pressures
Concentrating on short-term profits rather
than strengthening long-term competitiveness
Being slow to respond to price-cutting
Having too much excess capacity
Overspending on marketing
Failing to aggressively pursue cost
reductions
Characteristics of Declining
Industries
Demand grows more slowly than economy
as whole (or even declines)
Advancing technology gives rise to betterperforming substitute products
Customer group shrinks
Changing lifestyles and buyer tastes
Rising costs of complementary products
Competitive battle ensues among industry
members for the available business
End-Game Strategies
for Declining Industries
An end-game strategy can take either of two paths
Slow-exit strategy involving
Gradual phasing down of operations
Getting the most cash flow from the business
Fast-exit strategy involving
Disengaging from an industry during early stages of
decline
Quick recovery of as much of a companys
investment as possible
Shift resources
Adapt competencies
Create new competitive capabilities
Speed new products to market
Keys to Success in
Competing
in High Velocity Markets
Cutting-edge expertise
Characteristics of a
Fragmented Industry
Absence of market leaders
Product/service is delivered to neighborhood
locations
Buyer demand is diverse
Low entry barriers
Absence of scale economies
Market for industrys product/service may be
globalizing
Exploding technologies
Industry is young and crowded with aspiring
contenders
Examples of Fragmented
Industries
Book publishing
Landscaping and plant nurseries
Auto repair
Restaurant industry
Public accounting
Womens dresses
Meat packing
Paperboard boxes
Hotels and motels
Furniture
Competing in a
Fragmented Industry: The
Strategy Options
Strategies Based on a
Companys Market
Position
Industry leaders
Runner-up firms
Industry Leaders:
The Defining
Characteristics
Muscle-flexing strategy
Focusers
Concentrate on serving a
limited portion of market
Perennial runners-up
Lack competitive strength to do
more than continue in trailing position
Im
trying!
Characteristics of Runner-Up
Firms
When big size is a competitive asset, firms
with small market share face obstacles
in trying to strengthen their positions
Less access to economies of scale
Difficulty in gaining customer recognition
Inability to afford mass media advertising
Difficulty in funding capital requirements
Strategic Options
for Runner-Up Firms
When big size provides larger rivals with a
cost advantage, runner-up firms have
two options
Build market share
Lower costs and prices to grow sales or
Out-differentiate rivals in ways to grow sales
Weak Businesses:
Strategic Options
Launch an offensive turnaround
strategy
(if resources permit)
Employ a fortify-and-defend strategy
(to the extent resources permit)
Pursue a fast-exit strategy
Adopt a harvest strategy
(a slow-exit type of end-game strategy)
Achieving a Turnaround:
The Strategic Options
Sell off assets to generate cash and/or reduce
debt
Revise existing strategy
Launch efforts to boost revenues
Cut costs
Combination of efforts
What Is a Harvest
Strategy?
Steers middle course between status quo
and exiting quickly
Involves gradually sacrificing market
position
in return for bigger near-term cash flow/profit
Objectives
Short-term - Generate largest
feasible cash flow
Long-term - Exit market
10 Commandments for
Crafting Successful
Business Strategies
10 Commandments for
Crafting Successful
Business Strategies
10 Commandments for
Crafting Successful
Business Strategies
Competition in the
Video Game Console
Industry