Professional Documents
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Chapter Roadmap
Strategic Alliances and Partnerships Merger and Acquisition Strategies Vertical Integration Strategies: Operating
Across More Stages of the Industry Value Chain Outsourcing Strategies: Narrowing the Boundaries of the Business Business Strategy Choices for Specific Market Situations Timing Strategic Moves To be an Early Mover of a Late
more separate companies where there is Strategically relevant collaboration of some sort Joint contribution of resources Shared risk Shared control Mutual dependence Alliances often involve Joint marketing Joint sales or distribution Joint production Design collaboration Joint research Projects to jointly develop new technologies or products
important objective
It helps build, sustain, or enhance a core
market opportunities
It mitigates a significant risk
to a companys business
product development
To fill gaps in technical or manufacturing expertise To create new skill sets and capabilities
Racing against rivals to build a market presence in many different national markets Racing against rivals to seize opportunities on the frontiers of advancing technology
Collaborative arrangements can help a company lower its costs and/or gain access to needed expertise and capabilities
process of building a global presence Gain inside knowledge about unfamiliar markets and cultures Access valuable skills and competencies concentrated in particular geographic locations Establish a beachhead to participate in target industry Master new technologies and build new expertise faster than would be possible internally Open up expanded opportunities in target industry by combining firms capabilities with resources of partners
firm often taking on a new name Acquisition One firm, the acquirer, purchases and absorbs operations of another, the acquired Merger-acquisition strategy
Much-used strategic option Especially suited for situations where alliances do not provide a firm with needed capabilities or cost-reducing opportunities Ownership allows for tightly integrated operations, creating more control and autonomy than alliances
or competitive capabilities
To invent a new industry and lead
the convergence of industries whose boundaries are blurred by changing technologies and new market opportunities (Merger of AOL and Time Warner )
same industry
Backward into sources of supply Forward toward end-users of final product Can aim at either full or partial integration
Activities, Costs, & Margins of Forward Channel Allies & Strategic Partners
users and better market visibility To compensate for undependable distribution channels which undermine steady operations To offset the lack of a broad product line, a firm may sell directly to end users To bypass regular distribution channels in favor of direct sales and Internet retailing which may
Lower distribution costs Produce a relative cost advantage over rivals Enable lower selling prices to end users
Outsourcing Strategies
Concept Outsourcing involves withdrawing from certain value chain activities and relying on outsiders to supply needed products, support services, or functional activities
Suppliers Internally Performed Activities Functional Activities
Support Services
Distributors or Retailers
specialists Activity is not crucial to achieve a sustainable competitive advantage Risk exposure to changing technology and/or changing buyer preferences is reduced It improves firms ability to innovate Operations are streamlined to Improve flexibility Cut time to get new products into the market It increases firms ability to assemble diverse kinds of expertise speedily and efficiently Firm can concentrate on core value chain activities that best suit its resource strengths
activities, thus
Hollowing out capabilities
Losing touch with activities and expertise that determine overall long-term success
Most important drivers shaping a firms strategic options fall into two categories
6-24
Turbulent Markets
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
creative strategy Push hard to perfect technology, improve product quality, and develop attractive performance features Consider merging with or acquiring another firm to Gain added expertise Pool resource strengths When technological uncertainty clears and a dominant technology emerges, try to capture any first-mover advantages by moving quickly Form strategic alliances with Companies having related technological expertise or Key suppliers
What Is the Key to Success for Competing in Rapidly Growing Markets? A company needs a strategy predicated on growing faster than the market average so it
Can boost its market share and
Improve its competitive standing vis--vis
rivals
Slowing demand breeds stiffer competition More sophisticated buyers demand bargains Greater emphasis on cost and service Topping out problem in adding production capacity Product innovation and new end uses harder to come by International competition increases Industry profitability falls Mergers and acquisitions reduce number of rivals
thus leaving firm stuck in the middle Being slow to mount a defense against stiffening competitive pressures Concentrating on short-term profits rather than strengthening long-term competitiveness Being slow to respond to price-cutting Having too much excess capacity Overspending on marketing efforts Failing to aggressively
Invest in product / process innovations Pursue cost reductions
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
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
customer expectations
First-to-market capabilities
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
First-Mover Advantages
When to make a strategic move is often as crucial
competitive advantage by
Abandoning efforts to beat out competitors in existing markets and Inventing a new industry or distinctive market segment to render existing competitors largely irrelevant and
by competition
Industry offers wide-open
First-Mover Disadvantages
Moving early can be a disadvantage (or fail to