Industry Structure

Industry StructureOpportunities

Fragmented industry: Industries in which a large number of small or small to medium sized firms operate and no one has a dominant market share.

Industries of this type: Service industries like retailing, fabrics, commercial printing; Dry Cleaning (PurpleTie example in trying tounsuccessfullyconsolidate) Consolidation: consolidate the industry into a smaller number of firms (purchase firms). Example: Service Corporation International (SCI) funeral home industry; Dry Cleaning services

Entrepreneurial firms exploiting opportunities: Blockbuster consolidated the video rental industry (consider them now, though); Air conditioning industries; Starbucks in coffee restaurants; Kinkos in copying; Krispie Kreme in doughnuts

Emerging Industry: newly created or newly re-created industries formed by technological innovations, changes in demand, the emergence of new customer needs, etc.

Industries of this type: microprocessor industry, PCs, medical imaging industry, etc. First-mover advantages (there are also potentially disadvantagessecond-mover advantages)3 sources of 1st mover advantages:

1. Technology leadership: include firms making early investments in certain technologies in an industry. Can generate advantages b/c may obtain a low-cost position due to economies of scale and may obtain patent protections.

2. Strategically valuable assets: are resources to successfully compete in an industry. Those able to acquire will create barriers for other firms (e.g., diamond industry)

3. Creation of customer switching costs: occurs when customers make investments in order to use a firms particularly products/ services and changing firms is simply too costly (e.g., Microsoft) Entrepreneurial firms exploiting opportunities: eBay and internet auctions; Cisco and routers

Mature Industry: characterized by

1) slowing growth in industry demand,

2) development of experienced repeat customers,

3) slowdown in increases in production capacity,

4) slowdown in introductions of new products/services,

5) increase of intl competition,

6) overall reduction in profitability of firms in industry

Industries of this type: home detergents, motor oil, kitchen appliances Product refinement: Innovation to current products that focuses on extending and improving current offerings (e.g., additives in motor oil to keep oil cleaner longer)

Investment in service quality: To differentiate product offerings, firms often turn toward the quality of customer services (e.g., a convenience food industry reason for slower growth in fast food is due to casual dining like Chilis and Applebees)

Process Innovation: innovations that reduce manufacturing costs, increase product quality, and streamline management are important (e.g., US automobile industry to compete with Japanese firms)

Entrepreneurial firms exploiting opportunities: Wal-Mart in retailing; JetBlue in airlines; Silk Soymilk in milk industry

Industry StructureOpportunities

Declining Industry: An industry that has experienced an absolute decline in unit sales over a sustained period of time

Industries of this type: Defense industryeven in accounting for Gulf and Iraq Wars; video rental industry Market Leadership: Wait out shakeout period and enjoy a more benign environmentshould try to gain majority of market share (e.g., Defense industry)

Niche: narrow scope of operations and focus on a narrow segment of the declining industry

Harvest: Engage in a long, systematic withdrawal from the industry, extracting as much value as possible during withdrawal period.

Divestment: Like a harvest strategy, but happens very quickly

Entrepreneurial firms exploiting opportunities: Nucor in steelexploiting the steel in the minimill industrysmaller and produce a narrower range of productsthey are energy efficient and high-quality.

Global Industry: An industry that is experiencing significant international sales

Industries of this type: Athletic shoes; Fast food Can pursue a multidomestic or global strategy Multidomestic strategy: compete for market share on a country-by-country basis and vary their product or service offerings to meet demands of the local market (e.g., Fast Food Industry) Global Strategy: Use the same basic approach in all foreign markets (e.g., Athletic Shoes industry)