1. Strategy Issues in Industries and Life Cycle Stages
Chapter 8

2. Learning Objectives
Stages of industry life cycle and their impact on business strategy.
Implications of competing in fragmented or concentrated industries.
Value chain activities appropriate for organizational life cycle stages.
Risks of first mover strategy.
International strategy considerations.

3. Industries Evolve Opportunity recognition
New knowledge about value creation
Growth in demand (and supply)

4. Industry Stages Introduction – innovative new companies
Growth – increased demand, standardization
Maturity – slowed demand, commoditization
Decline – substitutes abound
Renewal – new customers, new segments
Redefine industry boundaries
Disaggregate bocks of value chain activity
Redefine value
Shift to complements

6. Competing in Consolidated Industries
Usually occurs during Growth and Maturity stages.
Usually scale (cost containment) addresses increasing standardization.
Focused differentiation can also work
Mobility barriers inhibit large companies
Anti-trust concerns hinder large companies
Large companies blind to niche opportunities
Large companies subject to margin pressure, cannot always divert resources

7. Competing in Fragmented Industries
Usually occurs
When entry barriers are low, or
Where value creation is locally-based (so that consolidation is ineffective)
Unbundling or disaggregating value chain activity into new configurations
Redefining how and where value is delivered, i.e change the game
Industry "roll-ups" – creating corporate value while maintaining local presence

8. Organizational Life Cycles
Conception – innovation, strategy, finance
Commercialization – production, hiring, and organizational issues
Growth – scaling up, marketing, culture, pace of change and chaos
Maturity – profitability, internal controls

10. First Mover Strategy
Not always successful

11. First Mover Advantages
Timing advantages
Set the standard
"Installed base" – creates switching costs
Reputation
Preemption
Size advantages
Scale
Experience curve
Scope
Network

12. First Mover Risks Expensive to pioneer new domain
Technology uncertainty – standard may ultimately be different
Demand uncertainty – "Will they buy?"
Inertia – reluctance to modify approaches as the industry develops ("sunk cost")

13. Dealing with Fast Growth
Growth at 20+ % per year
Organizational problems: chaos, paperwork, customer attention, competitive attention
"Solutions"
Use vision, mission, principles to unify
Carefully examine value chain activities
What's strategically critical, what's not
Emphasis on internal coordination of activities
Consider restructuring (Chapter 11)

14. Strategic Renewal Usually needed at the Maturity Stage "Solutions"
Build opportunity recognition capabilities
Reconfigure resources to develop new operational capabilities that can be leveraged
Develop new products / services at "platform" level – a foundation for future variations
Optioned investments in innovation – a portfolio approach
Retool culture and incentives to embrace change

15. International / Global Strategy
Growth into international markets is a strategic choice among alternatives
Common motivations
New geographic revenue opportunities
Leverage value chain and resources
Spread risk
Overcoming trade barriers
Achieve location-based advantages (where value creation is enhance by local presence)

16. Leveraging Value Chain

17. Four International Strategies
Global Transnational Multi-Domestic Centralized Single Country
Value added in upstream activities
Efficiency through scale & scope
Minor country-to-country variations
Value added downstream near customer
Efficiency through scale & scope is important
Variations across countries are meaningful
No pressure to be efficient
Variations across countries are significant
No pressure on efficiency
Occurs where markets are protected or government controlled

18. Evaluate "Fit" with Country

19. Evaluate CAGE "Distance" in Country

20. Modes of Entry to Country