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Strategy hierarchy
1. Corporate strategy: 1) growth strategy, 2) stability strategy, 3) retrenchment strategy.
2. Business unit strategy: 1) cost leadership, 2) differentiation, 3) focus, 4) mixed.
3. Functional strategy.
Prof. Dr. Majed El-Farra 20122 / /١٤٤٤ ٠٩ ٢٨ 18:55
Ch 5- 3
Types of Strategies
Operational Level
Functional Level
Division Level
Corp LevelA Large
Company
Corporate strategies
• Top level management formulate for overall organization
• The question at the corporate level we should answer when design strategies: In what industry should we be operating?
• It depends on the outcome of SWOT analysis.
Prof. Dr. Majed El-Farra 20125 / /١٤٤٤ ٠٩ ٢٨ 18:55
Growth strategiesGrowth strategies:They result increase in sales, market share and profit: the types:• Internal growth: Increase internal capacity of organization
without acquiring other firms.• Conglomerate Diversification: Acquiring unrelated business. • Merger: Two roughly similar size firms combine into one. To
benefit of synergy.• Strategic alliance: Temporary partnerships
Prof. Dr. Majed El-Farra 20126 / /١٤٤٤ ٠٩ ٢٨ 18:55
Corporate Restructuring
The change in a broad set of actions and decisions, e.g., changing relationships and organization of work.
• The aim of restructuring is to improve effectiveness.• Restructuring could be growth, stability or retrenchment.
This depends on why we use it.
Prof. Dr. Majed El-Farra 20127 / /١٤٤٤ ٠٩ ٢٨ 18:55
Retrenchment strategies
• Types:1- Turnaround: Eliminating unprofitable outputs,
pruning/cutting assets, reducing size of work force, rethinking firm’s products lines and customer groups.
2- Divestment: sell one of business units3- Liquidation: last resort strategy
Prof. Dr. Majed El-Farra 20128 / /١٤٤٤ ٠٩ ٢٨ 18:55
Prof. Dr. Majed El-Farra 20129
Strategies in ActionStrategies in Action
Vertical Integration StrategiesVertical Integration Strategies
• Forward integration• Backward integration• Horizontal integration
/ /١٤٤٤ ٠٩ ٢٨ 18:55
Prof. Dr. Majed El-Farra 201210
Strategies in ActionStrategies in Action
DefinedDefined
• Gaining ownership or increased control over distributors or retailers
ExampleExample
• General Motors is acquiring 10% of its dealers.
Forward Forward IntegrationIntegration
/ /١٤٤٤ ٠٩ ٢٨ 18:55
Strategies in Action
Guidelines for Forward IntegrationGuidelines for Forward Integration
Present distributors are expensive, unreliable, or incapable of meeting firm’s needs
Availability of quality distributors is limited When firm competes in an industry that is expected to grow
markedly Advantages of stable production are high Present distributor have high profit margins
Prof. Dr. Majed El-Farra 201211 / /١٤٤٤ ٠٩ ٢٨ 18:55
Prof. Dr. Majed El-Farra 201212
Strategies in ActionStrategies in Action
DefinedDefined
• Seeking ownership or increased control of a firm’s suppliers
ExampleExample
• Motel 8 acquired a furniture manufacturer.
Backward Backward IntegrationIntegration
/ /١٤٤٤ ٠٩ ٢٨ 18:55
Strategies in Action
Guidelines for Backward IntegrationGuidelines for Backward Integration
When present suppliers are expensive, unreliable, or incapable of meeting needs
Number of suppliers is small and number of competitors large High growth in industry sector Firm has both capital and human resources to manage new
business Advantages of stable prices are important Present supplies have high profit margins
Prof. Dr. Majed El-Farra 201213 / /١٤٤٤ ٠٩ ٢٨ 18:55
Prof. Dr. Majed El-Farra 201214
Strategies in ActionStrategies in Action
DefinedDefined
• Seeking ownership or increased control over competitors
ExampleExample
• Palestinian Islamic Bank acquired Cairo-Amman Bank Islamic transaction branch.
