1. Tailoring Strategy to Fit Specific Industry and Company Situations
McGraw-Hill/Irwin
Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Gary Hamel and Liisa Valikangas
“In a turbulent age, the only dependable advantage is reinventing your business model before circumstances force you to.
Gary Hamel and Liisa Valikangas

3. 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

4. Industry Transformation
Porter & Rivkin, HBSP

5. Industry Transformation
System change occurs in two modes:
Evolution
Revolution
Periods of transformation give companies latitude to influence future industry structure
Phases of transformation:
The trigger
Experimentation
Convergence

6. Industry Transformation
Structural analysis is an important tool in setting strategy.
New emphasis on:
Substitution
Shaping competition
Addressing uncertainty
Developing a posture

7. The Leader’s Disadvantage
Coughlin, HBSP,

8. The Leader’s (Dis)advantage
Size Advantages
Timing Advantages
Scale economies
Scope economies
Network effects
Learning effects
Preemption
Reputation effects
Buyer switching costs
Patents or institutional barriers

9. The Leader’s (Dis)advantage
Pioneering costs
Demand uncertainty
Technology uncertainty
“Only the paranoid survive” Andy Grove

10. Characteristics of an Emerging Industry
Little historical data for projections
Competing and/or proprietary technology
Desired product attributes are unknown
Buyers need a great deal of information to purchase
Relatively low entry barriers
Experience curve effects

11. Strategy Options for Competing in Emerging Industries
Rapid and continuous innovation
Pursue mergers and acquisitions
Take a first-mover position
Seek new markets: customer; geographic
Reduce adoption costs for the buyer
Shift from building awareness to increasing frequency of purchase or use
Perform value chain analysis
Reduce price

12. 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

13. Characteristics of Rapidly Growing Markets
Increase in the number of competitors
Increase in price sensitivity
Importance of distribution networks
Creation of buyer loyalty

14. Strategy Options for Competing in Rapidly Growing Markets
Drive down costs per unit
Pursue rapid product innovation
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

15. Characteristics of a Mature Industry
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

16. 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

17. 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

18. Characteristics of 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 battle ensues among industry members for the available business

19. 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

20. 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

21. Characteristics 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

22. 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

23. 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

24. Characteristics of a Fragmented Industry
Absence of market leaders
Product/service is delivered to neighborhood locations
Buyer demand is diverse
Low entry barriers
Absence of scale economies
Market for industry’s product/service may be globalizing
Exploding technologies
Industry is young and crowded with aspiring contenders

25. 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

26. 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

27. Fig. 8.2: Three Strategy Horizons for Sustaining Rapid Growth

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

29. Industry Leaders: The Defining Characteristics
Strong to powerful market position
Well-known reputation
Proven strategy
Key strategic concern – How to sustain dominant leadership position

30. Strategy Options: Industry Leaders
Stay-on-the-offensive strategy
Fortify-and-defend strategy
Muscle-flexing strategy

31. 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
I’m trying!

32. Characteristics of Runner-Up Firms
When big size is a competitive asset, firms with small market share face obstacles in trying to strengthen their positions
Less access to economies of scale
Difficulty in gaining customer recognition
Inability to afford mass media advertising
Difficulty in funding capital requirements

33. Strategic Options for Runner-Up Firms
When big size provides larger rivals with a cost advantage, runner-up firms have two options
Build market share
Lower costs and prices to grow sales or
Out-differentiate rivals in ways to grow sales
Withdraw from market

34. Strategic Approaches for Runner-Up Firms
1. Vacant niche strategy
2. Specialist strategy
3. Superior product strategy
4. Distinctive image strategy
5. Content follower strategy

35. Weak Businesses: Strategic Options
Launch an offensive turnaround strategy (if resources 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)

36. Achieving a Turnaround: The Strategic Options
Sell off assets to generate cash and/or reduce debt
Revise existing strategy
Launch efforts to boost revenues
Cut costs
Combination of efforts

37. What Is a Harvest Strategy?
Steers middle course between status quo and exiting quickly
Involves gradually sacrificing market position in return for bigger near-term cash flow/profit
Objectives
Short-term - Generate largest feasible cash flow
Long-term - Exit market

38. 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.

39. 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.

40. 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.

41. Competition in the Video Game Console Industry