Transcript STRATEGY AND ENVIRONMENT FIT

STRATEGY AND ENVIRONMENT FIT
Matching Strategy to External Environment
 International Markets (Chapter 7)
 Stage of Industry Life Cycle
 Turbulent, High-Velocity Markets
 Fragmented Industries
Matching Strategy to Internal Environment /
Company Situation
 Industry Leaders
 Runner-Up Firms
 Weak Businesses
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Overview: Matching Strategy
to a Company’s Situation
Most important
drivers shaping
a firm’s strategic
options fall into
two categories
Nature of industry
and competitive
conditions
Firm’s competitive
capabilities,
market position,
best opportunities
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Emerging Industry - Characteristics
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Formative stage of industry
New and unproven market/No rules of competition
Proprietary technology
No consensus concerning production technologies
Low entry barriers
Strong experience curve effects
Buyers are first-time users
Buyers may delay purchase until technology matures
Building reputation is important
Possible difficulties in securing raw materials
Access to capital critical
Variety of strategies being pursued
Mergers/acquisitions
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Emerging Industry - Strategy Options
 Choose a Competitive Strategy
 Other Strategic Actions to Consider
 Push to perfect technology, product, and product
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features
Consider merger/acquisition
Capture first-mover advantages
Acquire or form alliances with other companies
Pursue new customers, new user applications and
enter new geographic areas
Make it easy and cheap for first-time buyers to try
product
Try to build brand loyalty
Use price cuts to attract additional buyers
Form strategic alliances with suppliers
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Rapidly Growing Markets
 Frequent launches of new competitive moves
 Contains survivors
 Firms are more established
 Less variety of strategies
 Strategic groups begin to form
 Profits take off
 Customers more sophisticated
 Entry barriers emerge
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Rapidly Growing Markets
 Strategic Options:
 Must try to grow faster than the market
 Drive down costs
 Pursue rapid product innovation
 Gain access to distribution channels and sales
outlets
 Expand geographic coverage
 Expand product line
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Characteristics of Industry Maturity
 Slowing growth in demand = stiffer competition
 More sophisticated buyers demand bargains
 Greater emphasis on cost and service
 Slowdowns in capacity expansion
 New product innovation de-emphasized
 New process innovation emphasized
 International competition increases
 Industry profitability falls
 Industry consolidation – mergers/acquisitions
 Contains survivors
 Fewer larger firms
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Strategies for Maturing Industries
 Possible Strategies
 Pruning marginal products and models
 Improving value chain efficiency
 Trimming costs
 Increasing sales to present customers
 Acquiring rival firms at bargain prices
 Expanding internationally
 Building new or more flexible capabilities
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Stagnant or Declining Industries
 Demand grows more slowly than economy
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as whole (or even declines)
Advancing technology gives rise to better-performing
substitute products
Customer group shrinks
Changing lifestyles and buyer tastes
Rising costs of complementary products
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
Limited strategic options
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Stagnant or Declining Industries
 Possible Strategies
 3 Best Strategic Alternatives
 Focus on fastest-growing or slowest-
decaying market segments
 Stress differentiation based on quality
improvement and product innovation
 Strive to drive costs down and become
industry’s low cost leader
 End-Game Strategies
 Slow-exit
 Fast-exit
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Turbulent, High-Velocity Markets
 Rapid technological change
 Short product life-cycles
 Entry of important new rivals
 Lots of competitive maneuvering by rivals
 Fast evolving customer requirements and
expectations
 Swirling market conditions
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Turbulent, High-Velocity Markets
 Possible Strategies
 Need to figure out how to deal with change
 Invest aggressively in R&D to stay on the
leading edge of technological know-how
 Keep the companies products and services
fresh and exciting enough to stand out in the
midst of all the change that is taking place
 Develop quick-response capability
 Rely on strategic partnerships with outside
suppliers and with companies making tie-in
products
 Initiate fresh actions every few months
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Competitive Features of
Fragmented Industries
 Absence of market leaders with large market
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shares or widespread market recognition
Product/service is delivered locally
Buyer demand is so diverse 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
Limited geographical area can be served
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Strategic Options for Fragmented
Industries
 Possible Strategies
 Constructing and operating formula facilities
 Becoming a low-cost operator
 Specializing by product type
 Specialization by customer type
 Focusing on a limited geographic area
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Strategies Based on a
Company’s Market Position
Industry leaders
Runner-up firms
Weak or crisis-ridden firms
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Industry leaders
 Industry Leaders have:
 Strong to powerful market positions
 Well-known reputations
 Proven strategies
 Strategic Options
 Stay-on-the-offensive
 Fortify-and-defend
 Muscle-flexing
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Runner-up Firms
 Types 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
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Weak Businesses
 Strategic Options:
 Launch an offensive turnaround strategy (if
resource 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)
 Liquidation
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