1 © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright TAILORING STRATEGY TO FIT SPECIFIC INDUSTRY AND COMPANY SITUATIONS CHAPTER 8

“Competing in the marketplace is like war. You have injuries and casualties, and the best strategy wins.” John Collins “Quote” © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright

3 © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright Chapter Outline  Strategies for Emerging Industries  Strategies for Turbulent, High Velocity Markets  Strategies for Maturing Industries  Strategies for Fragmented Industries  Strategies for Sustaining Rapid Growth  Strategies for Weak Businesses  Ten Commandments for Crafting Strategies

4 © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright Most important drivers shaping a firm’s strategic options fall into two categories Firm’s competitive capabilities, market position, best opportunities Nature of industry and competitive conditions Overview: Matching Strategy to a Company’s Situation

5 © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright Features of an Emerging Industry  The capabilities that lead to True False competitive advantage are well known.  The necessary technology is easilyTrue False available.  Are the entry barriers typically high or low in an emerging industry?  Buyers are first-time users.True False

6 © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright Strategy Options for Competing in Emerging Industries  What type of marketing initiatives should be taken to win customers to the industry’s product?  Which value chain activities (both primary and secondary) are critical?  The product attributes in an True False emerging industry are standard.  The industry conditions surroundingTrue False an emerging industry require alliances.

7 © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright Features of High Velocity Markets  Technology changes take True False a long time.  Product life-cycles are short. True False  Competitive moves are True False frequent.  Customer expectations do not True False change often.

8 © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright Standard Velocity Industry Time (years) 10 Launch Exploitation Counterattack Returns from a Sustained Competitive Advantage

9 © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright High-Velocity Industry Time (years) Launch Exploitation Counterattack Returns from a Sustained Competitive Advantage Firm continues to move on to the next Advantage

10 © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright Figure 8.1: Meeting the Challenge of High-Velocity Change Strategic Posture Actions Strategy Reacting to Change Introduce better products in response to new offerings of rivals Respond to unexpected changes in buyer needs and preferences Adjust to new government policies React and respond as needed Defend and protect company’s position Defensive Offensive Anticipating Change Analyze prospects for market globalization Research buyer needs, preferences, and expectations Monitor new technological developments to predict future Plan ahead for future changes Add/adapt competitive capabilities Improve product line Strengthen distribution Leading Change Pioneer new and better technologies Introduce innovative products that open new markets and spur creation of whole new industries Seek to set industry standards Seize the offensive Be the agent of industry change Influence rules of the game Force rivals to follow

11 © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright Strategy Options for Competing in High Velocity Markets  Invest aggressively in R&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  Initiate fresh actions every few months  Keep products/services fresh and exciting

12 © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright Characteristics of Industry Maturity  What are some of the industry traits of a mature industry? (recall chapter 3 concepts, e.g., scope of the rivalry, market growth, etc.)  What activities of the value chain become more critical?  In mature industries, firms must True False look for products to abandon.

13 © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright Competitive Features of Fragmented Industries  Fragmented industries have clearTrue False market leaders with high market share.  Buyer demand is homogeneous.True False  Buyer demand is geographicallyTrue False scattered.  Scale economies is a major factor.True False  Buyers buy in large quantities. True False  What are some possible ways to compete in a fragmented industry?

14 © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright Weak Businesses: Strategic Options  What is a turnaround strategy?  What is a liquidation strategy?  What is an end-game strategy?  When should a firm consider a turnaround strategy? A liquidation strategy? An end-game strategy?

15 © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright 10 Commandments for Crafting Successful Business Strategies 1. Always put top priority on crafting and executing strategic moves that enhance a firm’s competitive position for the long-term and that serve to establish it as an industry leader. 2. Be prompt in adapting and responding to changing market conditions, unmet customer needs and buyer wishes for something better, emerging technological alternatives, and new initiatives of rivals. Responding late or with too little often puts a firm in the precarious position of playing catch-up.

16 © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright 3. Invest in creating a sustainable competitive advantage, for it is a most dependable contributor to above-average profitability. 4. Avoid strategies capable of succeeding only in the best of circumstances. 5. Don’t underestimate the reactions and the commitment of rival firms. 10 Commandments for Crafting Successful Business Strategies

17 © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright 6. Consider that attacking competitive weakness is usually more profitable than attacking competitive strength. 7. Be judicious in cutting prices without an established cost advantage. 8. Employ bold strategic moves in pursuing differentiation strategies so as to open up very meaningful gaps in quality or service or advertising or other product attributes. 10 Commandments for Crafting Successful Business Strategies

18 © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright 9. Endeavor not to get “stuck back in the pack” with no coherent long-term strategy or distinctive competitive position, and little prospect of climbing into the ranks of the industry leaders. 10 Commandments for Crafting Successful Business Strategies 10. Be aware that aggressive strategic moves to wrest crucial market share away from rivals often provoke aggressive retaliation in the form of a marketing “arms race” and/or price wars.