Managing Through The Life Cycle

Dr. Amit Shrivastava Page No.
1
NLDIMSR
Managing through the Life Cycle
Dr. Amit Shrivastava Page No. 2

IndiGo
• IndiGO has been offering smooth and gimmick free flight experience at affordable prices since 2005
• IndiGo has features like other low-price air-lines in Europe and US – minimum cost of service, no frills (like food),
internet ticket sales, Check-in booths and Q-busters (boarding pass print)
• Ties up with Makemytrip.com and Yatra.com for e-ticketing, Tied up with Sarovar for dining services in flight+hotel
options
• IndiGo boasts of low-switching costs from full-service provider airliner
• IndiGo proactively saved valuable resources by ordering 100 A-320 for better bargaining power and lower prices
• IndiGo reduces turn around time to less than 30 minutes and saves cost on idling aircraft
• Works hard to maintain high-quality employee relations – On-time and hassle-free is the mantra of the org
• On-time meeting, salaries, promotions, hiring, increments and bonuses
• IndiGo low fares motivate price-conscious leisure and business traveller
• IndiGo unbundles select services – preferential seating, meals and drinks, baggage plus, sports equipment, musical
instrument – opportunity to earn ancillary revenues

Pre-emptive strategy
• A pre-emptive strategy means acting before your competitors – perhaps targeting an emerging segment or introducing new
product
• Pre-emption involves risk and failure may be visible and costly but the cost of not acting may be significant particularly for
established players – These opportunity costs are increased market share or profits
• You are a computer company; you have no experience in digital music. Napster has closed and down-loading music via the
Internet faces immense uncertainty. Sony owns portable music players with the Walkman; this is their turf, and they will fight
you fiercely
• By not acting one the firm open up entry for potential competitors – Microsoft also missed this opportunity – “I regret that
there was a period around 2000s, when we were so focused on the on what we had to do around Windows that we weren’t
able to deploy talent to the new device called mobile phone – Steve Balmer”
• Jet Airways and Kingfisher not acted effectively against in the face of disruptive challenge against low-cost airlines
• The Value of Pre-emptive Strategy
• Meyer Feldberg Columbia School Dean realized that several leading schools in US were developing international
presence.
• He knew that LBS (London Business School) would be desirable partner for many U.S. schools, particularly Wharton
Developing Competitive Strategy
• Firm develops strategic options by developing scenarios that let it anticipate future competitive actions
• Each scenario has limited number of strategic options
• These options act as valuable input in formulating marketing strategy
• When life cycles were longer, firms could enter a market, fail, redevelop products and re-enter with a reasonable chance
of success
• Shortening life cycles reduces the time – to earn the highest unit margins
• Good strategic thinking early in the life cycle is important than ever

Scenario 5
Maturity – But Not Really!
Scenario 6
Maturity – Concentrated Market Leaders
Scenario 7
Maturity – Concentrated Market Followers
Scenario 8
Scenario 4 Maturity – Fragmented Markets
Late Growth Scenario 9
Decline
Scenario 2
Early-Growth Leaders
Sales Volume
Scenario 3
Early-Growth Followers Late Maturity
Growth
Decline
Scenario 1
Pioneers
Early Growth
Time

Scenerio 1 : Introduction Stage: Pioneer
• Gillette spent $1bn on developing and initially marketing the Mach3 razor
• First year marketing spends were $300 mn for a simultaneous launch in 19 countries
• Gillette’s corporate profits dropped in the launch year due to Mach3 stratup expenses
• Pioneering firms do not make profits in the introduction stage. They incur expenses on:
• R&D, market launch expenditures, plant, machinery, systems, cash-flows negative,
• Large firms typically subsidize new product launches with cash earned from more established products at their later life
cycle stages – Tide laundry detergent funds new ventures for P&G, Google Adwords for Google
• Small firms typically have fewer resources and often need outside resources – Angle investors.
• Later venture capitalists may provide financial backing when the opportunity starts to show promise – Flipkart, Lenskart,
Makemytrip and Myntra all got off the ground with this

