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Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
Business strategy  chapter (8)
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Business strategy chapter (8)

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  • 1. Published by www.iiuc28a9.com 8 Tailoring Strategy Chapter Title to Fit Specific Industry and Company Situations Md. Tarikul Islam Lecturer in Marketing16/e PPT IIUC, DC Cell: 01716 388990 E-mail: russelmkg@yahoo.com . .
  • 2. Matching Strategy to a Company’s Situation Nature of industry and competitive Most important conditionsdrivers shaping a firm’s strategic options fall into Firm’s competitive two categories capabilities, market position, best opportunities 8-2
  • 3. Features of an Emerging Industry New and unproven market Proprietary technology Lack of consensus regarding which of several competing technologies will win out Low entry barriers Experience curve effects may permit cost reductions as volume builds Buyers are first-time users and marketing involves inducing initial purchase and overcoming customer concerns First-generation products are expected to be rapidly improved so buyers delay purchase until technology matures Possible difficulties in securing raw materials Firms struggle to fund R&D, operations and build resource capabilities for rapid growth 8-3
  • 4. Strategy Options for Competing in Emerging Industries Win early race for industry leadership by employing a bold, creative strategy Push hard to perfect technology, improve product quality, and develop attractive performance features Consider merging with or acquiring another firm to  Gain added expertise  Pool resource strengths When technological uncertainty clears and a dominant technology emerges, try to capture any first-mover advantages by moving quickly Form strategic alliances with  Companies having related technological expertise or  Key suppliers 8-4
  • 5. Strategy Options for Competing in Emerging Industries (continued) Pursue new customers and user applications Enter new geographical areas Makeit easy and cheap for first-time buyers to try product Focus advertising emphasis on  Increasing frequency of use  Creating brand loyalty Use price cuts to attract price-sensitive buyers 8-5
  • 6. Strategic Hurdles for Companies in Emerging Industries Raising capital to finance initial operations until  Sales and revenues take off  Profits appear  Cash flows turn positive Developing a strategy to ride the wave of industry growth  What market segments to pursue  What competitive advantages to go after Managing the rapid expansion of facilities and sales to position a company to contend for industry leadership Defending against competitors trying to horn in on the company’s success 8-6
  • 7. What Is the Key to Success forCompeting in Rapidly Growing Markets? A company needs a strategy predicated on growing faster than the market average so it Can boost its market share and Improve its competitive standing vis-à-vis rivals 8-7
  • 8. Strategy Options for Competing in Rapidly Growing Markets Drivedown costs per unit to enable price reductions that attract droves of new customers Pursue rapid product innovation to  Set a company’s product offering apart from rivals  Incorporate attributes to appeal to growing numbers of customers Gain access to additional distribution channels and sales outlets Expand a company’s geographic coverage Expand product line to add models/styles to appeal to a wider range of buyers 8-8
  • 9. Industry Maturity: The Standout Features Slowing demand breeds stiffer competition More sophisticated buyers demand bargains Greater emphasis on cost and service “Topping out” problem in adding production capacity Product innovation and new end uses harder to come by International competition increases Industry profitability falls Mergers and acquisitions reduce number of rivals 8-9
  • 10. Strategy Options for Competing in a Mature Industry cut back marginal products and models Emphasize innovation in the value chain Strong focus on cost reduction Increase sales to present customers Purchase rivals at bargain prices Expand internationally Build new, more flexible competitive capabilities 8-10
  • 11. Strategic Pitfalls in a Maturing Industry Employing a ho-hum strategy with no distinctive features thus leaving firm “stuck in the middle” Being slow to mount a defense against stiffening competitive pressures Concentrating on short-term profits rather than strengthening long-term competitiveness Being slow to respond to price-cutting Having too much excess capacity Overspending on marketing Failing to aggressively pursue cost reductions 8-11
  • 12. Stagnant or Declining Industries: The Standout Features Demand grows more slowly than economy as whole (or even declines) Advancing technology gives rise to better- performing substitute products Customer group shrinks Changing lifestyles and buyer tastes Rising costs of complementary products Competitivebattle ensues among industry members for the available business 8-12
  • 13. Strategy Options for Competing in a Stagnant or Declining Industry Pursue focus strategy aimed at fastest growing market segments Stress differentiation based on quality improvement or product innovation Work diligently to drive costs down  Cut marginal activities from value chain  Use outsourcing  Redesign internal processes to exploit e-commerce  Consolidate under-utilized production facilities  Add more distribution channels  Close low-volume, high-cost distribution outlets  Prune marginal products 8-13
  • 14. 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 company’s investment as possible 8-14
  • 15. Features of High-Velocity Markets Rapid-fire technological change Short product life-cycles Entry of important new rivals Frequentlaunches of new competitive moves Rapidlyevolving customer expectations 8-15
  • 16. Fig. 8.1: Meeting the Challenge of High-Velocity Change 8-16
  • 17. Strategy Options for Competing in High-Velocity Markets Invest aggressively in R&D Initiate fresh actions every few months Develop quick response capabilities  Shift resources  Adapt competencies  Create new competitive capabilities  Speed new products to market Use strategic partnerships to develop specialized expertise and capabilities Keep products/services fresh and exciting 8-17
  • 18. Keys to Success in Competing in High Velocity Markets Cutting-edge expertise Speed in responding to new developments Collaboration with others Agility Innovativeness Opportunism Resource flexibility First-to-market capabilities 8-18
