McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter Eleven Strategies for Mature and Declining Markets

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Exhibit 11.1 Common Strategic Traps During Market Shakeouts n Failure to anticipate transition from growth to maturity n No clear competitive advantage n Assumption that an early advantage will insulate the firm from price or service competition n Sacrificing market share in favor of short-run profit

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Exhibit 11.3 Dimensions of Product Quality Performance Durability Conformance with specifications Features Reliability Serviceability Fit and finish Brand name How well does the washing machine wash clothes? How long will the lawn mower last? What is the incidence of product defects? Does an airline flight offer a movie and dinner? Will each visit to a restaurant result in consistent quality? What percentage of the time will a product perform satisfactorily? Is the product easy to service? Is the service system efficient, competent, and convenient? Does the product look and feel like a quality product? Is this a name that customers associate with quality? What is the brand’s image? Source: Adapted from “What Does ‘Product Quality’ Really Mean?” by David A. Garvin, Sloan Management Review, Fall 1984, pp Copyright © 1984 by the Sloan Management Review Association. All rights reserved. Used by permission of the publisher.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Exhibit 11.4 Dimensions of Service Quality Tangibles Reliability Responsiveness Assurance Empathy Appearance of physical facilities, equipment, personnel, and communications materials. Ability to perform the promised service dependably and accurately. Willingness to help customers and provide prompt service. Knowledge and courtesy of employees and their ability to convey trust and confidence. Caring, individualized attention the firm provides its customers. Source: Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, Delivering Quality Service: Balancing Customer Perceptions and Expectations (New York: Free Press, 1990), p. 26.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Exhibit 11.7 Determinants of Perceived Service Quality Source: Reprinted from A. Parasuraman, V. A. Zeithaml, and L. L. Berry, “ A Conceptual Model of Service Quality and Its Implications for Future Research,” Journal of Marketing, Fall 1985, p. 44. Published by the American Marketing Association. Also see Valarie A. Zeithami and Mary Jo Bitner, Services Marketing (NY: McGraw-Hill, 1996). Word-of-mouth communications Personal needsPast experience Expected service Perceived service Service delivery (including pre and postcontracts) Translation of perceptions into service quality specs External communication to consumers Customer Marketer Gap 1 Gap 2 Gap 3 Gap 5 Gap 4 Mgmt. perceptions of consumer. expectations

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Exhibit Factors Affecting the Attractiveness of Declining Market Environments (1 of 3) Environmental Attractiveness Conditions of demand Speed of decline Certainty of decline Pockets of enduring demand Product differentiation Price stability Hospitable Very slow 100% certain, predictable patterns Several or major ones Brand loyalty Stable price premiums attainableInhospitable Rapid or erratic Great uncertainty, erratic patterns No niches Commoditylike products Very unstable, pricing below costs Source: Kathryn Rudie Harrigan and Michael E. Porter, “End-Game Strategies for Declining Industries,” Harvard Business Review, July-August 1983, p. 117.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Exhibit Factors Affecting the Attractiveness of Declining Market Environments (2 of 3) Environmental Attractiveness Exit barriers Reinvestment requirements Excess capacity Asset age Resale markets for assets Shared facilities Vertical integration Single-product competitorsHospitable None Little Mostly old assets Easy to convert or sell Few, free-standing plants Little NoneInhospitable High, often mandatory and inv. cap. assets Substantial Sizable new assets and old ones not retired No markets available, substantial costs to retire Substantial and intercon- nected with imp. bus. Substantial Serveral large companies Source: Kathryn Rudie Harrigan and Michael E. Porter, “End-Game Strategies for Declining Industries,” Harvard Business Review, July-August 1983, p. 117.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Exhibit Factors Affecting the Attractiveness of Declining Market Environments (3 of 3) Environmental Attractiveness Rivalry determinants Customer industries Customer switching costs Diseconomies of scale Dissimilar strategic groupsHospitable Fragmented, weak High None FewInhospitable Strong bargaining power Minimal Substantial penalty Several in same target markets Source: Kathryn Rudie Harrigan and Michael E. Porter, “End-Game Strategies for Declining Industries,” Harvard Business Review, July-August 1983, p. 117.