1. Competitive Advantage in Mature Industries
OUTLINE
Key success factors in mature industries
Strategic Implementation: Structure, Systems, Style
Strategies for declining industries 22

2. Competitive Advantage in Retailing: U. S
Competitive Advantage in Retailing: U.S. Retailers with the Highest and Lowest Valuation Ratios
TOP Valuation Sales
Ratio ($,bil.)
Amazon.com (US)
Intimate Brands (US)
Hennes & Mauritz (Swed.)
Seven-Eleven Japan
Gap (US)
Home Depot (US)
Best Buy (US)
CDW Computer Cntrs. (US)
Wal-Mart (US)
Kohl’s (US)
Dixons Group (UK)
Bed, Bath & Beyond ( US)
Carrefour (France)
Pinault-Printemps
-Redoute (France)
Castorama Dubois (France)
J.C. Penny (US)
Federated Dept. Stores (US)
J. Sainsbury (UK)
Marks & Spencer (UK)
Great Universal Stores (UK)
Marui (Japan)
Jusco (Japan)
Sears Roebuck (US)
May Department Stores (US)
Ito-Yokado (Japan)
Albertson’s (US)
Tesco (UK)
Boots (UK)
George Weston (Canada)
Metro (Germany)
BOTTOM Valuation Sales
Ratio ($, bil.) 23

3. Key Success Factors in Mature Industries
Opportunities for sustainable -- limited potential for differentiation
competitive advantage are technology stable and well diffused
limited ease of entry due to well developed industry infrastructure and powerful distributors
-- international competition : domestic cost advantage vulnerable
Sources of Economies of scale
cost advantage -- Low-cost inputs
-- Low overheads
Segment and customer -- As general industry environment selection deteriorates, important to locate attractive segments and woo good
customers.
Sources of differentiation Emphasis on image differentiation and advantage differentiation through complementary
services.
Sources of innovation Limited opportunity for product and
process innovation but considerable
opportunity for strategic innovation 25

4. Sources of Strategic Innovation in Mature Industries
Reconfiguring the value chain: - Benetton in knitwear Southwest in airlines
- Dell in PCs
- Zara in fashion clothing
Redefining markets and products - Saturn in autos Enron in energy
- Barnes & Noble in book retailing
Innovative approaches to - Virgin Atlantic in air travel
differentiation - Sephora in cosmetics retailing
Who are the strategic innovators?
Typically new entrants - CNN in news broadcasting
- Nucor in the U.S. steel industry
Established firms constrained by “industry recipes” and existing
investments in resources and capabilities associated with past strategies. 26

5. Product, Process, and Strategic Innovation over the Life Cycle
RATE OF INNOVATION
Process
innovation
TIME 27

6. Strategy Implementation in Mature Industries:The Traditional Model
STRATEGY - Pursuit of cost efficiency through mass production
STRUCTURE - Functional departments
- Line and staff distinction
- Job specialization
CONTROLS - Quantitative, short-term performance targets
- Hierarchical monitoring and control
- Standard, formalized operating procedures,
reporting, and management by exception.
INCENTIVES - Emphasis on financial incentives linked to
individual performance
TOP - Primary functions are control and
MANAGEMENT strategic decision making
- Two main styles: politician and autocrat 28

7. The Competitive Environment of Declining Industries
Features - Excess capacity
of declining - Lack of technological change
industries - Consolidation (but some new entry as new firms exit)
- Old machines and employees
Smooth adjustment - Predictability of decline
of capacity Durable assets
depends upon Costs of closure
- Barriers to exit Management
commitment
- Strategies of surviving firms { 30

8. Strategy Options in Declining Industries
LEADERSHIP Establish dominant market position -encourage exit of rivals
-buy market share through acquisition
-acquire capacity
-demonstrate commitment
-dispel optimism about the industry’s future
-raise the stakes
NICHE Identify an attractive segment and dominate it.
HARVEST Maximize cash flow from existing sources
DIVEST Get out while there is still a market for industry assets 31

9. Strategy Alternatives for a Declining Industry
COMPANY’S COMPETITIVE POSITION
Strengths in Lacks strength in
remaining demand remaining demand
pockets pocket
Favorable LEADERSHIP HARVEST
INDUSTRY to or or
STRUCTURE decline NICHE DIVEST
Unfavorable NICHE DIVEST
to or QUICKLY
decline HARVEST 32