Business Unit Strategy: Concepts & Special Dimensions Michael Seymour Matt Anderson

3 Contexts (Stages) of Industry Evolution Emerging Stage High Costs (Often Unpredictable) Technology is Immature Fierce Competition Low Barriers to Entry Undeveloped Supplier Relationships/Distribution Channels Growth Stage Increased Segmentation Focus Shift to Expanding Market Shares Customers become More Knowledgeable Entry of ‘Follower’ Firms Maturity & Decline Stage Firm Must Chose Balance Between: Low-Cost/Differentiation Strategy Multiple/Single Industry Segments Declining Growth → Less Forgiving Environment Attractive Profits are Still Attainable

Exit Decisions Tend to be Extremely Difficult: Exit Barriers “Ripple Effect”

Strategy in Fragmented Markets Fragmented Industry: No Single Company or Small Group of Firms has Large enough Market Share to Strongly Effect Industry Structure/Outcomes Success is Dependant on Creative Strategizing Ex: H. Wayne Huizinga & Waste Management Corp.

Strategy in Deregulating Environment Deregulation: Lifting of Artificial Entry Constraints that Allows New Players to Enter a Market (1975) SEC Abolished Fixed Rates for U.S. Securities Brokers Has both Positive & Negative Impact on Markets

Strategy in Hypercompetitive Industries Hypercompetitive Market: Characterized by Intense Competitive Rivalry, Short Product Life Cycles, Emergence of New Technologies & Major Shifts in Market Boundaries Success Often Depends on Element of Surprise 3 Major Qualities Needed to Succeed

Special Dimensions Speed Creating Value through Innovation Pressures to speed Requirements of speed Methods to speed Consequences of speed Creating Value through Innovation

Speed The key to success in more and more industries How a company responds to meeting customer’s expectations Public images are synonymous with speed Ex: Domino’s, AAA

Pressures to Speed Customer expectations Need for competitive advantage Competitor strategies Industry shifts

Requirements of Speed Refocused mission Compatible culture Communication upgrades Process reengineering New metrics

Methods to Speed Streamline operations Upgrade technology Form partnerships

Creating Value through Innovation Sustaining innovation Some are incremental, others are breakthroughs Disrupting innovation Disrupts established basis of competition Focus on growth rather than profit Create a culture of innovation

Culture of Innovation Steps Top-level commitment to innovation Long-term focus Flexible organization structure loose and tight planning and control Include appropriate incentives by creating an environment for innovation