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Tailoring Strategy Chapter Title to Fit Specific Industry and Company Situations
Screen graphics created by: Jana F. Kuzmicki, Ph.D. Troy University-Florida Region
2007 The McGraw-Hill Companies, Inc. All rights reserved.
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McGraw-Hill/Irwin
dependable advantage is
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Chapter Roadmap
Strategies for Competing in Emerging Industries Strategies for Competing in Rapidly Growing Markets Strategies for Competing in Maturing Industries Strategies for Competing in Stagnant or Declining Industries Strategies for Competing in Turbulent, High-Velocity Markets Strategies for Competing in Fragmented Industries Strategies for Sustaining Rapid Company Growth Strategies for Industry Leaders Strategies for Runner-up Firms Strategies for Weak and Crisis-Ridden Businesses Ten Commandments for Crafting Successful Business Strategies
8-3
drivers shaping a
firms strategic options fall into two categories
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
8-5
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
When technological uncertainty clears and a dominant technology emerges, try to capture any first-mover advantages by moving quickly Form strategic alliances with
Enter
Make
it easy and cheap for first-time buyers to try product advertising emphasis on
Focus
Use
Sales and revenues take off Profits appear Cash flows turn positive
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 companys success
8-8
A company needs a strategy predicated on growing faster than the market average so it
Can
Improve
8-9
down costs per unit to enable price reductions that attract droves of new customers Pursue rapid product innovation to
Set a companys 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 companys geographic coverage Expand product line to add models/styles to appeal to a wider range of buyers
8-10
More
Greater
Topping Product
out problem in adding production capacity innovation and new end uses harder to come by
International
Industry Mergers
competition increases
Emphasize
Strong
Increase
internationally
a ho-hum strategy with no distinctive features thus leaving firm stuck in the middle slow to mount a defense against stiffening competitive pressures
Concentrating
Being
Having
Overspending Failing
grows more slowly than economy as whole (or even declines) technology gives rise to betterperforming substitute products
Advancing
Customer
Changing Rising
group shrinks
lifestyles and buyer tastes
Competitive
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
8-16
Gradual phasing down of operations Getting the most cash flow from the business
Disengaging from an industry during early stages of decline Quick recovery of as much of a companys investment as possible
8-17
technological change
Short
Entry
product life-cycles
of important new rivals
Frequent
Rapidly
8-19
aggressively in R&D
Initiate
Develop
Shift resources
Adapt competencies
Create new competitive capabilities Speed new products to market
Use
Keep
expertise
Speed
Collaboration
Agility
Innovativeness Opportunism Resource
flexibility capabilities
8-21
First-to-market
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 industrys 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
8-22
Become
a low-cost operator
Specialize
by product type
by customer type
Specialize
Focus
8-26
8-27
8-28
should not pursue all options to avoid stretching itself too thin of medium- and long-jump initiatives may cause firm to stray too far from its core competencies advantage may be difficult to achieve in medium- and long-jump businesses that do not mesh well with firms present resource strengths of long-jump initiatives may prove elusive
8-29
Pursuit
Competitive
Payoffs
leaders
Runner-up
firms
Weak
or crisis-ridden firms
8-30
Well-known
reputation
Proven
strategy
Key
Muscle-flexing strategy
8-32
Stay-on-the-Offensive Strategies
Be
Best
Concentrate
on achieving a competitive advantage and then widening the advantage over time
Relentlessly
Cut operating costs Establish competitive capabilities rivals cannot match Make it easier for potential customers to switch their purchases from other firms to the leaders 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
8-34
Fortify-and-Defend Strategy
Objectives
Make
it harder for new firms to enter and for challengers to gain ground onto present market share
current market position
Hold
Strengthen Protect
competitive advantage
8-35
Provide
Introduce Add
Keep
Build
Muscle-Flexing Strategy
Objectives
Play
competitive hardball with smaller rivals that threaten leaders position smaller rivals that moves to cut into leaders business will be hard fought rivals they are better off playing follow-the-leader or else attacking each other rather the industry leader
8-37
Signal
Convince
Counter
Offer
Dissuade
Provide
Make
Use
Muscle-Flexing Strategy
Risks
Running
Alienating
Arousing
8-39
challengers
Focusers
Im trying!
Perennial
runners-up
big size is a competitive asset, firms with small market share face obstacles in trying to strengthen their positions
big size provides larger rivals with a cost advantage, runner-up firms have two options
Lower costs and prices to grow sales or Out-differentiate rivals in ways to grow sales
Acquire smaller rivals to expand companys market reach and presence Find innovative ways to drive down costs to win customers from higher-priced rivals Craft an attractive differentiation strategy
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
8-43
strategy concentrated on end-use applications market leaders have neglected of an ideal vacant niche
Characteristics
Approaches
Reputation for charging lowest price Prestige quality at a good price Superior customer service Unique product attributes New product introductions Unusually creative advertising
8-49
involves avoiding
Approaches
Launch
Employ
Pursue
Adopt
Revise
Launch
Cut
costs of efforts
8-52
Combination
middle course between status quo and exiting quickly gradually sacrificing market position in return for bigger near-term cash flow/profit
Involves
Objectives
Hold
reinvestment to minimum
little priority on new capital investments
Place
Emphasize
Trim
Do
Shave
Building
Market
Reduced
levels of competitive effort will not trigger immediate fall-off in sales can re-deploy freed-up resources in higher opportunity areas is not a major component of diversified firms portfolio of businesses
8-55
Firm
Business
Liquidation Strategy
Wisest
Lack of resources
Dim profit prospects May serve stockholder interests better than bankruptcy
Unpleasant
strategic option