1. STRATEGIES FOR MATURE AND DECLINING MARKETS
Idil Yaveroglu Lecture Notes

2. Transition From Market Growth to Maturity to Decline
The Transition or Shake out Stage of the Generalized PLC
Time (years)
Profit per unit (real dollars)
Product category sales (real dollars)
Introduction
Decline or extension
Maturity
Competitive turbulence
Growth
Profit/unit
Sales
Life-cycle extension

3. Transition From Market Growth to Maturity to Decline
The Maturity Stage of the Generalized Product Life Cycle
Time (years)
Profit per unit (real dollars)
Product category sales (real dollars)
Introduction
Decline or extension
Maturity
Competitive turbulence
Growth
Profit/unit
Sales
Life-cycle extension
Strategic challenges:
Challenges in mature markets
Sustaining a meaningful competitive advantage
Challenges in declining markets
Maximize cash flow and profit over the product’s remaining life

4. Common Strategic Traps During a Shakeout Period
Failure to anticipate transition from growth to maturity
No clear competitive advantage as growth slows
Assumption that an early advantage will insulate firm from price or service competition
Instructor: See Exhibit 10.1

5. Maturity Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
SALES
COSTS
PROFITS
MKTG OBJECTIVES
Product
Price
Peak
Low cost per customer
High
Maximize profits while
defending market share
Diversify brand and models
Match or best competitors
Distribution
Build more intensive distribution
Promotion
Increase to encourage brand switching

6. Industry maturity
…does not imply a lack of opportunity; nor does imply an absence of technological change.
But… tends to reduce the # of opportunities for CA and shift these limited opportunities from differentiation-based to cost-based factors.

7. Innovation over the PLC
Rate of Innovation
Product Innovation
Strategic Innovation
Process Innovation
Time

8. Sources of Strategic Innovation in Mature Industries
Reconfiguring the value chain:
Benetton and Zara in clothing
Southwest & Ryanair in airlines
Dell in PCs
Redefining markets and products
Swatch in watches
Starbucks in coffee shops
Barnes & Noble in book retailing
Innovative approaches to differentiation
Virgin Atlantic in air travel
Sephora in cosmetics retailing
Baden Fuller & Stopford – reconciliation of multiple (often opposing) goals in order to create new options:
Maturity is a state of mind…not a state of business.
It is the firm that matters…not the industry.
Reconcile alternatives: quality at low cost; variety at low cost; speed at low cost; etc.
Be selective – a firm’s market scope needs to be limited by its resources and capabilities.
Create an entrepreneurial (intra) with freedom to experiment and the capacity to learn.
Sequence the strategic and organizational development.
Galvanize top management commitment; simplify by eliminating outdated/unnecessary activities/control systems; build the strategic capabilities needed; maintain momentum.
Sephora Cosmetics, for instance, has befuddled the traditional cosmetics retail
sector. In any department store worldwide, one would find counters representing the
various brands: Estée Lauder, Lancôme, Chanel, etc. Sephora, however, has stores that
display more than 600 different brands, wowing the customers because these are arranged
alphabetically along a wall. There is a lipstick counter that sports more than 365 hues,
arranged according to colour. By display, Sephora differentiates itself from other cosmetic
houses by allowing customers to have access to and test the products. There is no bundling
of purchases with gifts, just the items themselves. It captured twenty percent of the French
retail cosmetics by the end of spring 1999 through its ambience, design and merchandise
mix. The concept store has a wall of video screens, staff dressed in black with black
gloves on one hand to show off the merchandise, and a black and white store layout. Staff
work on a flat salary. It is an example of a new and attractive business concept.

9. Strategies for mature markets
For maintaining current market share:
Fortress defense
Add flanker brands
Pursue niche strategy
For extending volume growth
Increased penetration
Convert current nonusers in target segment into users
Extended use
Increase frequency of use among current users
Market expansion
Develop differentiated positioning focused on untapped or underdeveloped segments

10. Marketing Actions for Accomplishing Growth Extension Objectives
Increase penetration
Convert non-users (you really need an electric fryer)
Steal competitor’s customers (Shell gas is better)
Extend usage
Increase repeat purchase (don’t wait until it dies)
Demonstrate new product applications (it dices too)
Lead market evolution (oval, crust-less pizza)
Expand market focus
Review segmentation scheme (after-school activities)
Consider underserved segments (retirees)
Instructor: Refer to Exhibit 10.9
Increase penetration
Convert non-users (you really need a Food Saver)
Steal competitor’s customers (Shell gas is better)
Extend usage
Increase repeat purchase (don’t wait ‘till it dies)
Demonstrate new product applications (it dices too)
Lead market evolution (oval, crust-less pizza)
Expand market focus
Review segmentation scheme (after-school activities)
Consider underserved segments (retirees)

11. Decline Stage of the Product Life Cycle
Time (years)
Profit per unit (real dollars)
Product category sales (real dollars)
Introduction
Decline or extension
Maturity
Competitive turbulence
Growth
Profit/unit
Sales
Life-cycle extension

12. Summary of Characteristics, Objectives, & Strategies
Decline
Summary of Characteristics, Objectives, & Strategies
SALES
COSTS
PROFITS
MKTG OBJECTIVES
Product
Price
Declining
Low cost per customer
Reduce expenditures and milk the brand
Phase out weak items
Cut price
Distribution
Selective: phase out unprofitable outlets
Promotion
Reduce to minimum level

13. Early warnings of a coming decline
Excess capacity
Lack of technical change (stable product and process technology)
Declining number of competitors, but some entry as new firms get assets “on sale.”
High average age of resources.
Aggressive price competition.

14. Factors Affecting the Attractiveness of Declining Market Environments
Conditions of demand
Exit barriers
Intensity of future competitive rivalry
Instructor: Refer to Exhibit 10.10

15. Strategies for Declining Markets
Harvest
Maximize short-term cash flow
Maintenance
Maintain market share for the short-term
Profitable survivor
Increase share of the declining market
Niche
Strengthen share position in one or a few segments
Refer to Exhibit 10.11
Harvesting: staged withdrawal
Maximize short-term cash flow
Maintain or increase margins
Optional withdrawal: wait and see
Increase share at expense of margins
Profitable survivor: dominate in the future
Encourage others to leave
Niche: focused domination
Strengthen position with selected customer groups

16. Strategies for Declining Markets
COMPANY’S COMPETITIVE POSITION
Strengths in
remaining demand
pockets
Lacks strength in
remaining demand pockets
Favorable
PROFITABLE SURVIVOR or
NICHE
HARVEST
DIVEST
DIVEST QUICKLY
Pockets of Demand
INDUSTRY ENVIRONMENT
Rate of Decline
Price Pressure
Unfavorable 32

17. Marketing Actions for Strategies in Declining Markets
Harvest
Eliminate R&D expenditures and capital investments
Reduce marketing and sales budgets
Reduce production costs
Raise price if necessary to maintain margins
Maintenance
Design service programs
Continue trade promotion
Focus salesforce efforts
Lower prices if necessary to maintain share
Refer to Exhibit 10.12

18. Marketing Actions for Strategies in Declining Markets (continued)
Profitable survivor
Signal competitors
Introduce line extensions
Lower prices if necessary to increase share
Consider agreements to produce replacement parts
Niche
Continued product and process R&D
Produce for private labels
Focus advertising, sales promotion, etc
Maintain distribution channels
Refer to Exhibit 10.12