Download - Chap 08 AJS
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Tailoring Strategy to FitTailoring Strategy to Fit
Specific Industry andSpecific Industry andCompany SituationsCompany Situations
Tailoring Strategy to FitTailoring Strategy to Fit
Specific Industry andSpecific Industry andCompany SituationsCompany Situations
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Chapter
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Matching Strategy to aMatching Strategy to aCompanys SituationCompanys Situation
Matching Strategy to aMatching Strategy to aCompanys SituationCompanys Situation
Most important
drivers shaping a
firms strategic
options fall into
two categories
Firms competitive
capabilities,
market position,
best opportunities
Nature of industry
and competitive
conditions
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Features of anFeatures of anEmerging IndustryEmerging Industry
Features of anFeatures of anEmerging IndustryEmerging Industry
New and unproven market Proprietary technology Lack of consensus regarding which of
several competing technologies will win out Low entry barriers Experience curve effects may permit
cost reductions as volume builds Buyers are first-time users and marketing involves inducing
initial purchase and overcoming customer concerns
First-generation products are expected to be rapidly improvedso buyers delay purchase until technology matures
Possible difficulties in securing raw materials Firms struggle to fund R&D, operations and build resource
capabilities for rapid growth
S O i fS OS O i fS O
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Strategy Options forStrategy Opt ons orCompetingCompeting
in Emerging Industriesin Emerging Industries
Strategy Opti
ons forStrategy Opt ons orCompetingCompeting
in Emerging Industriesin Emerging Industries
Win early race for industry leadership by employing abold, creative strategy
Push hard to perfect technology, improveproduct
quality, and develop attractiveperformance featuresMove quickly when technological uncertainty clears and a
dominant technology emerges
Form strategic alliances withKey suppliers or
Companies having related technological expertise
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Features of High-Features of High-Velocity MarketsVelocity Markets
Rapid-fire technological change
Short product life-cycles
Entry of important new rivals
Frequent launches of
new competitive moves
Rapidly evolving
customer expectations
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Strategy Options for CompetingStrategy Options for Competing
in High-Velocity Marketsin High-Velocity MarketsStrategy Options for CompetingStrategy Options for Competing
in High-Velocity Marketsin High-Velocity Markets
Investaggressively inR&D Develop quick response capabilities
Shift resources
Adapt competencies Create new competitive capabilities
Speed new products to market
Use strategic partnerships to develop
specialized expertise and capabilities
Initiatefresh actions every few months
Keepproducts/services fresh and exciting
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Industry Maturity:Industry Maturity:The Standout FeaturesThe Standout Features
Industry Maturity:Industry Maturity:The Standout FeaturesThe Standout Features
Slowing demand breeds stiffer competition More sophisticated buyers demand bargains
Greater emphasis on cost and service
Topping out problem in addingproduction capacity
Product innovation and new end uses harder to come by
International competition increases
Industry profitability falls
Mergers and acquisitions reduce number of industry rivals
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Strategy Options for CompetingStrategy Options for Competingin a Mature Industryin a Mature Industry
Strategy Options for CompetingStrategy Options for Competingin a Mature Industryin a Mature Industry
Prune marginal products and models
Emphasize innovation in the value chain
Strong focus on cost reduction
Increase sales to present customers
Purchase rivals at bargain prices
Expand internationally
Build new, moreflexible competitive capabilities
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Strategic Pitfalls inStrategic Pitfalls ina Maturing Industrya Maturing IndustryStrategic Pitfalls inStrategic Pitfalls ina Maturing Industrya Maturing Industry
Employing a ho-hum strategy with no distinctive featuresthus leaving firm stuck in the middle
Concentratingon short-term profits rather than
strengthening long-term competitiveness
Being slow to adapt competencies to
changing customer expectations
Being slow to respondtoprice-cutting
Havingtoo much excess capacity
Overspendingon marketing
Failingtopursue cost reductions aggressively
Stagnant or Dec n ngtagnant or ec n ng
Stagnant or Dec n ngtagnant or ec n ng
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Demand grows more slowly thaneconomy as whole (or even declines)
Competitive pressures intensify
rivals battle for market share
To grow and prosper, firm must
take market share from rivals
Industry consolidates to a smaller number
of key players via mergers and acquisitions
Stagnant or Dec n ngtagnant or ec n ngIndustries:Industries:
The Standout FeaturesThe Standout Features
Stagnant or Dec n ngtagnant or ec n ngIndustries:Industries:
The Standout FeaturesThe Standout Features
St t O ti f C tiStrategy Options for CompetingSt t O ti f C tiStrategy Options for Competing
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Strategy Options for CompetingStrategy Options for Competing
in a Stagnant or Decliningin a Stagnant or Declining
IndustryIndustry
Strategy Options for CompetingStrategy Options for Competing
in a Stagnant or Decliningin a Stagnant or Declining
IndustryIndustry
Pursuefocus strategy aimed atfastest growing market segments
Stress differentiation based on qualityimprovement or product innovation
Work diligently to drive costs down Cut marginal activities from value chain
Use outsourcing
