Chapter Five Building Competitive Advantage Through Business- Level Strategy

Strategy in Fragmented or Growing Industry  Fragmented industry Restaurant industry, legal services  Focus strategy stands out as the best choice through: Chaining allows cost advantage and amazing buying power to promote competitive advantage. Franchising solves the problem of maintaining control over each location and retaining uniqueness.

Strategy in Fragmented or Growing Industry  Fragmented industry Horizontal Mergers consolidate an industry to secure a market. Using the Internet consolidates fragmented industries globally.

Strategy in a Mature Industry  In a mature industry it is crucial to adopt a strategy that will simultaneously preserve competitive advantages while preserving industry profitability  Interdependent companies adopt strategies to: Manage rivalry Deter entry

Figure 5.2: Strategies for Deterring Entry of Rivals

Strategies to manage rivalries in maturing industries  Different strategies such as; Price signaling (competitors, customers, tit for tat) Price leadership Non-price strategies

Figure 5.3: Four Nonprice Competitive Strategies

Strategy in a Declining Industry  When market is shrinking, competition tends to intensify and profit rates tend to fall

Figure 5.4: Factors that Determine the Intensity of Competition in Declining Industries

Strategy in a Declining Industry  Strategies to deal with decline include: –Leadership Strategy- involves a company seeking to become the dominant player in the industry –Niche Strategy- focuses on pockets of demands that are declining more slowly –Harvest Strategy- optimizes cash flow for a short period of time –Divestment Strategy- occurs when a company sells off its business to others

Figure 5.5: Strategy Selection in a Declining Industry