Group C Report Chapter 6 Hill and Jones
Group C Report Chapter 6 Hill and Jones
Group C Report Chapter 6 Hill and Jones
OPPORTUNITIES
THREATS
SUSTAINABLE ENVIRONMENT
COMPANIES MUST FACE THE CHALLENGES OF DEVELOPING AND MAINTAINING A COMPETITIVE STRATEGY IN:
FRAGMENTED INDUSTRIES EMBRYONIC INDUSTRIES GROWTH INDUSTRIES MATURE INDUSTRIES DECLINING INDUSTRIES
FRAGMENTED INDUSTRIES
CAUSES FOR FRAGMENTED ENTRIES: Low barriers to entry: lack of economies of scale Low entry barriers > constant entry by new companies Specialized customer needs - require small job lots of products no room for a mass-production Diseconomies of scale
FRAGMENTED INDSUTRIES - STRATEGIES: CHAINING linked outlets form networks to achieve cost leadership FRANCHISING for rapid growth (proven business concepts, reputation, management skills, and economies of scale)
FRAGMENTED INDSUTRIES - STRATEGIES: HORIZONTAL MERGER acquisition to obtain economies and growth IT AND INTERNET to develop new business models
CAUSES FOR FRAGMENTED ENTRIES: Low barriers to entry: lack of economies of scale Low entry barriers > constant entry by new companies Specialized customer needs - require small job lots of products no room for a mass-production Diseconomies of scale
EMBRYONIC INDUSTRIES
JUST BEGINNING TO DEVELOP WHEN TECHNOLOGICAL INNOVATION CREATES NEW MARKET OR PRODUCT OPPORTUNITIES.
GROWTH INDUSTRIES
WHEREIN DEMAND IS EXPANDING RAPIDLY AS MANY NEW CUSTOMERS ENTER THE MARKET.
REASONS FOR SLOW GROWTH IN MARKET DEMAND: Limited performance and poor quality of first products Customer unfamiliarity Poor distribution channels Lack of complementary products High production costs
DEVELOPMENT OF MASS MARKETS: TECHNOLOGICAL PROGRESS product is easier to use; customer value is increased DEVELOPMENT OF KEY COMPLEMENTARY PRODUCTS REDUCTION OF PRODUCTION COSTS lower prices.
BOTH INNOVATORS AND EARLY ADOPTERS ENTER THE MARKET WHILE THE INDUSTRY IS IN ITS EMBRYONIC STATE.
MOST MARKET DEMAND AND INDUSTRY PROFITS ARISE DURING THE EARLY AND LATE MAJORITY CUSTOMER SEGMENTS.
Technologically sophisticated Tolerant of engineering imperfections Reached through specialized distribution channels Relatively few in number Not particularly price-sensitive
STRATEGIC IMPLICATIONS
CROSSING THE CHASM (EARLY ADAPTERS & EARLY MAJORITY) Identify correctly the needs of the first wave of early majority users. Alter the business model in response. Alter the value chain and distribution channels to reach the early majority.
CROSSING THE CHASM (EARLY ADAPTERS & EARLY MAJORITY) Design the product to meet the needs of the early majority so that the product can be modified and produced or provided at low cost. Anticipate the moves of competitors.
WHY PRODIGY FAILED: Target Customers: Typical middle-class Americans; not computer-oriented They did not understand the full range of needs customers were trying to satisfy by using the internet
STRATEGIES OF AOL Unlimited email Chatrooms Quickly redesigned its software to fit the Microsoft Windows Systems
THE COMPANY CORRECTLY SENSED THE WAY CUSTOMER STRATEGIC IMPLICATIONS NEEDS WERE CHANGING AND THEY PROVIDED A DIFFERENTIATED PRODUCT THAT RATES MET THOSE NEEDS. OF GROWTH
FACTORS AFFECTING MARKET GROWTH RATES: Relative advantage Complexity Observability Compatibility Trialability
EMBRYONIC STAGES:
GROWTH STAGES:
IMPLICATIONS maintain relative competitive position
-Strengthen business model to prepare to survive industry shakeout -Requires investment to keep up with rapid growth of the market
- Dominant companies want to reap the reward of prior investments - Companys investment depends on the level of competition and source of the companys competitive advantage
MATURE INDUSTRIES
SMALL NUMBER OF LARGE COMPANIES DOMINATE THE INDUSTRY AND DETERMINE THE NATURE OF COMPETITION
ABOUT MATURE INDUSTRIES: BUSINESS LEVEL STRATEGY Based on how established companies collectively try to reduce strength of competition. INTERDEPENDENT COMPANIES Try to protect industry profitability.
SOME STRATEGIES
DETER ENTRY INTO INDUSTRY Product Proliferation, Maintaining Excess Capacity , Price Cutting,
FILLED SPACES Difficult for companies to gain foothold Difficult for companies to differentiate itself
Basic Principles
Look forward, reason back anticipate what rivals will do, then let it guide you Decision trees: think 3 steps ahead
Dominate use the most advantageous strategy pay-off matrix: if-then situations Strategy dictates the structure of payoff
Decision Trees
Adidas gets D. Rose as an endorser Probability: 80% Profit: $200M
Profit: $100M
Payoff Matrix
BDO Offer rewards Offer rewards
No rewards
No rewards
C I T I B A N K
5, 5
10, 0
0, 10
0, 0
Declining Industries
Height of exit barriers when its hard to pull out of the industry Commodity nature of products if there are lots of substitutes
Possible Strategies
Leadership seek to become the biggest player
Niche
focus on pockets of demand falling more slowly