Tailoring Strategy To Fit Specific Industry and Company Situations
Tailoring Strategy To Fit Specific Industry and Company Situations
Tailoring Strategy To Fit Specific Industry and Company Situations
Matching Strategy to
a Companys Situation
Most important
drivers shaping a
firms strategic
options fall into
two categories
Nature of industry
and competitive
conditions
Firms competitive
capabilities,
market position,
best opportunities
Expand internationally
7.
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 companys investment as
possible
Features 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
Shift resources
Adapt competencies
Create new competitive capabilities
Speed new products to market
Examples of Fragmented
Industries
Book publishing
Construction & Real Estate
Auto repair
Restaurant industry
Public accounting
Womens dresses
Paperboard boxes
Hotels and Motels
Furniture
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
Competitive Features
of a Fragmented Industry
Absence of scale economies
Market for industrys 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
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 firms present resource strengths
Payoffs of long-jump initiatives may prove elusive
Strategies Based on a
Companys Market Position
Industry leaders
Runner-up firms
Industry Leaders:
The Defining Characteristics
Strong to powerful market position
Well-known reputation
Proven strategy
Muscle-flexing strategy
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
Stay-on-the-Offensive Strategy
(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 leaders 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
Fortify-and-Defend Strategy
Objectives
Make it harder for new firms to enter and for
challengers to gain ground
Hold on to present market share
Strengthen current market position
Protect competitive advantage
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
Muscle-Flexing Strategy
Objectives
Play competitive hardball with smaller
rivals that threaten leaders position
Signal smaller rivals that moves to cut
into leaders business will be hard fought
Convince rivals they are better off playing
follow-the-leader or just attacking each
other rather than the industry leader
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
Muscle-Flexing Strategy
Risks
Focusers
Concentrate on serving a
limited portion of market
Perennial runners-up
Lack competitive strength to do
more than continue in trailing position
Im
trying!
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 because of having
Less access to economies of scale
Difficulty in gaining customer recognition
Inability to afford mass media advertising
Difficulty in funding capital requirements
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
Approaches
Reputation for charging lowest price
Prestige quality at a good price
Superior customer service
Unique product attributes
New product introductions
Unusually creative advertising
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
Liquidation Strategy
Wisest strategic option in certain situations
Lack of resources
Dim profit prospects
May serve stockholder interests
better than bankruptcy
Unpleasant strategic option
Hardship of job eliminations
Effects of closing on local community