Competitive strategies in different types of industries
Competitive Strategies in
Different Types of
Industry environment can be classified on the basis of
Industry concentration, state of industry maturity,
and exposure to international competition.
The intensity of competition in the industry also
depends on these dimensions. Hence the need to
consider these dimensions when formulating strategy.
Industries can be divided into- fragmented ,
emerging, maturing and declining industries
In fragmented industries, no firm has significant market share.
However the majority of firms can strongly influence the
outcome of the industry. These industries contain privately
owned small-and medium sized companies.
Such industries can be found in service, retailing, distribution,
furniture and metal fabrications, agricultural products and
creative business sectors.
Why are Industries fragmented?
1. Low overall entry barriers.
2.Absence of economies of scale or experience curve.
3.High transportation costs.
4.High inventory costs or erratic sales fluctuations.
5.No advantages of size in dealing with buyers or suppliers.
6. Diseconomies of scale in some important aspect.
Low overheads, highly diverse product line, diverse market
needs, high product differentiation , particularly if based on
image, exit barriers, local regulation, newness.
Formulating Strategies in
1.What is the structure of the industry and the positions of
2.Why is the industry fragmented?
3.Can fragmentation be overcome ? How ?
4.Is overcoming fragmentation profitable ? Where should the
firm be positioned to do so ?
5. If fragmentation is inevitable, what is the best alternative
for coping with it ?
Emerging industries are created by technological innovations,
emergence of new consumer needs, or shifts in relative cost
relationships. In these industries fundamental rules of the
competition change due to changes in the environment.
Primary characteristic of this type of industries from the point
of view of formulating strategies is that there are no rules.
e.g. 3G-Telecom services , convergence of telecom and IT ,
Common Structural Characteristics of
High initial costs but steep cost reduction
Embryonic companies and spin-offs
First time buyers
Short time horizons
No common standards
Formulating strategies in the
Shaping industry structure-becoming the pioneer/ first mover
Externalities in industry development- advocacy and self
Changing role of suppliers and channels
Shifting mobility barriers- after technology, marketing clout
may take place
Industries in which the growth rates are reaching saturation
stage are called maturing industries. This maturity stage is not
reached at a fixed point in time and can be delayed by
innovations and other events that fuel continuous growth for
industry players. Strategic breakthroughs may also cause
mature industries to regain their rapid growth.
e.g. 2G –Telecom services in urban areas
Characteristics of a maturing
1.Slowing growth means more competition for market share.
2.Firms in the industry sell to experienced, repeat buyers
3. Competition is concentrated on cost and service
4.Industry profits often fall .
Formulating Strategies in
1. Sophisticated cost analysis
2.Rationalizing the product mix.
4.Process innovation and design for manufacture
5.Increasing scope of purchases.
Declining industries are industries that have
experienced an absolute decline in unit sales over a
sustained period. The decline in these industries
results due to slower economic growth, product
substitution and continued technological changes in
areas such as electronics, computers and chemicals.
e.g. typewriter , jute , ceramic industries
Structural determinants of competition in declining
Conditions of demand- unsure of demand
Exit barriers- -continue competing even though demand is
Volatility of rivalry-costly price wars
Formulating Strategies in declining industries:
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