Redesign internal processes to exploit e-commerce
Consolidate under-utilized production facilitiesAdd more distribution channels
Close low-volume, high-cost distribution outlets
Prune marginal products
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Getting embroiled in a profitless battle
for market share with stubborn rivals
Diverting resources out of
business too quickly
Being overly optimistic aboutindustrys future (believing
things will get better)
Competing in a Stagnant Industry:Competing in a Stagnant Industry:
The Strategic MistakesThe Strategic MistakesCompeting in a Stagnant Industry:Competing in a Stagnant Industry:
The Strategic MistakesThe Strategic Mistakes
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Competitive Features ofCompetitive Features ofFragmented IndustriesFragmented Industries
Competitive Features ofCompetitive Features ofFragmented IndustriesFragmented Industries
Absence of market leaders with large market shares Buyer demand is so diverse and geographically scattered
that many firms are required to satisfy buyer needs Low entry barriers Absence of scale economies
Buyers require small amounts of
customized or made-to-order products Market for industrys product/service may be globalizing, thus
putting many companies across the world in same market arena
Exploding technologies force firms to specialize just to keep upin their area of expertise
Industry is young and crowded with aspiring contenders, with
no firm having yet developed recognition to command a large
market share
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Examples ofExamples ofFragmented IndustriesFragmented Industries
Book publishing
Landscaping and plant nurseries
Auto repair
Restaurant industryPublic accounting
Womens dresses
Meat packing
Paperboard boxes
Hotels and motels
Furniture
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Construct and operate formula facilities
Become a low-costoperator
Specialize byproducttype
Specialize by customertype
Focus on limited geographic area
Competing in a FragmentedCompeting in a Fragmented
Industry: The Strategy OptionsIndustry: The Strategy OptionsCompeting in a FragmentedCompeting in a Fragmented
Industry: The Strategy OptionsIndustry: The Strategy Options
S i dS i d
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Industry leaders
Runner-up firms
Weak or crisis-ridden firms
Strategies Based on aStrategies Based on a
Companys Market PositionCompanys Market PositionStrategies Based on aStrategies Based on a
Companys Market PositionCompanys Market Position
I d t L d ThI d t L d Th
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Industry Leaders: TheIndustry Leaders: TheDefining CharacteristicsDefining Characteristics
Strong to powerful market position
Well-known reputation
Proven strategy
Key strategic concern How to sustain
dominant leadership position
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Strategy Options: IndustryStrategy Options: IndustryLeadersLeaders
Stay-on-the-offensive strategy
Fortify-and-defend strategy
Muscle-flexing strategy
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Types of Runner-up FirmsTypes of Runner-up Firms
Market challengers
Use offensive strategies to gain market share
Focusers
Concentrate on serving a
limited portion of market
Perennial runners-up
Lack competitive strength to do
more than continue in trailing position
Imtrying!
Ob t l R UObstacles R nner UpOb t l R UObstacles R nner Up
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When big size is a competitive asset, firmswith small market share face obstaclesin 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
Obstacles Runner-UpObstacles Runner-Up
Firms Must OvercomeFirms Must OvercomeObstacles Runner-UpObstacles Runner-Up
Firms Must OvercomeFirms Must Overcome
St t i O tiStrategic OptionsSt t i O tiStrategic Options
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Strategic OptionsStrategic Optionsfor Runner-Up Firmsfor Runner-Up Firms
Strategic OptionsStrategic Optionsfor Runner-Up Firmsfor 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
Withdraw from market
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Rule of Offensive StrategyRule of Offensive Strategy
Runner-up firms should avoid attacking
a leader head-on with an imitative
strategy, regardless of the resources
and staying power an underdog may
have!
Weak Businesses:Weak Businesses:
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Weak Businesses:Weak Businesses:Strategic OptionsStrategic Options
Launch an offensive turnaround strategy
(if resources permit)
Employ afortify-and-defend strategy(to the extent resources permit)
Pursue afast-exit strategy
Adopt an end-game strategy
What Is anWhat Is an
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What Is anWhat Is anEnd-Game Strategy?End-Game Strategy?
Steers middle coursebetween status quo and exitingquickly
Involvesgraduallysacrificing market position
in return for biggernear-term cash flow/profit
Objectives
Short-term - Generate largestfeasible cash flow
Long-term - Exit market
Types ofTypes ofTypes ofTypes of
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Types ofTypes ofEnd-Game OptionsEnd-Game Options
Types ofTypes ofEnd-Game OptionsEnd-Game Options
Reduce operating budget to rock-bottom Hold reinvestment to minimum
Emphasize stringent internal cost controls
Place little priority on new capital investments Raise price gradually
Trim promotional expenses
Reduce quality in non-visible ways
Curtail non-essential customer services
Shave equipment maintenance
Chapter
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Tailoring Strategy to FitTailoring Strategy to Fit
Specific Industry andSpecific Industry andCompany SituationsCompany Situations
Tailoring Strategy to FitTailoring Strategy to Fit
Specific Industry andSpecific Industry andCompany SituationsCompany Situations
8888
p
Screen graphics created by:Jana F. Kuzmicki, Ph.D.
Troy State University-Florida and Western Region