Overview: Matching Strategy to a Companys Situation

1
Overview Matching Strategyto a Companys
Situation
Nature of industry and competitive conditions
Most important drivers shaping a firms strategic
options fall into two categories
Firms competitive capabilities, market position,
best opportunities
2
Overview Matching Strategyto a Companys
Situation
1. Stage of Life Cycle 2. Industry Structure 3.
Relative Strength of 5
Competitive Forces 4. The impact of industry
driving forces 5. Scope of Competitive Rivalry

• Nature of industry and competitive conditions

3
Overview Matching Strategyto a Companys
Situation

• 1. Leader or follower?
• 2. Company resources, capabilities,
  opportunities and threats.

• Firms competitive capabilities, market position,
  best opportunities

4
Types of Industries (Classic)

• Emerging Industries
• High Velocity Markets
• Maturing Industries
• Declining Industries
• Fragmented Industries
• Rapid Growth Strategies
• Leaders
• Followers
• Weaklings

5
Features of an Emerging Industry

• New and unproven market
• Proprietary technology
• Low entry barriers
• Experience curve effects may permitcost
  reductions as volume builds
• Buyers are first-time users
• Marketing involves inducing initial purchase and
  overcoming customer concerns
• Possible difficulties in securing raw materials
• Firms struggle to fund RD, operations and build
  resource capabilities for rapid growth

6
Strategy Options for Competing in Emerging
Industries

• Win early race for industry leadership by
  employing a bold, creative strategy
• Push hard to
• Perfect technology
• Improve product quality
• Develop attractive performance features
• Move quickly when technological uncertainty
  clears and a dominant technology emerges
• Form strategic alliances
• Capture potential first-mover advantages

7
Strategy Options for Competingin Emerging
Industries (cont.)

• Pursue
• New customers and user applications
• Entry into new geographical areas
• Focus advertising emphasis on
• Increasing frequency of use
• Creating brand loyalty
• Use price cuts to attract price-sensitive buyers
• Prepare for entry of established firms when
  industry future clears and risk lessens

8
Features of High Velocity Markets

• Rapid-fire technological change
• Short product life-cycles
• Rapidly evolving customer expectations
• Frequent launches of new competitive moves
• Entry of important new rivals

9
Strategy Options for Competingin High
Velocity Markets

• Invest aggressively in RD
• Develop quick response capabilities
• Match rivals
• Shift resources
• Adapt competencies
• Create new competitive capabilities
• Speed new products to market
• Use strategic partnerships to develop specialized
  expertise and capabilities

10
Keys to Success in Competingin High
Velocity Markets

• Cutting-edge expertise
• Speed in responding to new developments
• Collaboration with others
• Agility
• Innovativeness
• Opportunism
• Resource flexibility
• First-to-marketcapabilities

11
Characteristics of Industry Maturity

• Slowing demand generates stiff competition
• More sophisticated buyers demand bargains
• Greater emphasis on cost and service
• Topping out problem in adding production
  capacity
• Product innovation and new end uses harder to
  come by
• International competition increases
• Industry profitability falls
• Mergers and acquisitions reduce the number of
  industry rivals

12
Strategy Options for Competingin a Mature
Industry

• Prune product line
• Emphasize process innovation
• Strong focus on cost reduction
• Increase sales to present customers
• Purchase rivals at bargain prices
• Expand internationally
• Build new, more flexible competitive capabilities

13
Competing in a Mature Industry The Strategy
Pitfalls and Mistakes

• A ho-hum strategy - no stand-out or distinctive
  features, leaving the company stuck in the
  middle
• Short-term profits rather than long-term
  competitiveness
• Being slow to adapt to consumer changes
• Being slow to respond to price-cutting
• Having too much excess capacity
• Overspending on marketing
• Failing to pursue cost reductions aggressively

14
Stagnant or Declining Industries The Standout
Features

• Demand grows more slowly than economy 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

15
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

16
Who Doesnt Want Rapid Growth?

• The economics of a particular industry generally
  determine the range of growth possibilities.
• Innovation can lead to rapid company growth
• Continuous significant innovation is difficult to
  achieve
• Rapid growth through unrelated diversification
  usually fails.

17
Industry Leaders

• Stay-on-the-offensive
• Fortify and defend
• Muscle-flexing strategy

18
Fast Seconds, Runners-up, Followers

• Choice
• Remain a fast second
• Improve market standing to 1st tier
• Fast Seconds lower risk, lower return, but
  often still a very good business (Content
  follower strategy)
• Vacant-niche
• Superior product
• Distinctive image
• To challenge the leader
• Growth through acquisition
• Superior product
• Distinctive image

19
Moves for Companies in Trouble

• How to turn it around?
• Sell off assets
• Overhaul the strategy
• Cost cutting
• Combination of the above
• Liquidation
• Harvest

20
10 Commandments for Crafting Successful
Business Strategies

• 1. Make strategy a priority
• Change promptly, be proactive where possible.
• SCA
• Avoid overly-optimistic strategy.
• Dont underestimate rivals
• Attack weaknesses, not strengths
• Use price-cutting carefully.
• Make sure differentiation gap is significant.
• Dont get stuck in the middle
• Dont be overly aggressive in stealing
  market-share, you might destroy the market.