BUSINESS STRATEGY II

Strategic Groups & Industry Evolution

STRATEGIC GROUPS TWO EXAMPLES
• U S Steel Industry- High Cost Producers like US Steel, LTV Steel, Bethlehem Steel-around US$ 1873 per ton-Integrated Steel Mills • Mini Steel Mills- Specialty Steel-5 Million tons, US$ 400 per ton),Nucor, Chaparral, Florida Steel, North Western Steel- 21 million tons, US$ 280 per ton • Cheap Imports- 2 million tons US$ 200 per ton

STRATEGIC GROUPS TWO EXAMPLES
• Pharma Industry- Proprietary groups like Merck, Pfizer, Eli Lilly-High COST, high R&D Spending- Low Product Differentiation, Price Competition • Generic Group- Dr Reddy’s Labs, Ranbaxy, Marion Labs,Carter WallaceLow Cost, Low Spending on R&D

INDUSTRY EVOLUTION
• Strategic Types- Defenders preoccupied with cost reduction, no innovation, Prospectors with broad product items, focus on innovation, inefficient, Analyzers I both stable & variable markets stress on innovation, creativity, differentiation but also efficient, Reactors with no consistent strategy, stuck in the middle

COMPETITIVE CHANGES IN INDUSTRY EVOLUTION
• Embryonic Industry Environment-buyers unfamiliar with products, slow growth, prices high like in PCs at the beginning • Growth Industry Environment- products are familiar, new customers and increasing demand, low prices due to experience curve, low entry barriers, channels grow, competition, new entrants are absorbed because of expanding market,

COMPETITVE CHANGES ( CONTD)
• Shakeout Stage-Growth Stage not sustained, demand not from new customers but replacement- intense rivalry, excess capacity- price wars • Mature Stage- market saturated, replacement demand, no new entrants, firms compete by reducing prices and brand loyalty, cost reduction, emergence of oligopolies

COMPETITIVE CHANGES (CONTD)
• Declining Stage- follows the mature stage, technological substitutions like courier service, e mail etc. throwing out postal services- intense rivalry • The stages may not always follow the same sequence

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