Scenario 1 : Introduction Stage: Pioneer
• A critical pioneering task is to ahead of competition
• An effective way of slowing competitive entry is to create barriers – Government specific, product-specific and firm-
driven
• Government-Imposed Barriers
• Patents are the most common govt-imposed entry barriers – It provides owners with legal monolpies – Pharma
companies are frequent user of patent barriers
• Sometimes Pioneers benefit from the barrier structure already in place – Banks like ICICI, Axis Bank, Yes Bank and
SBI benefit from regulations that require difficult to secure license from new entrants, Coal-based power
companies depend upon tightly controlled mining industry
• Product-specific barriers
• Includes access to capital, raw materials, human resources
• The product itself can raise these barriers – Metro services in cities such as Lucknow or Jaipur, the required product
investment and relatively smaller market size with long break even point would not allow multiple players to
flourish. The product or process-specific innovations cause product-specific barriers to diminish over time
• Firm-driven barriers – Penetration Pricing and First Mover Advantage
• Penetration pricing
• The plays on low-profit margins over a long period
• PP requires substantial resources as the firm continually cut costs and prices, build capacity
• If PP is successful – low prices built on low costs and experience curve advantages are a significant entry
barrier
• PP is attractive if switching costs are high – Software services are good examples
• Firms selling consumer goods and consumables – razors and razor blades, printers and toners
• PP works best when demand does not vary – PP fails when demand varies – GM & Ford Ford’s Model T with
Cheverolet but other segments – Buick, Cadillac etc.

• Penetration pricing
• The plays on low-profit margins over a long period
• PP requires substantial resources as the firm continually cut costs and prices, build capacity
• If PP is successful – low prices built on low costs and experience curve advantages are a significant entry
barrier
• PP is attractive if switching costs are high – Software services are good examples
• Firms selling consumer goods and consumables – razors and razor blades, printers and toners
• PP works best when demand does not vary – PP fails when demand varies – GM & Ford Ford’s Model T with
Cheverolet but other segments – Buick, Cadillac etc.

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• First Mover Advantage
• The pioneer may be able to sustain technological advantage by improving products or developing new
applications – DuPont, 3M, Duracell with Alkaline Batteries, e-bay used network effects
• Early market entry gives superior market knowledge
• Key for sustaining FMA is to establishing the standard against which customers judge subsequent entries – Maruti –
Family Passenger Car, Tata Truck – Load Carriers

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Scenario 2 : Early Growth Leaders
• Early-Growth Leaders
• The leader has worked out market-entry problems and unit costs are under control
• The firm may be profitable – Cash flows may still be negative as it invests to grow the market and adds capacity
• The leader has four strategic options – two each based on continuing and surrendering leadership
• Continue to be a leader – enhance position
• Continue to be leader – maintain position
• Surrender leadership – retreat to market segment or segment(s)
• Surrender leadership – exit the market

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• Continue To Be Leader: Enhance Position
• The firm grows and broadens the market by continuously investing in R&D to produce new products, extensive advertising
and personal selling
• Enhances production capacity to aggressively reduce costs – Airtel outsourced its network and information technology to
other companies so that it could focus on marketing
• Firm communication moves from market development to emphasizing superiority
• Leaders may also block the competitor by entering emerging segments, new geographical areas and distribution channels
• Continue To Be Leader: Maintain Position
• The firm may prefer conservative approach because a strong competitor may enter or customer demand additional source
• Multiple standards cause uncertainty – The firm may like to compete on one standard
• The firm must select their market segment carefully – The firm shifts from first time users to repeat users to acquiring
competitive customers – Amazon began by selling books and then recorded music, electronics and subsequently other
products

