tailoring ppt

1

LECTURE 7

Tailoring Strategy to Fit Specific Industry and Company Situation

M Akbar Ali bpm ppmDIG, Bangladesh PoliceEmail: [email protected]: +8801711806888

2

Lecture 7

“Competing in the marketplace is like war. You have injuries and casualties, and the best strategy wins.”-- John Collins

Lecture 7 Strategic Management3

Lecture 7 Tailoring Strategy to Fit Specific Industry and Company Situations

This lecture looks at the strategy making task in nine commonly encountered situations:

1. Companies competing in Emerging Industries of the future

2. Companies competing in Turbulent, High-velocity markets

3. Companies competing in Mature, Slow-growth industries



4. Companies competing in Stagnant or Declining industries

5. Companies competing in Fragmented Industries

6. Companies pursuing Rapid Growth7. Companies in Industry Leadership

Positions8. Companies in Runner-up Positions9. Companies in Competitively Weak

Positions or plagued by crisis conditions.

5


Aim: • To give strong appreciation of the importance

of customizing a company’s strategy• To provide better idea as to how to weigh the

various external and internal considerations and balance the pros and cons of the various strategic options that are open to a company.



Companies competing in Emerging Industries of the Future

Strategic Avenues:1. Try to win the early race for industry leadership with risk-taking entrepreneurship, and a bold, creative strategy.2. Push to perfect the technology, to improve product quality, and develop additional attractive performance features3. As a dominant technology emerges, adopt it quickly.

7


4. Form strategic alliances with key suppliers to gain access to specialized skills, technological capabilities, and critical material or components.

5. Acquire or form alliances with companies that have related or complementary technological expertise.

6. Try to capture any early mover advantages7. Pursue new customer group, new geographic areas8. Make it easy and cheap for first time buyers to try

the industry’s first generation product.9. Use price cuts to attract the next layer of price-

sensitive buyers.



Strategies for Competing in Turbulent, High-velocity Markets

A company can assume any of the three strategic postures in dealing with high-velocity change: (See Figure 8.1)

React to Change Anticipate Change Lead Change

(Cont’d on slide 8)


Lecture 7 Figure 8.1 Managing the Challenge of High-Velocity Change

Reacting To

Change

•Introduce better products inResponse to new offerings Of rivals.•Respond to unexpected Changes in buyer need andPreferences•Adjust to new government policies

•React and respond As needed.•Defend and protect the company’sPositions.

Anticipating Change

•Analyze the prospects for Market globalization•Research buyer needs, Preferences, and expectations•Monitor new technological Development closely to Predict future path.

Leading Change

•Pioneer new and better Technologies•Introduce innovative products That open new markets and Spur the condition of whole New industries.•Seek to set industry standards

•Plan ahead forexpected future changes-add/adapt resources and competitive capabilities-Improve product line- Strengthen distribution

•Seize the offensive•Be the agents of Industry changes; set the pace•Influence the rules of the game•Force rivals to follow.

Defensive

Offensive

10

Strategies for Competing in Turbulent, High-velocity Markets (Cont’d from slide 6)

The following strategic moves may offer best payoffs: Invest aggressively on the R&D to stay on the leading edge

of technological know how Develop and maintain the organizational capability to

respond quickly to the moves of the rivals and surprising new developments.

Rely on strategic partnerships with outside suppliers and with companies making tie-in products.

Initial fresh actions every few months, not just when a competitive response is needed.

Keep the company’s products and services fresh and exciting enough to stand out in the midst of all the changes



Strategies for Competing in Maturing Industries

A Maturing industry is one that is moving from rapid growth to significantly slower growth. Characteristics:

1. Slowing growth in buyer demand generates more head-to-head competition for market share

2. Buyers become more sophisticated, often driving a harder bargain on repeat purchase

3. Competition often produces a greater emphasis on cost and service (Cont’d on Slide 10)

12

(Cont’d from slide 9)

4. Firms have a ‘topping-out’ problem in adding a new facilities

5. Product innovation and new end-use applications are harder to come by

6. International competition increases7. Industry profitability falls temporarily or

permanently8. A number of merger and acquisition takes

place



Strategic Moves in Maturing Industries:1. Pruning marginal Products and Model2. More Emphasis on Value Chain

Innovation3. A Strong Focus on Cost Reduction4. Increasing Sales to Present

Customers5. Purchasing Rival Firms at Bargain

Prices6. Expanding Internationally7. Building New or More Flexible

Capabilities.



