1. 1 STRATEGY AND ENVIRONMENT FIT Matching Strategy to External Environment  International Markets (Chapter 7)  Stage of Industry Life Cycle  Turbulent, High-Velocity Markets  Fragmented Industries Matching Strategy to Internal Environment / Company Situation  Industry Leaders  Runner-Up Firms  Weak Businesses

2. 2 Most important drivers shaping a firm’s strategic options fall into two categories Firm’s competitive capabilities, market position, best opportunities Nature of industry and competitive conditions Overview: Matching Strategy to a Company’s Situation

3. 3 Emerging Industry - Characteristics  Formative stage of industry  New and unproven market/No rules of competition  Proprietary technology  No consensus concerning production technologies  Low entry barriers  Strong experience curve effects  Buyers are first-time users  Buyers may delay purchase until technology matures  Building reputation is important  Possible difficulties in securing raw materials  Access to capital critical  Variety of strategies being pursued  Mergers/acquisitions

4. 4 Emerging Industry - Strategy Options  Choose a Competitive Strategy  Other Strategic Actions to Consider  Push to perfect technology, product, and product features  Consider merger/acquisition  Capture first-mover advantages  Acquire or form alliances with other companies  Pursue new customers, new user applications and enter new geographic areas  Make it easy and cheap for first-time buyers to try product  Try to build brand loyalty  Use price cuts to attract additional buyers  Form strategic alliances with suppliers

5. 5 Rapidly Growing Markets  Frequent launches of new competitive moves  Contains survivors  Firms are more established  Less variety of strategies  Strategic groups begin to form  Profits take off  Customers more sophisticated  Entry barriers emerge

6. 6 Rapidly Growing Markets  Strategic Options:  Must try to grow faster than the market  Drive down costs  Pursue rapid product innovation  Gain access to distribution channels and sales outlets  Expand geographic coverage  Expand product line

7. 7 Characteristics of Industry Maturity  Slowing growth in demand = stiffer competition  More sophisticated buyers demand bargains  Greater emphasis on cost and service  Slowdowns in capacity expansion  New product innovation de-emphasized  New process innovation emphasized  International competition increases  Industry profitability falls  Industry consolidation – mergers/acquisitions  Contains survivors  Fewer larger firms

8. 8 Strategies for Maturing Industries  Possible Strategies  Pruning marginal products and models  Improving value chain efficiency  Trimming costs  Increasing sales to present customers  Acquiring rival firms at bargain prices  Expanding internationally  Building new or more flexible capabilities

9. 9 Stagnant or Declining Industries  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 pressures intensify--rivals battle for market share  To grow and prosper, firm must take market share from rivals  Industry consolidates to a smaller number of key players via mergers and acquisitions  Limited strategic options

10. 10 Stagnant or Declining Industries  Possible Strategies  3 Best Strategic Alternatives Focus on fastest-growing or slowest- decaying market segments Stress differentiation based on quality improvement and product innovation Strive to drive costs down and become industry’s low cost leader  End-Game Strategies Slow-exit Fast-exit

11. 11 Turbulent, High-Velocity Markets  Rapid technological change  Short product life-cycles  Entry of important new rivals  Lots of competitive maneuvering by rivals  Fast evolving customer requirements and expectations  Swirling market conditions

12. 12 Turbulent, High-Velocity Markets  Possible Strategies  Need to figure out how to deal with change  Invest aggressively in R&D to stay on the leading edge of technological know-how  Keep the companies products and services fresh and exciting enough to stand out in the midst of all the change that is taking place  Develop quick-response capability  Rely on strategic partnerships with outside suppliers and with companies making tie-in products  Initiate fresh actions every few months

13. 13 Competitive Features of Fragmented Industries  Absence of market leaders with large market shares or widespread market recognition  Product/service is delivered locally  Buyer demand is so diverse that many firms are required to satisfy buyer needs  Low entry barriers  Absence of scale economies  Buyers require small amounts of customized or made-to-order products  Limited geographical area can be served

14. 14 Strategic Options for Fragmented Industries  Possible Strategies  Constructing and operating formula facilities  Becoming a low-cost operator  Specializing by product type  Specialization by customer type  Focusing on a limited geographic area

15. 15 Strategies Based on a Company’s Market Position Industry leaders Runner-up firms Weak or crisis-ridden firms

16. 16 Industry leaders  Industry Leaders have:  Strong to powerful market positions  Well-known reputations  Proven strategies  Strategic Options  Stay-on-the-offensive  Fortify-and-defend  Muscle-flexing

17. 17 Runner-up Firms  Types of Runner-up Firms:  Market challengers Use offensive strategies to gain market share  Focusers Concentrate on serving a limited portion of market  Perennial runners-up Lack competitive strength to do more than continue in trailing position

18. 18 Weak Businesses  Strategic Options:  Launch an offensive turnaround strategy (if resource permit)  Employ a fortify-and-defend strategy (to the extent resources permit)  Pursue a fast-exit strategy  Adopt a harvest strategy (a slow-exit type of end-game strategy)  Liquidation