2. Fragmented Industry
• No sellers has a sizable market share (sometimes the
industry is so new that no large firms have yet emerged.
• No firm can dictate directions
• No scale of economies
• Buyers required small amounts of customized products
• The market is do diverse that a lot of firms exists or must
exist to satisfy customer needs.
• Low entry barriers
• Limited geographical area to be served
• Local delivery of products/services
• Improving technologies force firms to specialize to keep
up in the area of their expertise
• Crowded with young and aspiring contenders
4. Examples of Fragmented Industries
• Fashion industry
• Auto shops/Auto repair shops
• Cafes
• Salons
• Restaurant industry
• Furniture
• Meat processing
• Professional services industry
• Publishing
5. Strategic Options for Fragment
Industries
• Constructing and operating formula facilities
• Becoming a low-cost operator
• Specializing by product type
• Specialization by customer type
• Focusing on a limited geographic area
9. Strategic Options of Industry
Leaders
Fortify and Defend Strategy
Stay-on-the-offensive Strategy
Follow the Leader Strategy
10. Stay On The Offensive Strategy
• Be the first mover, leading industry change
• Best defense is good offense
• Always pursue innovation and continuous
improvements
• Force rival to scramble to keep up
• Launch initiatives to keep rivals off balance
• Grow faster than industry taking market
share from rivals
11. Fortify And Defend Strategy
• Objectives:
– Make it harder for new firms to join and
challengers to gain grounds
– Hold on to present market share
– Strengthen current market position
12. Fortify And Defend Strategy
Options
• Increase marketing and R&D
• Improve and provide the highest level of customer service
• Introduce more brand/options to match attributes of
rivals
• Boost buyer loyalty
• Keep prices reasonable and maintain high quality of
products
• Build new capacity ahead of market demand
• Invest enough to remain cost competitive
• Patent Technologies
• Sign exclusive contracts with best suppliers, distributors,
and endorsers.
13. Follow-The-Leader Strategy
• Objectives
– Use competitive muscle to encourage runner up
firms to be content followers
– Signal smaller rivals that moves to cut into
leader’s business will be hard fought
14. Follow-The-Leader Strategy
Options
• Be quick to meet competitive price cuts
• Counter with large-scale promotional campaign if
challengers boost advertising
• Offer better deals to major customers of maverick
firms
• Dissuade distributors from carrying rivals’ products
• Attempt to attack key executives of rivals
• Use “hard ball” measures to signal aggressive small
firms who should lead
• Use arm twisting tactics to pressure present
customers not to use rival’s products
15. Runner UP Firms
• Industry leaders were once runners up
• They are profitable but has less market share
• Lagging in terms of competitive positions
16.
17.
18.
19. Types of Runner Up Firms
– Market challengers
• Use offensive strategies to gain market share
• Cherry mobile, O+, myPhone
– Focusers
• Concentrate on serving a limited portion of market
• Niche strategy, profits are adequate
• Vertu, Bugati Veyron, concept car producers
– Perennial runners-up
• Lack competitive strength to do more than continue in
trailing position. Still profitable
• IBC 13, Net 25
20. Strategic Options for Runners Up
• Case 1
– Where large size yields significantly lowers unit costs
giving large-share firms a cost advantage, options are:
• Build market share
• Become a lower cost producer
• Pursue a differentiation strategy
• Withdraw from the business
• Rule: Runner up firms should avoid attacking a
leader head on with an imitative strategy
regardless of resources and staying power an
underdog may have. Ex.: TV5
21. Strategic Options for Runners Up
• Case 2
– Where large size does not yield a cost advantage,
runner up firms have 6 options:
1. Vacant niche strategy (Sony Walkman)
2. Specialist strategy (Huawei communications tech)
3. “Ours is better than theirs” (Apple, EC Gas)
4. Content follower strategy (Twitter ads)
5. Growth via acquisition strategy (Yahoo, when it
suddenly went down)
6. Distinctive image strategy (GMA 7, EC Gas)
22. Strategic Options for Runners Up
• Case 3 Obstacles
– Where big size is a competitive asset, firms with
low market share face obstacles
• Less Access to economies of scale
• Difficulty in gaining customer recognition
• Inability to afford mass media advertising
• Difficulty in funding capital requirements
23. Strategic Options for Runners Up
• Case 3 Overcoming Obstacles Strategies
– Focus on a few segments where strengths can yield
competitive edge
– Develop technical expertise highly values by
customers
– Aggressively pursue development of new products
for customers in target segments
– Use innovative entrepreneurial approaches to out-
manage slow to change leaders
24. Weak Business Strategy
• Launch a strategic offensive
• Play aggressive defense
• Pursue immediate abandonment
• Adopt harvest strategy
25. Harvest Strategy
• Using the profits of a mature brand or line of
business or a soon to be gone firm to finance
a more promising LOB, firm, or brand.
• Example is the Symbian OS to allow growth
of Windows 8 and android run Nokia phones.
• Short term goal: to gain cash flow
• Long term goal: to exit the market
26. 13 Commandments of Successful
Business Strategies
1. Always put top priority on crafting and
executing strategic moves that enhances a
firms competitive position for the long-term
and that serve to establish it as an industry
leader.
2. Understand that a clear, consistent competitive
strategy, when well-crafted and well-executed,
builds reputation and recognizable industry
position whereas a strategy aimed solely at
capturing momentary market opportunities
yields fleeting benefits.
27. 13 Commandments of Successful
Business Strategies
3. Endeavour 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.
4. Invest in creating a sustainable competitive
advantage, for it is a most dependable
contributor to above average profitability.
28. 13 Commandments of Successful
Business Strategies
5. Play aggressive offense to build competitive
advantage and aggressive defense to protect
it.
6. Avoid strategies capable of succeeding only in
the best circumstances.
7. Avoid rigidly prescribed or inflexible strategies
changing market conditions may render it
quickly obsolete
29. 13 Commandments of Successful
Business Strategies
8. Don’t underestimate the commitment and
the reactions of rival firms.
9. Be wary of attacking strong, resourceful rivals
without first having solid competitive
advantage and ample financial strength.
10. Consider that attacking competitive
weakness is usually more profitable than
attacking competitive strength.
30. 13 Commandments of Successful
Business Strategies
11. Be judicious in cutting prices without an
established cost advantage.
12. Be aware that aggressive strategic moves to
wrest crucial market share away from rivals often
provoke aggressive retaliation in the form of
marketing “arms race” and or price wars.
13. Employ bold strategic moves in pursuing
differentiation strategies so as to open up very
meaningful gaps in quality of service or
advertising of other product attributes.
