1. COURSE TITLE : COMPETITIVE STRATEGY
Ashesi University
COURSE TITLE : COMPETITIVE STRATEGY
SEMESTER : 1ST 2011/2012
MODULE 6: Tailoring Strategy to Fit Specific Industry and Company Situations
Lecturer : Ebow Spio

2. Tailoring Strategy to Fit Specific Industry and Company Situations
“ Strategy is all about combining choices of what to do and what not to do into a system that creates the requisite fit between what the environment needs and what the company does” Costas Markides

3. Learning Objectives Recognize how and why different types of market
situations shape business strategy choices
Understand when being a first-mover or a fast-follower or a late-mover can lead to competitive advantage
Gain some insights into crafting a successful business strategy

4. Tailoring Strategy to Fit Specific Industry and Company Situations
Strategies for Competing in Emerging Industries
Strategies for Competing in Rapidly Growing Markets
Strategies for Competing in Maturing Industries
Strategies for Competing in Stagnant or Declining Industries
Strategies for Competing in Turbulent, High-Velocity Markets
Strategies for Competing in Fragmented Industries

5. Matching Strategy to a Company’s Situation
Nature of industry and competitive conditions
Most important drivers shaping a firm’s strategic options fall into two categories
Firm’s competitive capabilities, market position, best opportunities

6. Features of an Emerging Industry
New and unproven market
Proprietary technology
Lack of consensus regarding which of several competing technologies will win out
Low entry barriers
Experience curve effects may permit cost reductions as volume builds
Buyers are first-time users and marketing involves inducing initial purchase and overcoming customer concerns
First-generation products are expected to be rapidly improved so buyers delay purchase until technology matures
Possible difficulties in securing raw materials
Firms struggle to fund R&D, operations and build resource capabilities for rapid growth
An emerging market is one in the formative stage e.g. online education, e-book publishing, solar energy production etc.

7. Strategy Options for Competing in Emerging Industries
Win early race for industry leadership by employing a bold, creative strategy
Push hard to perfect technology, improve product quality, and develop attractive performance features. Out-innovating the competition is often on the best avenues to industry leadership.
Consider merging with or acquiring another firm to
Gain added expertise
Pool resource strengths
When technological uncertainty clears and a dominant technology emerges, try to capture any first-mover advantages by moving quickly
Form strategic alliances with
Companies having related technological expertise or
Key suppliers
The lack of established rules of the game gives industry participants considerable freedom to experiment with a variety of different strategic approaches. In addition to choosing a competitive strategy, companies in an emerging industry usually have to fashion a strategy containing one or all of the actions mentioned in the
slide above.

8. Strategy Options for Competing in Emerging Industries (continued)
Pursue new customers and user applications
Enter new geographical areas
Make it easy and cheap for first-time buyers to try product
Focus advertising emphasis on
Increasing frequency of use
Creating brand loyalty
Use price cuts to attract price-sensitive buyers

9. Strategic Hurdles for Companies in Emerging Industries
Raising capital to finance initial operations until
Sales and revenues take off
Profits appear
Cash flows turn positive
Developing a strategy to ride the wave of industry growth
What market segments to pursue
What competitive advantages to go after
Managing the rapid expansion of facilities and sales to position a company to contend for industry leadership
Defending against competitors trying to horn in on the company’s success

10. What Is the Key to Success for Competing in Rapidly Growing Markets?
A company needs a strategy predicated on growing faster than the market average so it
Can boost its market share and
Improve its competitive standing vis-à-vis rivals

11. Strategy Options for Competing in Rapidly Growing Markets
Drive down costs per unit to enable price reductions that attract droves of new customers-
Pursue rapid product innovation to
Set a company’s product offering apart from rivals
Incorporate attributes to appeal to growing numbers of customers
Gain access to additional distribution channels and sales outlets
Expand a company’s geographic coverage
Expand product line to add models/styles to appeal to a wider range of buyers
Nokia driving down costs to enable price reductions in the mobile phone market and Apple innovating to gain substantial market share growth.

12. Test Your Knowledge
Which one of the following is not likely to be a suitable strategy option for companies competing in rapid-growth industries?
A. Driving down costs per unit so as to enable price reductions that attract droves of new customers
B. Pursuing rapid product innovation, both to set a company’s product offering apart from rivals and to incorporate attributes that appeal to growing numbers of customers
C. Gaining access to additional distributional channels and sales outlets
D. Expanding the product line to add models/styles that appeal to a wider range of buyers
E. Putting top priority on heavy advertising and other marketing-related actions calculated to strongly differentiate its product offering from rivals
Answer: E

13. Industry Maturity: The Standout Features
Slowing demand breeds stiffer competition
More sophisticated buyers demand bargains
Greater emphasis on cost and service
“Topping out” problem in adding production capacity
Product innovation and new end uses harder to come by
International competition increases
Industry profitability falls
Mergers and acquisitions reduce number of rivals

14. Strategy Options for Competing in a Mature Industry
Prune marginal products and models
Emphasize innovation in the value chain
Strong focus on cost reduction
Increase sales to present customers
Purchase rivals at bargain prices
Expand internationally
Build new, more flexible competitive capabilities