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• Surrendering Leadership: Retreat to a market segment or market segments
• The firm may lack resources for fully developing the market or funding an ongoing stream of products or financially
stronger competitor sets a market leadership goal and firm knows it can not win head-on battle
• The follower initiates a penetration strategy by building economies and cutting prices – The firm may identify less price
sensitive segments where it can add value and over come the competitor’s cost advantage
• The firm requires good marketing research capability to identify the segments and the flexibility to address them
• Apple, HP and IBM all experiences these pressure – but Apple survived because of the graphics art segment and creativity
• Surrendering Leadership: Exit the market
• As customer needs and markets evolve – the firm must continually assess the value of its market position
• Based on the projected value of discounted profits – If this projected value is less than the current sales value – exit it
• The firms products may be strategically significant for a potential acquirer – fits well its current portfolio
• The acquirer has resources to invest and drive product growth – Busy Infotech gets sold to India Mart, Biotech firms face
the sell decision by inventing products they are ill-equipped to commercialize

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Scenario 3 : Early Growth Followers
• Some firms prefer to be followers by pursuing wait and see strategy and free ride on pioneer’s efforts in market development
• Follower leverages on past successes and learn from pioneer’s mistakes
• Unless the leader is price-skimming, followers are often unprofitable and cash flow is likely to be negative
• Followers have following options:
• Seek market leadership
• Settle for second place
• Focus on gaining leadership in a segment
• Exit the market
• Seek market leadership
• Imitation – The follower copies the leader but executes more effectively – Successful imitators spend heavily on catch-up
product development and outspend the leader in promotion
• The follower leverages the current distribution infra and highlights the differentiated value – The follower should consfuse
imitation with price-cutting. E.g. Facebook raced ahead of Myspace in social media

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• Leapfrog – The follower offers enhanced value by developing innovative and superior products or it enters emerging markets
before the leader
• It can spend heavily on R&D as well as marketing than the leader – Ninetendo and Sega Leapfrogged first-mover Atari’s original
video. Later Sony Play station leapfrogged both Ninetendo and Sega by offering 3-D graphics and better digital soundtrack
• Effective leapfroggers often do an excellent job in spotting segments before the leaders and in offering differential advantage
• In 1988, the Yellow Pages book was leader in local search services for businesses – In 2002 YP added online search. In 1996
justdial launched providing similar services – In 2007 Justdial leapfrogged YP by launching web-based version for small
customers – It also provided added advantage by launching mobile applications
• Settle for Second Place
• A follower needs substantial resources to become market leader, so settling for second position may be a reasonable and
profitable option.
• Several situations may support the alternative:
• Leader is content with current market share and does not want to increase it
• Customer may demand a second supplier – Smorgen set out to become Australia’s second domestic steel producer after
BHP
• Focus on Market Segment
• This option may be attractive if the follower has fewer resources than the leader and other followers and if the segment is
attractive
• When drugs go off the patent – the pharma companies withdraw the marketing support but add services for narrow physician
segment
• Exit the Market
• If the business sale value is greater than the projected discounted profit stream, the firm should consider exiting the market
• Since the product is in early growth and it may have higher value for a potential acquirer eager to enter the product’s market