Horizontal Horizontal IntegrationIntegration
/ /١٤٤٤ ٠٩ ٢٨ 18:55
Strategies in Action
Guidelines for Horizontal IntegrationGuidelines for Horizontal Integration
Firm can gain monopolistic characteristics without being challenged by federal government
Competes in growing industry Increased economies of scale provide major competitive
advantages Faltering/losing due to lack of managerial expertise or need for
particular resources
Prof. Dr. Majed El-Farra 201215 / /١٤٤٤ ٠٩ ٢٨ 18:55
Prof. Dr. Majed El-Farra 201216
Strategies in ActionStrategies in Action
Intensive StrategiesIntensive Strategies
• Market penetration• Market development• Product development
/ /١٤٤٤ ٠٩ ٢٨ 18:55
Prof. Dr. Majed El-Farra 201217
Strategies in ActionStrategies in Action
DefinedDefined
• Seeking increased market share for present products or services in present markets through greater marketing efforts
ExampleExample
• Ameritrade, the on-line broker, tripled its annual advertising expenditures to $200 million to convince people they can make their own investment decisions.
Market Market PenetrationPenetration
/ /١٤٤٤ ٠٩ ٢٨ 18:55
Strategies in Action
Guidelines for Market PenetrationGuidelines for Market Penetration
Current markets not saturated Usage rate of present customers can be increased significantly Market shares of competitors declining while total industry
sales increasing Increased economies of scale provide major competitive
advantages
Prof. Dr. Majed El-Farra 201218 / /١٤٤٤ ٠٩ ٢٨ 18:55
Prof. Dr. Majed El-Farra 201219
Strategies in ActionStrategies in Action
DefinedDefined
• Introducing present products or services into new geographic area
ExampleExample
• Khuzendar Tiles maker introduce his product to Gulf markets.
Market Market DevelopmenDevelopmen
tt
/ /١٤٤٤ ٠٩ ٢٨ 18:55
Strategies in Action
Guidelines for Market DevelopmentGuidelines for Market Development
New channels of distribution that are reliable, inexpensive, and good quality
Firm is very successful at what it does Untapped or unsaturated markets Capital and human resources necessary to manage expanded
operations Excess production capacity Basic industry rapidly becoming global
Prof. Dr. Majed El-Farra 201220 / /١٤٤٤ ٠٩ ٢٨ 18:55
Prof. Dr. Majed El-Farra 201221
Strategies in ActionStrategies in Action
DefinedDefined
• Seeking increased sales by improving present products or services or developing new ones
ExampleExample
• Apple developed the G4 chip that runs at 500 megahertz.
• Khuzendar Tiles maker introduce Ceramic as a new product.
Product Product DevelopmenDevelopmen
tt
/ /١٤٤٤ ٠٩ ٢٨ 18:55
Strategies in Action
Guidelines for Product DevelopmentGuidelines for Product Development
Products in maturity stage of life cycle Competes in industry characterized by rapid technological
developments Major competitors offer better-quality products at comparable
prices Compete in high-growth industry Strong research and development capabilities
Prof. Dr. Majed El-Farra 201222 / /١٤٤٤ ٠٩ ٢٨ 18:55
Prof. Dr. Majed El-Farra 201223
Strategies in ActionStrategies in Action
Diversification StrategiesDiversification Strategies
• Concentric diversification• Conglomerate diversification• Horizontal diversification
/ /١٤٤٤ ٠٩ ٢٨ 18:55
Prof. Dr. Majed El-Farra 201224
Strategies in ActionStrategies in Action
DefinedDefined
• Adding new, but related, products or services
ExampleExample
• National Westminister Bank PLC in Britain bought the leading British insurance company, Legal & General Group PLC.
Concentric Concentric DiversificatiDiversificati
onon
/ /١٤٤٤ ٠٩ ٢٨ 18:55
Strategies in Action
Guidelines for Concentric DiversificationGuidelines for Concentric Diversification
Competes in no- or slow-growth industry Adding new & related products increases sales of current
products New & related products offered at competitive prices Current products are in decline stage of the product life cycle Strong management team
Prof. Dr. Majed El-Farra 201225 / /١٤٤٤ ٠٩ ٢٨ 18:55
Prof. Dr. Majed El-Farra 201226
Strategies in ActionStrategies in Action
DefinedDefined
• Adding new, unrelated products or services
ExampleExample
• Consultant Construction Engineering acquired Bisects factory.
