LECTURE 7

Tailoring Strategy to Fit Specific Industry and Company Situation

M Akbar Ali bpm ppm DIG, Bangladesh Police Email: alibpm@yahoo.com Cell: +8801711806888

Lecture 7
Competing in the marketplace is like

war. You have injuries and casualties, and the best strategy wins.
-- John Collins

Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

This lecture looks at the strategy making task in nine commonly encountered situations: 1. Companies competing in Emerging Industries of the future 2. Companies competing in Turbulent, High-velocity markets 3. Companies competing in Mature, Slow-growth industries
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Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

4. Companies competing in Stagnant or Declining industries 5. Companies competing in Fragmented Industries 6. Companies pursuing Rapid Growth 7. Companies in Industry Leadership Positions 8. Companies in Runner-up Positions 9. Companies in Competitively Weak Positions or plagued by crisis conditions.
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Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

Aim: To give strong appreciation of the importance of customizing a companys strategy To provide better idea as to how to weigh the various external and internal considerations and balance the pros and cons of the various strategic options that are open to a company.

Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

Companies competing in Emerging Industries of the Future Strategic Avenues:

1. Try to win the early race for industry leadership with risk-taking entrepreneurship, and a bold, creative strategy. 2. Push to perfect the technology, to improve product quality, and develop additional attractive performance features 3. As a dominant technology emerges, adopt it quickly.
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Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

4. Form strategic alliances with key suppliers to gain access to specialized skills, technological capabilities, and critical material or components. 5. Acquire or form alliances with companies that have related or complementary technological expertise. 6. Try to capture any early mover advantages 7. Pursue new customer group, new geographic areas 8. Make it easy and cheap for first time buyers to try the industrys first generation product. 9. Use price cuts to attract the next layer of pricesensitive buyers.
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Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

Strategies for Competing in Turbulent, High-velocity Markets

A company can assume any of the three strategic postures in dealing with high-velocity change: (See Figure 8.1) React to Change Anticipate Change Lead Change
(Contd on slide 8)
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Lecture 7 Figure 8.1 Managing the Challenge of High-Velocity Change

Defensive
Introduce better products in Response to new offerings Of rivals. Respond to unexpected Changes in buyer need and Preferences Adjust to new government policies Analyze the prospects for Market globalization Research buyer needs, Preferences, and expectations Monitor new technological Development closely to Predict future path.

Reacting To Change

React and respond As needed. Defend and protect the companys Positions.

Anticipating Change

Plan ahead for expected future changes -add/adapt resources and competitive capabilities -Improve product line - Strengthen distribution

Leading Change
Offensive

Seize the offensive Pioneer new and better Be the agents of Technologies Industry changes; Introduce innovative products set the pace That open new markets and Influence the rules Spur the condition of whole of the game New industries. Lecture 7 Strategic Management Force rivals to follow. Seek to set industry standards

Strategies for Competing in Turbulent, High-velocity Markets (Contd from slide 6)

The following strategic moves may offer best payoffs:

Invest aggressively on the R&D to stay on the leading edge of technological know how Develop and maintain the organizational capability to respond quickly to the moves of the rivals and surprising new developments. Rely on strategic partnerships with outside suppliers and with companies making tie-in products. Initial fresh actions every few months, not just when a competitive response is needed. Keep the companys products and services fresh and exciting enough to stand out in the midst of all the changes

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Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

Strategies for Competing in Maturing Industries

A Maturing industry is one that is moving from rapid growth to significantly slower growth. Characteristics: 1. Slowing growth in buyer demand generates more head-to-head competition for market share 2. Buyers become more sophisticated, often driving a harder bargain on repeat purchase 3. Competition often produces a greater emphasis on cost and service
(Contd on Slide 10)
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(Contd from slide 9)

4. Firms have a topping-out problem in adding a new facilities 5. Product innovation and new end-use applications are harder to come by 6. International competition increases 7. Industry profitability falls temporarily or permanently 8. A number of merger and acquisition takes place
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Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

Strategic Moves in Maturing Industries: 1. Pruning marginal Products and Model 2. More Emphasis on Value Chain Innovation 3. A Strong Focus on Cost Reduction 4. Increasing Sales to Present Customers 5. Purchasing Rival Firms at Bargain Prices 6. Expanding Internationally 7. Building New or More Flexible Capabilities.
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Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