Scenario 4 : Late Growth
• Early on most mobile offered same basic functions – Later, major players added features like messaging, music, color display
later calorie counter etc.
• The customers benefits and values that drove purchase in introduction or early growth stage are important however they may
still not make it to customer choice decisions – These attributes become qualifiers or antes but not determining benefits and
values
• Early in the air travel market, the safety was critical – Today most flyers believe that all major airliners flying similar aircrafts are
equally safe, hence safety is an ante.
• Determining benefits and values are time-convenience, frequent-flyer miles, coverage and availability of direct flight
• The firm has to target the evolving segment – which has an unstated need that can create opportunities
• Successful firms address target segments with rifle shot marketing and then build defensible position against the competitors
• Even small segments may offer good profit potential – Many local and regional retailers successfully compete against national
chains
• In northern India – Mr. Brown Bakery started in Lucknow expanded to other cities clearly focusing on gourmet bakery products
• Thaggu ke Laddu (Kanpur) and Om or Prakash Namkeen (Indore) by targeting a narrow segment
Scenario 5 : Maturity – But Not Really
• Before the firm examines the strategic options in maturity – It must affirm that the life cycle really is in maturity
• Some authors assert “There is no such thing as matured market – there are only mature managers!”
• Barriers to Growth
• Behavioral Barriers – Significant behavioural change by the customer is often a barrier – Bicycles were old-fashioned in late
1970s and 1980s but the price and sales increased dramatically after exercising became fashionable in the 90s.
• Coffee consumption grew outside the home as consumer embraced new and trendier establishments such as Starbucks
• Economic Barriers – Economic barriers are often linked to technology – When Monsanto lost patent immunity in Phillipines on
“Herbicide” – It cut price to compete with cheaper generics. Monsanto discovered, it has underestimated the price elasticity.
Sales grew dramatically when many farmers could afford the “Herbicide” .
• Government-Imposed Barriers – When the government removes regulations, competitors often enter and growth explodes.
Deregulation of air transportation spawned rapid growth in air freight and passenger air travel.
• Technological Barriers – Innovation may destroy technological barriers to growth. Mechanical watches to quartz watches, wind-
up radio to transistor.
•
• Increase product use
• The firm may increase product use via reminder promoting different applications, occasions and locations, providing incentives
and bundling opportunities to reduce undesirable consequence
• Change the model – Fashion firms make seasonal changes in the clothing styles; auto firms change models, software companies
introduce new and improved versions
• Design the product to expire – Incorporate discard date to encourage repurchase. Incorporate devices to indicate product
disposal time – Physical indicators on razors, batteries and water filters
• Develop new produce use – Pidilite developed Fevicol for carpenters and realized potential for consumers and encouraged usage
by introducing usages for stationery, crockery etc. Arm & Hammer Baking soda used for baking and antacids developed many
new uses – removing refrigerator smell and sink odours, treating swimming pools, sanitize laundry.
• Improve packaging for better ease of use – Single-serving cereals, storage-friendly packages, individual laundry and dishwasher
tablets, storage friendly bulk items like Coke and Pepsi 2.5 Ltrs.
• Incraese quantity per use occasion – Options include increasing package size, like two liter vs 1 liter Pepsi, increasing the
opeming for dispensing ease
• Make the product easier to use – Consumer do not have to clean or disinfect the contact lenses. Pharma firms often redesign
injectable drugs as tablets
• Improve the Product/Service - Firms experience sale to slow if products do not satisfy customer needs – The remedy is improve
offer. Colorx introduced lemon-fresh version of Pine-Sol houselhold floor and wall cleaner – Sales grew by 25%
• Colorx added a squirt of floral scent and lemon to Colorx bleach and gained 1% market share
• Since product quality has improve significantly and gaining product based advantage becomes difficult hence firms use services
to rejuvenate their brands – Asian Paints started services in the area of painting the house from selling paints before
• Improving physical distribution
• Coca-cola uses any distribution that works in a geography – Motor cylces, Pack mules or camels – to get to rural backwards
• Kerala fishermen use mobile phone to track and respond to market demands
• Reposition the Brand
• The firm offers the same product but with new benefits and values for new customers – fine grained segments
• Honda repositioned motorcycles for long haired guys and the police officer chasing them to a family activity
• Tata Nano’s low price gave it a cheap car positioning before Tata repositioned as smear city car with better interiors, power
steering and fuel efficiency.
• Enter New Markets
• When fax capability threatened overnight document delivery – The Fedex refocused on shipping goods for direct marketers –
the changed focus positioned Fedex as an essential part of the new e-commerce industry.
• In India Cummins, gained 40% market share in the low-horse power generator market with lower-powered modularized engines
with add-ons – ready to assemble gensets for different segment such as farmers and small retailers in power-deficient states