Conglomerate Conglomerate DiversificatiDiversificati
onon
/ /١٤٤٤ ٠٩ ٢٨ 18:55
Strategies in Action
Guidelines for Conglomerate DiversificationGuidelines for Conglomerate Diversification
Declining annual sales and profits Capital and managerial talent to compete successfully in a new
industry Financial synergy between the acquired and acquiring firms Exiting markets for present products are saturated
Prof. Dr. Majed El-Farra 201227 / /١٤٤٤ ٠٩ ٢٨ 18:55
Prof. Dr. Majed El-Farra 201228
Strategies in ActionStrategies in Action
DefinedDefined
• Adding new, unrelated products or services for present customers
ExampleExample
• The El-Awda Co. provide ice-cream product to present customer
Horizontal Horizontal DiversificatiDiversificati
onon
/ /١٤٤٤ ٠٩ ٢٨ 18:55
Strategies in Action
Guidelines for Horizontal DiversificationGuidelines for Horizontal Diversification
Revenues from current products/services would increase significantly by adding the new unrelated products
Highly competitive and/or no-growth industry w/low margins and returns
Present distribution channels can be used to market new products to current customers
New products have counter cyclical sales patterns compared to existing products
Prof. Dr. Majed El-Farra 201229 / /١٤٤٤ ٠٩ ٢٨ 18:55
Prof. Dr. Majed El-Farra 201230
Strategies in ActionStrategies in Action
Defensive StrategiesDefensive Strategies
• Joint venture• Retrenchment• Divestiture• Liquidation
/ /١٤٤٤ ٠٩ ٢٨ 18:55
Prof. Dr. Majed El-Farra 201231
Strategies in ActionStrategies in Action
DefinedDefined
• Two or more sponsoring firms forming a separate organization for cooperative purposes
ExampleExample
• Lucent Technologies and Philips Electronic NV formed Philips Consumer Communications to make and sell telephones.
Joint VentureJoint Venture
/ /١٤٤٤ ٠٩ ٢٨ 18:55
Strategies in Action
Guidelines for Joint VentureGuidelines for Joint Venture
Combination of privately held and publicly held can be synergistically combined
Domestic forms joint venture with foreign firm, can obtain local management to reduce certain risks
Distinctive competencies of two or more firms are complementary
Overwhelming resources and risks where project is potentially very profitable (e.g., Alaska pipeline)
Two or more smaller firms have trouble competing with larger firm
A need exists to introduce a new technology quickly
Prof. Dr. Majed El-Farra 201232 / /١٤٤٤ ٠٩ ٢٨ 18:55
Prof. Dr. Majed El-Farra 201233
Strategies in ActionStrategies in Action
DefinedDefined
• Regrouping through cost and asset reduction to reverse declining sales and profit. Sometimes it is called turnaround or reorganizational strategy.
ExampleExample
• A company sold off a land and 4 apartments to raise cash needed. It introduce expense effective control system.
RetrenchmenRetrenchmentt
(turnaround)(turnaround)
/ /١٤٤٤ ٠٩ ٢٨ 18:55
Strategies in Action
Guidelines for RetrenchmentGuidelines for Retrenchment
Firm has failed to meet its objectives and goals consistently over time but has distinctive competencies
Firm is one of the weaker competitors Inefficiency, low profitability, poor employee morale, and
pressure from stockholders to improve performance. When an organization’s strategic managers have failed Very quick growth to large organization where a major internal
reorganization is needed.
Prof. Dr. Majed El-Farra 201234 / /١٤٤٤ ٠٩ ٢٨ 18:55
Prof. Dr. Majed El-Farra 201235
Strategies in ActionStrategies in Action
DefinedDefined
• Selling a division or part of an organization
ExampleExample
• Harcourt General, the large US publisher, is selling its Neiman Marcus division.
DivestitureDivestiture
/ /١٤٤٤ ٠٩ ٢٨ 18:55
Strategies in Action
Guidelines for DivestitureGuidelines for Divestiture
When firm has pursued retrenchment but failed to attain needed improvements
When a division needs more resources than the firm can provide
When a division is responsible for the firm’s overall poor performance
When a division is a misfit with the organization When a large amount of cash is needed and cannot be
obtained from other sources.
Prof. Dr. Majed El-Farra 201236 / /١٤٤٤ ٠٩ ٢٨ 18:55
Prof. Dr. Majed El-Farra 201237
Strategies in ActionStrategies in Action
DefinedDefined
• Selling all of a company’s assets, in parts, for their tangible worth
ExampleExample
• El-Ameer Block factory sold all its assets and ceased business.
