Business Strategies in Different Industry and Sectoral Contexts Chapter 5 Business Strategies in Different Industry and Sectoral Contexts

Learning objectives By the time you have completed this topic you will be able to: recognize the different stages of industry development and understand the factors that drive the process of industry evolution; identify the key success factors associated with industries at different stages of their development and the strategies appropriate to different stages in the industry life cycle; appreciate the sources of organizational inertia and the challenges of managing strategic change and be familiar with different approaches to strategic change, including the use of scenario analysis and the quest for ambidexterity; become familiar with the different approaches that firms have taken in developing organizational capabilities. Wiley Canada

Structure of the session the industry life cycle, managing organizational adaptation and strategic change, managing strategic change. Wiley Canada 3

The industry life cycle The two major forces that drive industry evolution are: demand growth , and the production and diffusion of knowledge. Wiley Canada

Product and process innovation over time Once a dominant design emerges, the focus of innovation shifts from product innovation to process innovation. Wiley Canada

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Innovation and renewal in the industry life cycle: U.S. retailing Wiley Canada

Industry structure and competition over the life cycle Introduction Growth Maturity Decline Demand Early adopters Rapidly increasing market penetration Replacement/ repeat buying; price sensitive customers Obsolescence Technology Competing technologies; rapid product innovation Standardization; rapid process innovation Diffused know how; incremental innovation Little innovation Products Wide variety of features & designs Design & quality improve; dominant design emerges Commoditization; brand differentiation Differentiation difficult Manufacturing & Distribution Short-runs, skill intensive Capacity shortage, mass- production Over-capacity emerges; deskilling of production Overcapacity Trade ------Production shifts from advanced to developing countries Competition Few companies Entry, mergers and exits Shakeout & consolidation Price wars & exits Key Success Factors Product innovation Design for manufacture Process innovation Cost efficiency (scale economies, low cost inputs) Low overheads; rationalization; buyer selection Wiley Canada

Managing Organizational Adaptation and Strategic Change Why is change so difficult? organizational routines social and political structures conformity limited search – exploitation over exploration complementaries between strategy, structure, and systems Wiley Canada

Coping with technological change Is the technology competence enhancing or competence destroying? a hybrid engine for a car does not require a major reconfiguration of car design and engineering Is the technology an architectural or a component innovation? A battery powered electric motor requires redesign of the entire car Wiley Canada

Disruptive technologies Why do established firms find it so difficult to adapt to new technology? New capabilities may be developed internally or through acquisition, but the main challenge is integrating resources into capabilities and aligning new capabilities with other aspects of the organization. Wiley Canada

Managing strategic change dual strategies and organizational ambidexterity positioning for the present and adapting to the future Tools of strategic change management: creating a perception of crisis, establishing stretch targets, creating organizational initiatives, reorganization and new blood. Wiley Canada

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