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Tailoring Strategy to FitTailoring Strategy to Fit

Specific Industry andSpecific Industry andCompany SituationsCompany Situations



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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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in a Stagnant or Decliningin a Stagnant or Declining

IndustryIndustry


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

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Screen graphics created by:Jana F. Kuzmicki, Ph.D.

Troy State University-Florida and Western Region

Documents

Chap 08 AJS