LiquidationLiquidation
/ /١٤٤٤ ٠٩ ٢٨ 18:55
Strategies in Action
Guidelines for LiquidationGuidelines for Liquidation
When both retrenchment and divestiture have been pursued unsuccessfully
If the only alternative is bankruptcy, liquidation is an orderly alternative
When stockholders can minimize their losses by selling the firm’s assets
Prof. Dr. Majed El-Farra 201238 / /١٤٤٤ ٠٩ ٢٨ 18:55
Prof. Dr. Majed El-Farra 2012Ch 5- 39
Michael Porter’s Generic Strategies
Cost Leadership Strategies(Low-Cost & Best-Value)
Differentiation Strategies
Focus Strategies(Low-Cost Focus &
Best-Value Focus)
/ /١٤٤٤ ٠٩ ٢٨ 18:55
Business Unit Strategies
• Here we answer the question: How should we compete in the chosen industry? Cost leadershipDifferentiation (real or perceived). MixedFocus
Prof. Dr. Majed El-Farra 201240 / /١٤٤٤ ٠٩ ٢٨ 18:55
6-41
Business Strategy
Focuses on improving competitive position of company’s products or services within the specific industry or market segment
Prof. Dr. Majed El-Farra 2012 / /١٤٤٤ ٠٩ ٢٨ 18:55
6-42
Porter’s Competitive Strategies
Generic Competitive Strategies --
–Lower Cost strategy•Greater efficiencies than competitors
–Differentiation strategy•Unique/superior value, quality, features, service
Prof. Dr. Majed El-Farra 2012 / /١٤٤٤ ٠٩ ٢٨ 18:55
6-43
Porter’s Competitive Strategies
Competitive Advantage --
–Determined by Competitive Scope•Breadth of the target market
Prof. Dr. Majed El-Farra 2012 / /١٤٤٤ ٠٩ ٢٨ 18:55
6-46
Porter’s Competitive Strategies
Cost Leadership --
–Low-cost competitive strategy–Broad mass market–Efficient-scale facilities–Cost reductions–Cost minimization
Prof. Dr. Majed El-Farra 2012 / /١٤٤٤ ٠٩ ٢٨ 18:55
Michael Porter’s Generic Strategies
• Cost leadership emphasizes producing standardized products at a very low per-unit cost for consumers who are price-sensitive.
• There are two types of cost leadership strategies.• a. A low-cost strategy offers products to a wide range of
customers at the lowest price available on the market. • b. A best-value strategy offers products to a wide range of
customers at the best price-value available on the market.
Prof. Dr. Majed El-Farra 2012Ch 5- 47 / /١٤٤٤ ٠٩ ٢٨ 18:55
Cost leadership
• Striving to be the low-cost producer in an industry can be especially effective when the market is
composed of many price-sensitive buyers, when there are few ways to achieve product
differentiation, when buyers do not care much about differences from brand to brand, or when
there are a large number of buyers with significant bargaining power.
Prof. Dr. Majed El-Farra 2012Ch 5- 48 / /١٤٤٤ ٠٩ ٢٨ 18:55
Cost leadership• The basic idea behind a cost leadership strategy is to
underprice competitors or offer a better value and thereby gaindriving some competitors out market share and sales, of the market entirely.
• To successfully employ a cost leadership strategy, firms must ensure that total costs across the value chain are lower than that of the competition. This can be accomplished by:
• a. performing value chain activities more efficiently than competition, and
• b. eliminating some cost-producing activities in the value chain.
Prof. Dr. Majed El-Farra 2012Ch 5- 49 / /١٤٤٤ ٠٩ ٢٨ 18:55
Benefits
• Provides a defense against competitors
• Provides a barrier to entry• Generates increased market share
/ /١٤٤٤ ٠٩ ٢٨ 18:55Prof. Dr. Majed El-Farra 201250
6-52
Porter’s Competitive Strategies
Differentiation –
–Broad mass market–Unique product/service–Premiums charged–Less price sensitivity
Prof. Dr. Majed El-Farra 2012 / /١٤٤٤ ٠٩ ٢٨ 18:55
Differentiation
• Differentiation is aimed at producing products that are considered unique. This strategy is most powerful with the source of differentiation is especially relevant to the target market
Prof. Dr. Majed El-Farra 2012Ch 5- 53 / /١٤٤٤ ٠٩ ٢٨ 18:55
Differentiation
• A successful differentiation strategy allows a firm to charge higher prices for its products to gain customer loyalty because consumers may become strongly attached to the differentiation features.
• 3. A risk of pursuing a differentiation strategy is that the unique product may not be valued highly enough by customers to justify the higher price.
Prof. Dr. Majed El-Farra 2012Ch 5- 54 / /١٤٤٤ ٠٩ ٢٨ 18:55
Differentiation
• Common organizational requirements for a successful differentiation strategy include strong coordination among the R&D and marketing functions and substantial amenities/incentives to attract scientists and creative people.
