CHAPTER SEVEN

SUMMARY
REVIEW

Leticia Williams - Presenter

This chapter comprises of various Headings & Sub-heading such as: Fragmented Industries Chaining Franchising Horizontal Merger Embryonic & Grow Industries Complementary Assets Heights of Barrier Imitation Capacity Control Declining Industries
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*A Fragmented Industries is one composed of a large number of small & medium sized companies. eg. Video Rental, Auto Repair, Agriculture, Computer components/Hardware retail and the Construction Industries. New entry in the industry can keep the industry fragmented and high cost in transportation.
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In this industry customers needs are so specialized that only small job lots are required. You would use your customer group, customer needs and geographic region.

*Chaining Industries are established networks of linked merchandising outlets that are so interconnected they function as one large entity. eg. Department Stores, Supermarkets etc. they would open branches in different areas forming a chain of stores operating under one headquarters. Chaining strategy is pursue to obtain the advantage of cost leader in the market.
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*Franchising Industries is when the parent company grants the franchise the right to use the parent name, reputation and business skills. eg. Fast food Industries (KFC, Juici Patties etc)

*Horizontal Merger this occurs when two companies in the same market join together. The merger can either have a very large effect or little or no effect on the market.

eg. If a small drug store merge with another local small drugstore this would have minimal effect (S&S & Simpsons Pharmacy). But if a large company with say for instant a 60% of the market should merge with another large company with another 30%, that would give them a 90% market share, which would be unfair market over there competitors (Digicel merging with Claro).
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*Embryonic Industry this simply means that they are the first in a new market. High profit in this industry can attract potential imitators and second movers. The imitator or second movers would usually enter this market in the growth stage and may cause the first mover company to losses some of its commanding position. Three strategies are available to the company:
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To develop and market the innovation itself. To develop and market innovation jointly with other companies. To license the innovation to others and let them develop the market. eg. Excelsior Water Crackers first start making and crackers National & Lasco was the second mover.
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Complementary Assets are those assets required to exploit (make full use of & derive benefit from) a new innovation & gain a competitive advantage successfully. Patent are easy to imitate and study shows that 60% of patented innovations within 4 yrs. For you to imitate effectively you would need R&D Skills (research and development), Access to Complementary Assets.

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*Mature Industry is often dominated by a small number of large companies. It can also be many medium size and a host of small specialized ones, the large companies determine the nature of the industrys competition. Competitive advantage in a Mature Industry - employees to permit them to adjust their work to meet changing circumstances.
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Strategies to deter entry in this industry: Product Proliferation, Price Cutting, Maintaining Excess Capacity. Product Proliferation the strategy of pursuing a broad product line to deter entry.
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Price Cutting in some cases pricing strategies involve price cutting this will deter other companies from entering the market due to fair of losing. Maintaining Excess Capacity- is producing more of a product than customer can currently demand. In general the profitability of a Mature Industry can be strained by:
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1. Sluggish demand growth, 2. Lack of product differentiation & 3. Customers bargaining power. How to manage Rivalry in Mature Industries: Pricing Signalling is a message sent to consumers and producers in the form of a price charged for a commodity.
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Price Leadership- taking on by one company of the responsibility for setting industry prices. eg. Grace Kennedy & Digicel. Non-price Competition- is a marketing strategy in which one firm tries to distinguish its product or service from competing products on the basis of attributes like design and workmanship.
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This normally involves promotional expenditure, (such as advertising, selling staff, the location convenience, sales promotion, coupons, special orders or free gifts) marketing research, new product development, and brand management costs.
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Market Penetration- this is one of the Product-Market Growth Matrix this occurs when a company enters a market with current products. The best way of doing this is to attract non-users of your product or convincing current clients to use more of your product/service. (by advertising)
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Product Development- is the creating of new or improved products to replace existing ones. eg. McDonald is always in the fast food industry but frequently markets new burgers.
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*Declining Industries industries start declining for several reasons including technological changes, social trends and demographic shifts. eg. Railroad and Sugar Industries. The railroad decline because of non servicing of trains and railroad, and technology and social trends. Person want to be in there own cars and SUVs, and taxis becomes more frequent and available.
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Sugar factories building and equipment are outdated and dilapidated. And because of the crop metal industry equipment and rail roads theft are rampant and this lead to a further decline in these industries.

THE END

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