Industry Evolution & Strategic Change IMBA May 8, 2009 Te-Kuang Chou

This chapter contains a lot of propositions that you can test or elaborate in your thesis.

The greatest challenge of management is to ensure that adaptation of the enterprise matches the changes occurring within the business environment.

Owing to organizational inertia, the life cycle of firms tend to be much shorter than the life cycle of industry. This implies that changes at the industry level tend to occur through the death of existing firms and birth of new firms rather than through continuous adaptation by a constant population of firms.

Industry Evolution: the Life Cycle

Industry Evolution: Product and Process Innovation over Time

How general is the life cycle pattern? Duration: The duration of life cycle varies greatly form industry to industry. The duration of life cycle varies greatly form industry to industry. The industry life cycle tends to be compressed nowadays. The industry life cycle tends to be compressed nowadays.

How general is the life cycle pattern? Pattern: Some industries may never enter a decline phase. Some industries may never enter a decline phase. Some industries may experience a rejuvenation of their life cycle. Some industries may experience a rejuvenation of their life cycle.

Innovation and renewal in the industry life cycle: retailing

How general is the life cycle pattern? Cross border comparison: An industry is likely to be at different stages of its life cycle in different countries. An industry is likely to be at different stages of its life cycle in different countries.

What ’ s up along the ILC? Demand: Emergence: only limited early adopters: high-income; vanguard. Emergence: only limited early adopters: high-income; vanguard. Growth: market penetration rapidly increased. Growth: market penetration rapidly increased. Maturity: mass market ; repeat or replacement buying; price sensitive. Maturity: mass market ; repeat or replacement buying; price sensitive. Decline: obsolescence. Decline: obsolescence.

What ’ s up along the ILC? Technology: Emergence: Competing technologies. Rapid product innovation. Emergence: Competing technologies. Rapid product innovation. Growth: Standardization around dominant technology. Rapid process innovation. Growth: Standardization around dominant technology. Rapid process innovation. Maturity: well-diffused technical know-how; request for improvement. Maturity: well-diffused technical know-how; request for improvement. Decline: product or process innovation are rare. Decline: product or process innovation are rare.

What ’ s up along the ILC? Products: Emergence: Poor quality. Wide variety of features. Frequent design. Emergence: Poor quality. Wide variety of features. Frequent design. Growth: Emergence of dominant design. Quality improve. Growth: Emergence of dominant design. Quality improve. Maturity: Trend to commoditization. Differentiate by branding, quality, bundling. Maturity: Trend to commoditization. Differentiate by branding, quality, bundling. Decline: differentiation difficult. Decline: differentiation difficult.

What ’ s up along the ILC? Manufacturing & distribution: Emergence: Small scale production. High-skilled labor content. Specialized distribution channels. Emergence: Small scale production. High-skilled labor content. Specialized distribution channels. Growth: Mass Production. Competition for distribution. Growth: Mass Production. Competition for distribution. Maturity: Overcapacity. Distributors carry fewer lines. Maturity: Overcapacity. Distributors carry fewer lines. Decline: Overcapacity. Specialty channels. Decline: Overcapacity. Specialty channels.

What ’ s up along the ILC? Trade: Emergence: Producers and consumers in advanced countries. Emergence: Producers and consumers in advanced countries. Growth: Exports from advanced countries to rest of the world. Growth: Exports from advanced countries to rest of the world. Maturity: Production shifts to newly industrializing countries. Maturity: Production shifts to newly industrializing countries. Decline: Exports from countries with lowest labor costs. Decline: Exports from countries with lowest labor costs.

What ’ s up along the ILC? Competition: Emergence: Few company. Emergence: Few company. Growth: Entry, mergers, exits. Growth: Entry, mergers, exits. Maturity: Shakeout. Price competition increases. Maturity: Shakeout. Price competition increases. Decline: Price war. Exits. Decline: Price war. Exits.

What ’ s up along the ILC? Key success factors: Emergence: Product innovation. Emergence: Product innovation. Growth: Design for manufacture. Process innovation. Access to distribution. Brand building. Growth: Design for manufacture. Process innovation. Access to distribution. Brand building. Maturity: Cost efficiency through capital intensity, scale efficiency, and low input cost. competition increases. Maturity: Cost efficiency through capital intensity, scale efficiency, and low input cost. competition increases. Decline: overheads. Rationalizing capacity. Decline: overheads. Rationalizing capacity.

Competitive Advantage from responsiveness to Change Entrepreneurship Entrepreneurship As markets become increasingly turbulent, so responsiveness to external change has become increasingly important as a source of competitive advantage. As markets become increasingly turbulent, so responsiveness to external change has become increasingly important as a source of competitive advantage. Time-based competition : Time-based competition : Key resource – information Key resource – information Key capability – flexibility Key capability – flexibility

Porter ’ s generic strategies

Sources of competitive advantage

The growth/share matrix