Prof. Dr. Majed El-Farra 2012Ch 5- 55 / /١٤٤٤ ٠٩ ٢٨ 18:55
Benefits
• Lowers customers sensitivity to price
• Increases buyer loyalty• Barrier to entry• Can generate higher profits
/ /١٤٤٤ ٠٩ ٢٨ 18:55Prof. Dr. Majed El-Farra 201256
Focus
• 1. Focus means producing products and services that fulfill the needs of small groups of consumers.
• 2. There are two types of focus strategies.• a. A low-cost focus strategy offers products or services to a
small range (niche) of customers at the lowest price available on the market.
• b. A best-value focus strategy offers products to a small range of customers at the best price-value available on the market. This is sometimes called focused differentiation.
Prof. Dr. Majed El-Farra 2012Ch 5- 57 / /١٤٤٤ ٠٩ ٢٨ 18:55
Focus
• Focus strategies are most effective when the niche is profitable and growing, when industry leaders are uninterested in the niche, when industry leaders feel pursuing the niche is too costly or difficult, when the industry offers several niches, and when there is little competition in the niche segment.
Prof. Dr. Majed El-Farra 2012Ch 5- 58 / /١٤٤٤ ٠٩ ٢٨ 18:55
6-59
Porter’s Competitive Strategies
Cost-Focus –
–Low-cost competitive strategy–Focus on market segment–Niche focused–Cost advantage in market segment
Prof. Dr. Majed El-Farra 2012 / /١٤٤٤ ٠٩ ٢٨ 18:55
6-60
Porter’s Competitive Strategies
Differentiation Focus –
–Specific group or geographic market focus–Differentiation in target market–Special needs of narrow target market
Prof. Dr. Majed El-Farra 2012 / /١٤٤٤ ٠٩ ٢٨ 18:55
6-61
Porter’s Competitive Strategies
Stuck in the middle –
–No competitive advantage–Below-average performance
Prof. Dr. Majed El-Farra 2012 / /١٤٤٤ ٠٩ ٢٨ 18:55
6-63
Risks of Generic Strategies
Risks of Cost Leadership
Cost leadership is not sustained:
•Competitors imitate. •Technology changes. •Other bases for cost
leadership erode.Proximity in
differentiation is lost.Cost focusers achieve
even lower cost in segments.
Risks of DifferentiationDifferentiation is not
sustained: •Competitors imitate. •Bases for differentiation
become less important to
buyers.Cost proximity is lost.
Differentiation focusers achieve even greater
differentiation in segments.
Risks of FocusThe focus strategy is
imitated:The target segment
becomes structurally unattractive:
•Structure erodes. •Demand disappears.
Broadly targeted competitors overwhelm
the segment: •The segment’s
differences from other segments narrow.
•The advantages of a broad line increase.
New focusers subsegment the industry.
Risks of Cost LeadershipCost leadership is not sustained:• Competitors imitate.• Technology changes.• Other bases for cost leadership erode.•Proximity in differentiation is lost.•Cost focusers achieve even lower cost in segments.
Risks of DifferentiationDifferentiation is not sustained:• Competitors imitate.• Bases for differentiation
become less important to buyers.•Cost proximity is lost.•Differentiation focusers achieve even greater differentiation in segments.
Risks of FocusThe focus strategy is imitated:The target segment becomes structurally unattractive:• Structure erodes.• Demand disappears.Broadly targeted competitors overwhelm the segment:• The segment’s differences from other segments narrow.• The advantages of a broad line increase.New focusers subsegment the industry.
Prof. Dr. Majed El-Farra 2012 / /١٤٤٤ ٠٩ ٢٨ 18:55
Level of Strategy
• Functional/operational Strategies:Concern with org. internal resources and
processes which effectively deliver the corporate and business strategic direction.
Functional strategies are interrelated.Functional strategies e.g.: purchasing &
materials management, production, finance, R&D, HR, IT, and marketing.
Prof. Dr. Majed El-Farra 201264 / /١٤٤٤ ٠٩ ٢٨ 18:55
purchasing & materials management (as example)
Buying materials in quantity, quality and cost which correspond with the corp. generic strategies (Business Unit strategies).
Prof. Dr. Majed El-Farra 201265 / /١٤٤٤ ٠٩ ٢٨ 18:55
Prentice Hall, Inc. ©20126-66
Hyper-competition and Competitive Advantage Sustainability
Competitive advantage in a hyper-competitive market is characterized by a continuous series of multiple short- term initiatives that replace current products with new products before competitors can do so.
