1. Published by www.iiuc28a9.com
8
Tailoring Strategy
Chapter Title
to Fit Specific
Industry and
Company Situations
Md. Tarikul Islam
Lecturer in Marketing
16/e PPT IIUC, DC
Cell: 01716 388990
E-mail: russelmkg@yahoo.com
. .
2. Matching Strategy to
a Company’s Situation
Nature of industry
and competitive
Most important
conditions
drivers shaping a
firm’s strategic
options fall into Firm’s competitive
two categories capabilities,
market position,
best opportunities
8-2
3. 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
8-3
4. 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
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
8-4
5. Strategy Options for Competing
in Emerging Industries (continued)
Pursue new customers and user applications
Enter new geographical areas
Makeit 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
8-5
6. 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
8-6
7. 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
8-7
8. Strategy Options for Competing
in Rapidly Growing Markets
Drivedown 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
8-8
9. 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
8-9
10. Strategy Options for Competing
in a Mature Industry
cut back 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
8-10
11. 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
8-11
12. 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
Competitivebattle ensues among industry
members for the available business
8-12
13. 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
8-13
14. 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
8-14
15. Features of High-Velocity Markets
Rapid-fire technological change
Short product life-cycles
Entry of important new rivals
Frequentlaunches of
new competitive moves
Rapidlyevolving
customer expectations
8-15
17. 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
8-17
18. 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
8-18
19. 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
8-19
20. 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
8-20
21. 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
8-21
22. Fig. 8.2: Three Strategy Horizons for Sustaining Rapid Growth
8-22
23. Risks of Pursuing
Multiple Strategy Horizons
Firm should not pursue all options
to avoid stretching itself too thin
Pursuit of medium- and long-jump
initiatives may cause firm to stray
too far from its core competencies
Competitive advantage may be difficult to achieve
in medium- and long-jump businesses that do not
mesh well with firm’s present resource strengths
Payoffs of long-jump initiatives may prove elusive
8-23
24. Strategies Based on a
Company’s Market Position
Industry leaders
Runner-up firms
Weak or crisis-ridden firms
8-24
25. Industry Leaders:
The Defining Characteristics
Strong to powerful market position
Well-known reputation
Proven strategy
strategic concern – How to sustain
Key
dominant leadership position
8-25
27. Stay-on-the-Offensive Strategies
Be a first-mover, leading industry change
Best defense is a good offense
Concentrate on achieving a competitive advantage
and then widening the advantage over time
Relentlessly pursue continuous improvement
and innovation, being first to market with
Technological improvements
New or better products
More attractive performance features
Customer service improvements
8-27
28. Stay-on-the-Offensive Strategies (continued)
Aggressively seek out ways to
Cut operating costs
Establish competitive capabilities rivals cannot match
Make it easier for potential customers to switch their purchases from
other firms to the leader’s own products
Aggressively attack profit sanctuaries of important rivals
Launch fresh initiatives to expand overall industry
demand
Spur creation of new families of products
Make product more suitable for consumers
in emerging-country markets
Discover new uses for product
Attract new users of product
Promote more frequent use
Grow faster than industry, taking market share from rivals
8-28
29. Fortify-and-Defend Strategy
Objectives
Make it harder for new firms to enter and for
challengers to gain ground
Hold onto present market share
Strengthen current market position
Protect competitive advantage
8-29
30. Fortify-and-Defend Strategy:
Strategic Options
Increase advertising and R&D
Provide higher levels of customer service
Introduce more brands to match attributes of rivals
Add personalized services to boost buyer loyalty
Keep prices reasonable and quality attractive
Build new capacity ahead of market demand
Invest enough to remain cost competitive
Patent feasible alternative technologies
Sign exclusive contracts with best suppliers and
distributors
8-30
31. Muscle-Flexing Strategy
Objectives
Play competitive hardball with smaller
rivals that threaten leader’s position
Signal smaller rivals that moves to cut
into leader’s business will be hard fought
Convince rivals they are better off playing
“follow-the-leader” or else attacking each
other rather the industry leader
8-31
32. Muscle-Flexing Strategy:
Strategic Options
Be quick to meet price cuts of rivals
Counter with large-scale promotional campaigns if
rivals boost advertising
Offer better deals to rivals’ major customers
Dissuade distributors from carrying rivals’ products
Provide
salespersons with documentation about
weaknesses of competing products
Make attractive offers to key executives of rivals
Use arm-twisting tactics to pressure present
customers not to use rivals’ products
8-32
33. Muscle-Flexing Strategy
Risks
Running afoul of antitrust laws
Alienating customers with bullying tactics
Arousing adverse public opinion
8-33
34. Types of Runner-up Firms
Market challengers
Use offensive strategies to gain market share
Focusers I’m
trying!
Concentrate on serving a
limited portion of market
Perennial runners-up
Lack competitive strength to do
more than continue in trailing position
8-34
35. Obstacles Runner-Up
Firms Must Overcome
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
8-35
36. Strategic Options
for Runner-Up Firms
Whenbig 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
8-36
37. Offensive Strategies for Runner-Up Firms:
Building Market Share
Acquire smaller rivals to expand company’s market reach
and presence
Find innovative ways to drive down costs
to win customers from higher-priced rivals
Craft an attractive differentiation strategy
Pioneer a leapfrog technological breakthrough
Be first-to-market with new or better products and build
reputation for product leadership
Outmaneuver slow-to-change market leaders in adapting
to evolving market conditions and customer needs
Forge strategic alliances with key distributors, dealers, or
marketers of complementary products
8-37
39. Vacant Niche Strategy
for Runner-Up Firms
Focus strategy concentrated on end-use
applications market leaders have neglected
Characteristics of an ideal vacant niche
Sufficient size to be profitable
Growth potential
Well-suited to a firm’s capabilities
Hard for leaders to serve
8-39
40. Specialist Strategy for Runner-Up Firms
Strategy concentrated on
being a leader based on
Specific technology
Product uniqueness
Expertise in
Special-purpose products
Specialized know-how
Delivering distinctive customer services
8-40
41. Superior Product Strategy
for Runner-Up Firms
Differentiation-based focused strategy based on
Superior product quality or
Unique product attributes
Approaches
Fine craftsmanship
Prestige quality
Frequent product innovations
Close contact with customers to
gain input for better quality product
8-41
42. Distinctive Image Strategy
for Runner-Up Firms
Strategy concentrated on ways to
stand out from rivals
Approaches
Reputation for charging lowest price
Prestige quality at a good price
Superior customer service
Unique product attributes
New product introductions
Unusually creative advertising
8-42
43. Content Follower Strategy
for Runner-Up Firms
Strategy involves avoiding
Trend-setting moves and
Aggressive moves to steal
customers from leaders
Approaches
Do not provoke competitive retaliation
React and respond
Defense rather than offense
Keep same price as leaders
Attempt to maintain market position
8-43
44. 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)
8-44
45. 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
8-45
46. 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
8-46
47. Types of Harvest Options
Reduce operating expenses to rock-bottom
Hold reinvestment to minimum
Place little priority on new capital investments
Emphasize stringent internal cost controls
Trim advertising and promotion expenses
Do not replace employees who leave
Shave equipment maintenance
8-47
48. When Should a Harvest
Strategy Be Considered?
Industry’s long-term prospects are unattractive
Building up business would be too costly
Market share is increasingly costly to maintain
Reduced levels of competitive effort will not trigger
immediate fall-off in sales
Firm can re-deploy freed-up resources
in higher opportunity areas
Business is not a major component of
diversified firm’s portfolio of businesses
8-48