Strategies for Firms in Stagnant or Declining Industries

For Competitive Advantage, needs one of the three strategic themes: 1. Pursue a focused strategy aimed at faster-growing market segments within the industry 2. Stress differentiation based on quality improvement and product innovation. 3. Strive to drive costs down and become the industries low-cost leader.
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Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

Strategies for Competing in Fragmented Industries

Hundreds even thousands of small and medium-sized companies, many privately held and none with a substantial share of total industry sales. Hotel, auto repair, apparels, gasoline etc
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Reasons why Fragmented;

Extensive and diverse market demand eg, hotel and restaurant in NY, London or Tokyo. Low entry barriers Absence of scale economies Customized product : Interior design, kitchen cabinet, ads Product or service is becoming global in the same competitive market arena. Technologies in the value chain are exploding The industry is young with no firms having yet developed the resource base, competitive capabilities and achieve significant market share.
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Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

Suitable competitive strategy options include Constructing and operating formula facilities Becoming a low-cost provider Specializing by product type Specializing by customer type Focusing on a limited geographic area
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Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

Strategies for sustainable Rapid Company Growth

Strategic Initiatives to craft covering three horizons

Horizon 1: Strategic initiatives to fortify and extend their position in existing business Horizon 2: Strategic initiatives to leverage existing resources and capabilities by entering new businesses with promising growth potential Horizon 3: Strategic initiatives to plant the seeds for ventures in businesses that do not yet exist.
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Lecture 7 Figure 8.2: The Strategic Horizons for Sustaining Rapid Growth
Portfolio of Strategy Initiatives Strategy Horizon 2 Strategy Horizon 3 Long-jump

Medium-Jump Initiatives to leverage Existing resources and Strategy Capabilities to pursue Horizon 1 Growth in new Businesses Moderate revenues Short-Jump And profit gains now, Initiatives to fortify and Extend current business But foundation laid for Sizable gains over Immediate gains in next 2-5 years Revenues and profits

Initiatives to sow the Seeds for growth in Businesses of the Future. Minimal revenue gains now and likely losses, but potential for Significant contributions To revenues and Profits in 5-10 years.

Time
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Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

Strategies for Industry Leaders

Stronger than average to powerful Well-known Leader in Low-cost or Differentiation Microsoft in computer software McDonalds in fast food Gillette in razor blades Wal-Mart in discount retailing Eastman Kodak in camera film Levi in jeans
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Some Industry Leaders:

Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

1. 2. 3.

Three contrasting strategic postures are open to industry leaders and dominant firms; Stay-on-the-offensive Strategy Fortify-and-defend Strategy Muscle-flexing Strategy

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Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

Strategy for Runner-up Firms

Offensive strategies to Build Market Share Growth-via-acquisition Strategy Vacant-Niche Strategy Specialist Strategy Superior Product Strategy Distinctive image Strategy Content Follower Strategy
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Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

Strategies for Weak and Crisis-Ridden Businesses

Four Basic Strategic Options:

1. Turnaround Strategies for Businesses in Crisis.

Turnaround can involve any of the following actions:

Selling of assets to raise cash to save the part of the business Revising the existing strategy Launching efforts to boast revenues Pursuing cost reduction Using a combination of these efforts.

2. 3. 4.

Fortifying and defend Strategy Liquidation End-game Strategy

Lecture 7 Strategic Management

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Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

10 Commandments for Crafting Successful Business Strategies

1. Place top priority on crafting and executing strategic moves that enhance the companys competitive position for the long run 2. Be prompt in adapting to changing market conditions, unmet customer needs, buyer wishes for something better, emerging technical alternatives, and new initiatives of competitors. 3. Invest in creating a sustainable competitive advantage 4. Avoid strategies capable of succeeding only in the optimistic circumstances.
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Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

5. Dont underestimate the reactions and the commitments of rival firms 6. Consider that attacking competitive weakness is usually more profitable and less risky than attacking competitive strength. 7. Be judicious in cutting prices without an established cost advantage. 8. Strive to open up very meaningful gaps in quality or service or performance features when pursuing a differentiation strategy, 9. Avoid struck in the middle strategies that represents compromises between lower costs and greater differentiation and between broad and narrow market appeal. 10. Be aware that aggressive moves to wrest market share away from rivals often provoke retaliation in the form of a marketing arms race or a price war to the detriment of everyones profit.
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