• Leads to an over emphasis on short-term tactics
Prentice Hall, Inc. ©20126-67
Competitive Tactics
Tactic- a specific operating plan that details how a strategy is going to be implemented in terms of when and where it is to be put into action
• Narrower in scope and shorter in time horizon than strategies
Prentice Hall, Inc. ©20126-68
Timing Tactics: When to Compete
Timing Tactics- when a company implements a strategy
• First movers• Late movers
Prentice Hall, Inc. ©20126-69
Cooperative Strategies- used to gain a competitive advantage within an industry by working with other firms
Prentice Hall, Inc. ©20126-70
Collusion- the active cooperation of firms/ suppliers within an industry to reduce output and raise prices to avoid economic law of supply and demand
Prentice Hall, Inc. ©20126-71
Strategic Alliances- a long-term cooperative arrangement between two or more independent firms or business units that engage in business activities for mutual economic gain Used to:
• Obtain or learn new capabilities• Obtain access to specific markets• Reduce financial risk• Reduce political risk
Prentice Hall, Inc. ©20126-72
Types of Cooperative Agreements
• Mutual Service Consortia• Joint Venture• Licensing Arrangements• Value-Chain Partnerships
Prentice Hall, Inc. ©20126-73
1.What industry forces might cause a favorable niche to disappear?
2.Is it possible for a company or business unit to followa cost leadership and a differentiation strategysimultaneously? Why or why not?3. Why are strategic alliances temporary?
• What kind of internal factors help managers determine whether a firm should emphasize the production and sales of a large number of low-priced products or a small number of high-priced products?
Prof. Dr. Majed El-Farra 201274 / /١٤٤٤ ٠٩ ٢٨ 18:55
• The most important factors can be brought out by going through each functional area. For example, under marketing, a strong market research group may be able to identify the kinds of niches available to the products or services under consideration.
Prof. Dr. Majed El-Farra 201275 / /١٤٤٤ ٠٩ ٢٨ 18:55
• low-priced products suggests a large capital intensive manufacturing facility.
• In order to produce high-quality products, a fairly sophisticated applied R&D effort may be needed. An expensive engineering staff may be needed,
• In terms of human resource management, a fairly unskilled and low paid workforce cannot normally be expected to produce a high quality
Prof. Dr. Majed El-Farra 201276 / /١٤٤٤ ٠٩ ٢٨ 18:55
• Is it possible for a company or business unit to follow a cost leadership strategy and a differentiation strategy simultaneously? Why or why not?
Prof. Dr. Majed El-Farra 201277 / /١٤٤٤ ٠٩ ٢٨ 18:55
• Michael Porter argues that a business unit which is unable to achieve one of the competitive strategies is likely to be "stuck in the middle" of the competitive marketplace with no competitive advantage. That unit, according to Porter, is doomed to below-average performance.
Prof. Dr. Majed El-Farra 201278 / /١٤٤٤ ٠٩ ٢٨ 18:55
• Research by Greg Dess and Peter Davis as well as by Rod White, suggests however, that this may not be the case. Examples can be found of businesses which have been able to jointly follow overall low cost and high quality differentiation strategy. Japanese companies such as Toyota in automobiles and Matsushita (Panasonic and National) in consumer electronics are good examples. Their offer of low price and high quality created serious problems for those companies following only cost leadership in the U.S.
Prof. Dr. Majed El-Farra 201279 / /١٤٤٤ ٠٩ ٢٨ 18:55
How can a company overcome the limitations of being in a fragmented industry?
• Businesses tend to be local and oriented to market segments. This may occur because the industry is relatively new - based upon a product in the early stage of its product life cycle.
• Entry barriers are probably low and new entrants are constantly moving into the industry as others leave or go bankrupt. Often, the trick to be a successful firm in this kind of industry is to find the key to standardization which allows economies.
Prof. Dr. Majed El-Farra 201280 / /١٤٤٤ ٠٩ ٢٨ 18:55
How can a company overcome the limitations of being in a fragmented industry?
• Domino's Pizza achieved success in fast food by providing standardized pizza throughout North America and by guaranteeing delivery time faster than competition. Before Pizza Hut and Domino's settled upon standardized pizza appealing to a wide variety of tastes across North American, the pizza business was a fragmented industry characterized by many small pizza "parlors" serving small market segments in cities throughout America .
Prof. Dr. Majed El-Farra 201281 / /١٤٤٤ ٠٩ ٢٨ 18:55