15. Strategic Pitfalls in a Maturing Industry
Employing a ho-hum strategy with no distinctive features thus leaving firm “stuck in the middle”
Being slow to mount a defense against stiffening competitive pressures
Concentrating on short-term profits rather than strengthening long-term competitiveness
Being slow to respond to price-cutting
Having too much excess capacity
Overspending on marketing
Failing to aggressively pursue cost reductions

16. Stagnant or Declining Industries: The Standout Features
Demand grows more slowly than economy as whole (or even declines)
Advancing technology gives rise to better-performing substitute products
Customer group shrinks
Changing lifestyles and buyer tastes
Rising costs of complementary products
Competitive battle ensues among industry members for the available business

17. Strategy Options for Competing in a Stagnant or Declining Industry
Pursue focus strategy aimed at fastest growing market segments
Stress differentiation based on quality improvement or product innovation
Work diligently to drive costs down
Cut marginal activities from value chain
Use outsourcing
Redesign internal processes to exploit e-commerce
Consolidate under-utilized production facilities
Add more distribution channels
Close low-volume, high-cost distribution outlets
Prune marginal products

18. End-Game Strategies for Declining Industries
An end-game strategy can take either of two paths
Slow-exit strategy involving
Gradual phasing down of operations
Getting the most cash flow from the business
Fast-exit strategy involving
Disengaging from an industry during early stages of decline
Quick recovery of as much of a company’s investment as possible

19. Features of High-Velocity Markets
Rapid-fire technological change
Short product life-cycles
Entry of important new rivals
Frequent launches of new competitive moves
Rapidly evolving customer expectations

20. Fig. 8.1: Meeting the Challenge of High-Velocity Change

21. Strategy Options for Competing in High-Velocity Markets
Invest aggressively in R&D
Initiate fresh actions every few months
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
Keep products/services fresh and exciting

22. Keys to Success in Competing in High Velocity Markets
Cutting-edge expertise
Speed in responding to new developments
Collaboration with others
Agility
Innovativeness
Opportunism
Resource flexibility
First-to-market capabilities

23. Competitive Features of a Fragmented Industry
Absence of market leaders with large market shares or widespread buyer recognition
Product/service is delivered to neighborhood locations to be convenient to local residents
Buyer demand is so diverse that many firms are required to satisfy buyer needs
Low entry barriers
Absence of scale economies
Market for industry’s product/service may be globalizing, thus putting many companies across the world in same market arena
Exploding technologies force firms to specialize just to keep up in their area of expertise
Industry is young and crowded with aspiring contenders, with no firm having yet developed recognition to command a large market share

24. Examples of Fragmented Industries
Book publishing
Landscaping and plant nurseries
Auto repair
Restaurant industry
Public accounting
Women’s dresses
Meat packing
Paperboard boxes
Hotels and motels
Furniture

25. Competing in a Fragmented Industry: The Strategy Options
Construct and operate “formula” facilities
Become a low-cost operator
Specialize by product type
Specialize by customer type
Focus on limited geographic area

26. Test Your Knowledge
Which of the following is unlikely to be a promising option for competing in a fragmented industry?
A. Employing deep price discounting, extensive advertising, and other muscle-flexing maneuvers to gain market dominance in a select few country markets
B. Specializing by product type or becoming a low-cost operator
C. Specializing by customer type
D. Focusing on a limited geographic area
E. Constructing and operating "formula" facilities at many different locations
Answer: A

27. Timing Strategic Moves : To be an early mover
Being first to initiate a strategic move can have a high payoff in terms of strengthening a company’s market position and competitiveness when:
a. Pioneering builds a firm’s image and reputation with buyers
b. Early commitments to new technologies, new-style components, distribution channels, and so on can produce an absolute cost advantage over rivals
c. First time customers remain strongly loyal to pioneering firms in making repeat purchases
d. Moving first constitutes a preemptive strike, making imitation extra hard or unlikely
When to make a strategic move is often as crucial as what move to make. Timing is especially important when first-mover advantages or disadvantages exist.

28. Timing Strategic Moves : To be a late mover
There are times when there are actually advantages to being an adept follower rather than a first-mover. Late-mover advantages or first-mover disadvantages arise when:
a. Pioneering leadership is more costly than imitating followership and only negligible experience or learning-curve benefits accrue to the leader
b. The products of an innovator are somewhat primitive and do not live up to buyer expectation.
c. The demand side of the market place is skeptical about the benefits
d. Rapid market evolution gives fast-followers and maybe even cautious late-movers the openings to leapfrog a first-mover’s products
When to make a strategic move is often as crucial as what move to make. Timing is especially important when first-mover advantages or disadvantages exist.

29. 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.

30. 10 Commandments for Crafting Successful Business Strategies
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.
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.

31. 10 Commandments for Crafting Successful Business Strategies
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.
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. 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.

32. Exercises
Listed below are 10 industries. Classify each one as (a) emerging, (b) rapid-growth, (c) mature/slow-growth, (d) stagnant/declining, or (e) high-velocity/turbulent, and (f) fragmented. Do research on the Internet, if needed, to locate information on industry conditions and reach a conclusion on what classification to assign each of the following:
(1) Exercise and fitness industry
(2) Dry cleaning industry
(3) Poultry industry
(4) Camera film and film-developing industry
(5) Wine, beer, and liquor retailing
(6) Watch industry
(7) Cell phone industry
(8) Recorded music industry (CDs, tapes)
(9) Computer software industry
(10) Newspaper industry