Scenario 6 : Maturity – Concentrated Market Leaders
• Concentrated Markets support a few substantial competitors whose aggregate market share often exceeds 60%
• The market leader has two strategic options:
• Maintain leadership over the long run
• Harvest the business
• Maintain leadership over the long run
• The core decision for maintaining leadership is:
• Choosing the right investment levels
• Choosing the right areas – the firm may reap profits for many years
• Over investment to gain market share from entrenched competitors often waste resources. Pressures for overinvestments
are:
• Few alternative opportunities – The firm fails to develop other growth opportunities like new product or strategic
alliances
• Internally focused funding criteria – The firm bases funding on current financial performance. The firm underfunds
unprofitable new products and overinvests in mature products
•
• Reasons for under investment are:
• Fear of cannibalization – The firm could maintain leadership by introducing lower-profit versions but the firms fails to act in the
fear of losing sales of higher profit products
• Inertia – Performance is acceptable and firm sees no reason to change
• Limited view of competition – The firm takes too narrow a view – International paper (U.S.) took little action as disposable plastic
cups replaced its market leadership in paper-cups
• Misunderstanding the Challenger's Strategy - The firm’s competitive data-gathering and analysis is weak
• Complacency and arrogance can accentuate any or all of these errors and past successes blind the firm of evolving realities
• To maintain the leadership, the firm should be ready to react to the follower actions - Whirlpool’s Maytag acquisition to frustrate
Electrolux and Haier
• The firm can maintain leadership by continuous product development – When test results indicated the Lipitor reduces the
probability of heart-attack by 16% - Pfizer widely advertised and achieved over 40% market share
• The firm should tightly manage working capita; by reducing accounts receivables and lengthening account payables

• Addressing Low Price Competitors
• Leaders from mature Western Markets often face competition from low price/low cost competitors – Aldi (Germany), Huawei
(China), Ikea (Sweden) and RyanAir (Ireland) have made it difficult for traditional leaders
• Strategic options include:
• Do nothing – Wait and see – Lets the leader gain market insight into the new entrant’s strategy and performance
• Develop a dual strategy
• Continue with current product.
• Introduce low-price/low-cost offer to compete with the follower head-on.
• The firm must set clear customer expectations – Less price implies less service
• Be prepared to cannibalize the original business
• Several actions such as:
• Reduced cost, limited product range, website-only order, low technical support, delivery in certain quantity
• Switch to solutions – The firm makes price less competitive by bundling the product with service – IBM, Xerox

• Harvest
• The may be a market leader but Harvest may be better than maintaining sales and market share. Reasons include:
• Change in firm strategy
• The product becomes less central to the firm – Pfizer redefined itself as pharmaceutical firm and divested over-the-counter
products
• Desire to avoid specific competitors – If the firm forecasts tougher competition, harvesting may be the best option –
Westinghouse exited traditional in electrical products where GE was frequently successful
• Government regulations – The government may restrict the industry or eliminate the product use – Many governments have
banned the use of some pesticides
• Investment requirement are too high – Necessary investment to remain competitive like new products or new process
technology may be too high – British Aerospace (BA) launched the world’s first jet aircraft – but costs to develop and produce to
develop large commercial jet aircraft rose. BA withdrew except as a part-owner and subcontractor for Airbus

