Competitive strategies in different types of industries


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Competitive strategies in different types of industries

  1. 1. Competitive Strategies in Different Types of Industries
  2. 2. Industry environment can be classified on the basis of certain dimensions: 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
  3. 3. Fragmented 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.
  4. 4. 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.
  5. 5. Formulating Strategies in Fragmented Industries 1.What is the structure of the industry and the positions of competitors? 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 ?
  6. 6. Emerging Industries: 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 , Bio-tech
  7. 7. Common Structural Characteristics of Emerging Industries Technological uncertainty Strategic uncertainty High initial costs but steep cost reduction Embryonic companies and spin-offs First time buyers Short time horizons Subsidies No common standards
  8. 8. Formulating strategies in the Emerging Industry: Shaping industry structure-becoming the pioneer/ first mover Externalities in industry development- advocacy and self interest Changing role of suppliers and channels Shifting mobility barriers- after technology, marketing clout may take place
  9. 9. Maturing Industries 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
  10. 10. Characteristics of a maturing Industry: 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 .
  11. 11. Formulating Strategies in Maturing Industries: 1. Sophisticated cost analysis 2.Rationalizing the product mix. 3.Correct pricing 4.Process innovation and design for manufacture 5.Increasing scope of purchases. 6.Buyer selection.
  12. 12. Declining Industries: 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
  13. 13. Structural determinants of competition in declining industries. Conditions of demand- unsure of demand Exit barriers- -continue competing even though demand is falling Volatility of rivalry-costly price wars Formulating Strategies in declining industries: Leadership Niche Harvest Quick Divestment