  • 19. 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 Absence of scale economies Market for industry’s 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 8-19
  • 20. Examples of Fragmented Industries Book publishing Landscaping and plant nurseries Auto repair Restaurant industry Public accounting Women’s dresses Meat packing Paperboard boxes Hotels and motels Furniture 8-20
  • 21. Competing in a Fragmented Industry: The Strategy Options Construct and operate “formula” facilities Become a low-cost operator Specialize by product type Specialize by customer type Focus on limited geographic area 8-21
  • 22. Fig. 8.2: Three Strategy Horizons for Sustaining Rapid Growth 8-22
  • 23. 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 firm’s present resource strengths Payoffs of long-jump initiatives may prove elusive 8-23
  • 24. Strategies Based on a Company’s Market Position Industry leaders Runner-up firms Weak or crisis-ridden firms 8-24
  • 25. Industry Leaders: The Defining Characteristics Strong to powerful market position Well-known reputation Proven strategy strategic concern – How to sustain Key dominant leadership position 8-25
  • 26. Strategy Options: Industry Leaders Stay-on-the-offensive strategy Fortify-and-defend strategy Muscle-flexing strategy 8-26
  • 27. 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 8-27
  • 28. Stay-on-the-Offensive Strategies (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 leader’s 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 8-28
  • 29. Fortify-and-Defend Strategy Objectives Make it harder for new firms to enter and for challengers to gain ground Hold onto present market share Strengthen current market position Protect competitive advantage 8-29
  • 30. 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 8-30
  • 31. Muscle-Flexing Strategy Objectives Play competitive hardball with smaller rivals that threaten leader’s position Signal smaller rivals that moves to cut into leader’s business will be hard fought Convince rivals they are better off playing “follow-the-leader” or else attacking each other rather the industry leader 8-31
  • 32. 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 8-32
  • 33. Muscle-Flexing Strategy Risks Running afoul of antitrust laws Alienating customers with bullying tactics Arousing adverse public opinion 8-33
  • 34. Types of Runner-up Firms Market challengers  Use offensive strategies to gain market share Focusers I’m trying!  Concentrate on serving a limited portion of market Perennial runners-up  Lack competitive strength to do more than continue in trailing position 8-34
  • 35. 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  Less access to economies of scale  Difficulty in gaining customer recognition  Inability to afford mass media advertising  Difficulty in funding capital requirements 8-35
  • 36. Strategic Options for Runner-Up Firms Whenbig 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 8-36
  • 37. Offensive Strategies for Runner-Up Firms: Building Market Share Acquire smaller rivals to expand company’s market reach and presence Find innovative ways to drive down costs to win customers from higher-priced rivals Craft an attractive differentiation strategy Pioneer a leapfrog technological breakthrough Be first-to-market with new or better products and build reputation for product leadership Outmaneuver slow-to-change market leaders in adapting to evolving market conditions and customer needs Forge strategic alliances with key distributors, dealers, or marketers of complementary products 8-37
  • 38. Strategic Approaches for Runner-Up Firms1. Vacant niche strategy2. Specialist strategy3. Superior product strategy4. Distinctive image strategy5. Content follower strategy 8-38
  • 39. Vacant Niche Strategy for Runner-Up Firms Focus strategy concentrated on end-use applications market leaders have neglected Characteristics of an ideal vacant niche  Sufficient size to be profitable  Growth potential  Well-suited to a firm’s capabilities  Hard for leaders to serve 8-39
  • 40. Specialist Strategy for Runner-Up Firms Strategy concentrated on being a leader based on  Specific technology  Product uniqueness  Expertise in  Special-purpose products  Specialized know-how  Delivering distinctive customer services 8-40
  • 41. Superior Product Strategy for Runner-Up Firms Differentiation-based focused strategy based on  Superior product quality or  Unique product attributes Approaches  Fine craftsmanship  Prestige quality  Frequent product innovations  Close contact with customers to gain input for better quality product 8-41
  • 42. Distinctive Image Strategy for Runner-Up Firms Strategy concentrated on ways to stand out from rivals Approaches  Reputation for charging lowest price  Prestige quality at a good price  Superior customer service  Unique product attributes  New product introductions  Unusually creative advertising 8-42
  • 43. Content Follower Strategy for Runner-Up Firms Strategy involves avoiding  Trend-setting moves and  Aggressive moves to steal customers from leaders Approaches  Do not provoke competitive retaliation  React and respond  Defense rather than offense  Keep same price as leaders  Attempt to maintain market position 8-43
  • 44. Weak Businesses: Strategic Options Launch an offensive turnaround strategy (if resources permit) Employ a fortify-and-defend strategy (to the extent resources permit) Pursue a fast-exit strategy Adopt a harvest strategy (a slow-exit type of end-game strategy) 8-44
  • 45. 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 8-45
  • 46. What Is a Harvest Strategy? Steers middle course between status quo and exiting quickly Involves gradually sacrificing market position in return for bigger near-term cash flow/profit Objectives  Short-term - Generate largest feasible cash flow  Long-term - Exit market 8-46
  • 47. Types of Harvest Options Reduce operating expenses to rock-bottom Hold reinvestment to minimum Place little priority on new capital investments Emphasize stringent internal cost controls Trim advertising and promotion expenses Do not replace employees who leave Shave equipment maintenance 8-47
  • 48. When Should a Harvest Strategy Be Considered? Industry’s long-term prospects are unattractive Building up business would be too costly Market share is increasingly costly to maintain Reduced levels of competitive effort will not trigger immediate fall-off in sales Firm can re-deploy freed-up resources in higher opportunity areas Business is not a major component of diversified firm’s portfolio of businesses 8-48

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