Scenario 7 : Maturity – Concentrated Market Followers
• Followers have smaller market shares than their leader; they probably also have higher costs, lower profits and are weaker
financially, but leader can lose position due to poor decisions and followers may attain leadership – IndiGo, Delta and United
Airline.
• Most firms are in this scenario hence it has broad applicability. The follower has three options and each with several sub-
options:
• Improve market position:
• Market segmentation
• Good segmentation is the dominant option for counter-acting the market leader’s advantage – HMT was a market
leader when Tata (Titan) launched in 1984 – Titan introduced multiple watch varieties to respond to customer tastes
and now Titan has more than 60 percent market share.
• FabIndia built a Rs550 crore business by targeting customers who like stylish ethnic wear
• Firms often target segments by adding benefits to satisfy customer’s even fine-grained needs at higher prices – but in
maturity there is often a segment that wantsbasic product (back to basics) at a lower price –Honda City, Maruti Alto,
IndiGo etc.
• Kenneling
• Kenneling is a metaphor for brining several dog (Seemingly worthless) products together – A follower ay acquire several
unprofitable (or marginally profitable) low-market share products and then execute a roll-up into a single offer
• Asea Brown Bovery (ABB) acquired many small, local, heavy-equipment manufacturers in different countries.
• Each acquired entity eliminated marginal and unprofitable products so as to specialize in producing a few products.
• Each national (acquired) firm offers a product line by securing products from sister firm and provide local customer
service thus ABB secured significant production economies and rates its kennelling strategy as very effective.
• Direct Attack
• If the leader has been lazy, underinvested, sets price too high or served customer poorly, direct attack may be the follower’s best
option
• Good market intelligence helps find the leader’s weak spots – so the follower can invest to exploit them
• Firefox offering greater virus security and faster inter-website speed has earned roughly 30% global market share of web
browsers mostly taken from Internet Explorer.

• Keep on Truckin
• Maintain Position
• Holding market share roughly constant over the long-run can be viable if the firm has a profitable market position and
strengths in one or more segments
• Royal Enfield has a relatively low market share of the motorcycle market – but design, performance and community
building have provided a loyal user base.
• The firm may also leverage its position to other markets and segments like Royal Enfield’s U.S. counter part Harley-Davidson
restaurants
• Rationalize Position
• If profits are marginal or negative, rationalizing operations may be the way to go.
• The firm should examine all aspects of business such as operations, distribution, sales with a fine-tooth comb and make tough
cost-cutting decisions
• The form may forestall an exit, retain a skilled workforce and continued access to raw material or technology – may be useful in
future
• Keep on Truckin
• Exit
• Follower should choose exit if profitability is unlikely and the product’s future is doubt-ful, perhaps due to negative brand
image and slowing market demand.
• Divest – By finding a buyer for which the product is a good fit – the firm can secure cash quickly
• Bristol-Myers Squibb divested Clairol (headache pain reliever) to Proctor & Gamble
• Bristol-Myers Squibb divested Excedrin(personal care product) to Novartis
• Liquidate – If no buyers appear, the only reasonable action is liquidation – closing down and selling assets

Scenario 8 : Maturity – Fragmented Markets
• Fragmented Markets have many players but no firm is dominant. Hence leader or follower distinction have little relevance.
• Acquisition – Acquisition is similar to kenneling – A global firm may acquire many national firms to secure greater market share
• AXA the French Insurance giant built strong regional position in the fragmented global insurance industry by acquiring or
venturing various European Insurance firms and Equitable (U.S.)
• Standardization and Branding
• In fragmented industries many players typically offer a wide range of products/services
• Standardization is a way to reduce variation and improve consistency across various suppliers; branding assures customers
that each provider supplies the same value
• Aditya Birla and Tata both offer lesser known products in many markets. By promoting the corporate brand, customers
have confidence that individual products will deliver the promised value.

Scenario 9 : Decline
• In declining stage, the competitor entry is unlikely and competitors exit
• Two important dimensions are important in analysing the Decline stage
• Business Hospitality – A decline market is inhospitable if;
• Decline is rapid and/or uncertain
• The market is commoditized, there is no price-insensitive segments
• Competitors are viable and credible
• Customer switching costs are low
• Competitors are not able to exit the business
• Characteristics of hospitable markets are opposite of these conditions
• Business Strength
• Firms with good business strength should have
• Low costs
• Good raw material contracts

Scenario 9 : Decline
• Leadership – Pursuing leadership is a viable option when the market is hospitable and the firm has high business strength
• Publicly recognize the decline – But also demonstrate its commitment
• Market aggressively by adding new products, advertising and promotion or cutting prices – The newspaper industry
• Consider reducing production capacity
• Consider encouraging competitors to exit by offering long-term supply contracts for their customers

Thank You

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Dr. Amit Shrivastava Page No.