Strategic Market Manangement 7th Edition

1
(No Transcript)
2
Chapter Fifteen
Strategies in Declining and Hostile Markets
3
Anyone can hold the helm when the sea is
calm. - Publilius Syrus
4
Where there is no wind, row. - Portuguese
proverb
5
There is nothing so useless as doing effectively
that which should not be done at all. - Peter
Drucker
6
Routes to Revitalizing a Stagnant Market
New Markets
New Products
Revitalized Markets
Super Premium Arena
New Applications
Revitalized Marketing
Governmental-Stimulated Growth
Exploitation of Growth Submarkets
Figure 15.1
7
Milk or Harvest

• Conditions Favoring a Milking Strategy
• Implementation Problems
• When the Premises are Wrong
• Forecasting and Managing the Flow of Funds from
  Milking
• The Hold Strategy

8
Strategies for Declining or Stagnant Industries
Business Position in Key Segments

• Industry Environment
• Rate of Decline
• Pockets of Demand
• Price Pressure

Figure 15.2
9
The Investment Decision in a Declining Industry

• Some Strategic Uncertainties
• Market Prospects
• 1. Is the rate of decline orderly and
  predictable?
• 2. Are there pockets of enduring demand?
• 3. What are the reasons for the decline is it
  temporary?
• Competitive Intensity
• 4. Are there dominant competitors with unique
  skills or competencies?
• 5. Are there many competitors unwilling to exit
  or contract gracefully?
• 6. Are customers brand loyal? Is there product
  differentiation?
• 7. Are there price pressures?

Figure 15.3
10
The Investment Decision in a Declining Industry

• Some Strategic Uncertainties
• Performance/Strengths
• 8. Is the business profitable? What are its
  future prospects?
• 9. What is the market-share position and trend?
• 10. Does the business have some SCAs with
  respect to key segments?
• 11. Can the business manage costs in the face of
  declining sales?
• Interrelationships with Other Businesses
• 12. Is there synergy with other businesses?
• 13. Is the business compatible with the firms
  current strategic thrust?
• 14. Can the firm support the cash needs of the
  business?
• Implementation barriers
• 15. What are the exit barriers?
• 16. Can the organization manage all the
  investment options?

Figure 15.3
11
Six Phases of Hostility

• Phase 1 - Margin pressure
• Phase 2 - Share shifts
• Phase 3 - Product proliferation
• Phase 4 - Self-defeating cost reduction
• Phase 5 - Consolidation and shakeout
• Phase 6 - Rescue

Figure 15.4
12
Strategies That Win in Hostile Markets

• Focus on large customers
• Differentiate on reliability
• Cover broad spectrum of price points
• Turn price into a commodity
• Have an effective cost structure

13
Key Learnings

• One strategic option in a declining or stagnant
  industry is to create a growth context,
  revitalizing the industry by seeking new markets,
  technologies, applications-marketing tactics,
  government-stimulated demand, and growth
  submarkets.
• Another option is to be the profitable survivor
  by strengthening a leadership position and
  encouraging others to exist, perhaps by buying
  their assets.
• A milking or harvesting strategy (generating cash
  flow by reducing investment and operation
  expenses) works when the involved business is not
  crucial to the firm financially or
  synergistically. For milking to be feasible,
  though, sales must decline in an orderly way.
• The exit decision can be optimal, even though it
  is psychologically and professionally painful and
  usually must face organizational barriers. A
  proactive divestiture policy will be better than
  waiting until the situation deteriorates to the
  point that the decision is obvious.

14
Key Learnings

• The investment decision in declining markets
  should rely on an analysis of market prospects,
  competitive intensity, business strengths,
  interrelationships with other businesses in the
  firm, and implementation barriers.
• Hostile markets, caused by too many competitors
  as well as declining demand, typically go through
  phases margin pressures, share shifts, product
  proliferation, self-defeating cost reductions,
  consolidation, and rescue.
• Two strategies to gain above-average returns in
  hostile markets are represented by Golds (number
  one or two firms with economies of scale and
  substantial presence) and Silvers (number three
  or lower firms that focus on a smaller segment,
  usually at the high end of the market.

15
(No Transcript)
16
Ancillary Slides
17
Nothing is more difficult, and therefore more
precious, than to be able to decide. - Napoleon
Bonaparte
18
Once you learn to quit, it becomes habit. -
Vince Lombardi
19
Dont let adverse facts stand in the way of a
good decision. - Colin Powell
20
(No Transcript)