Strategies for Firms in Stagnant or Declining Industries

For Competitive Advantage, needs one of the three strategic themes:

1. Pursue a focused strategy aimed at faster-growing market segments within the industry

2. Stress differentiation based on quality improvement and product innovation.

3. Strive to drive costs down and become the industries low-cost leader.



Strategies for Competing in Fragmented Industries

Hundreds even thousands of small and medium-sized companies, many privately held and none with a substantial share of total industry sales.

Hotel, auto repair, apparels, gasoline etc

16

Reasons why Fragmented; Extensive and diverse market demand eg, hotel and restaurant

in NY, London or Tokyo. Low entry barriers Absence of scale economies Customized product : Interior design, kitchen cabinet, ads Product or service is becoming global in the same competitive

market arena. Technologies in the value chain are exploding The industry is young with no firms having yet developed the

resource base, competitive capabilities and achieve significant market share.



Suitable competitive strategy options include

Constructing and operating “formula” facilities

Becoming a low-cost provider Specializing by product type Specializing by customer type Focusing on a limited geographic

area



Strategies for sustainable Rapid Company Growth

Strategic Initiatives to craft covering three horizons

Horizon 1: Strategic initiatives to fortify and extend their position in existing business

Horizon 2: Strategic initiatives to leverage existing resources and capabilities by entering new businesses with promising growth potential

Horizon 3: Strategic initiatives to plant the seeds for ventures in businesses that do not yet exist.


Lecture 7 Figure 8.2: The Strategic Horizons for Sustaining Rapid Growth

•“Short-Jump”Initiatives to fortify andExtend current business•Immediate gains inRevenues and profits

•“Medium-Jump”Initiatives to leverageExisting resources andCapabilities to pursueGrowth in new Businesses•Moderate revenues And profit gains now, But foundation laid forSizable gains over next 2-5 years

•“Long-jump”Initiatives to sow the Seeds for growth in Businesses of the Future.•Minimal revenue gains now and likely losses, but potential forSignificant contributionsTo revenues and Profits in 5-10 years.

Portfolio of Strategy Initiatives

Strategy Horizon 1

Strategy Horizon 2

Strategy Horizon 3

Time

20


Strategies for Industry Leaders “Stronger than average to powerful” Well-known Leader in Low-cost or DifferentiationSome Industry Leaders: Microsoft in computer software McDonald’s in fast food Gillette in razor blades Wal-Mart in discount retailing Eastman Kodak in camera film Levi in jeans

21


Three contrasting strategic postures are open to industry leaders and dominant firms;

1. Stay-on-the-offensive Strategy

2. Fortify-and-defend Strategy

3. Muscle-flexing Strategy

22


Strategy for Runner-up Firms Offensive strategies to Build Market Share Growth-via-acquisition Strategy Vacant-Niche Strategy Specialist Strategy Superior Product Strategy Distinctive image Strategy Content Follower Strategy



Strategies for Weak and Crisis-Ridden Businesses

Four Basic Strategic Options:

1. Turnaround Strategies for Businesses in Crisis. Turnaround can involve any of the following actions:

Selling of assets to raise cash to save the part of the business Revising the existing strategy Launching efforts to boast revenues Pursuing cost reduction Using a combination of these efforts.

2. Fortifying and defend Strategy3. Liquidation4. End-game Strategy



10 Commandments for Crafting Successful Business Strategies

1. Place top priority on crafting and executing strategic moves that enhance the company’s competitive position for the long run

2. Be prompt in adapting to changing market conditions, unmet customer needs, buyer wishes for something better, emerging technical alternatives, and new initiatives of competitors.

3. Invest in creating a sustainable competitive advantage

4. Avoid strategies capable of succeeding only in the optimistic circumstances.

25


5. Don’t underestimate the reactions and the commitments of rival firms

6. Consider that attacking competitive weakness is usually more profitable and less risky than attacking competitive strength.

7. Be judicious in cutting prices without an established cost advantage.

8. Strive to open up very meaningful gaps in quality or service or performance features when pursuing a differentiation strategy,

9. Avoid “struck in the middle” strategies that represents compromises between lower costs and greater differentiation and between broad and narrow market appeal.

10. Be aware that aggressive moves to wrest market share away from rivals often provoke retaliation in the form of a marketing “arms race” or a price war– to the detriment of everyone’s profit.

tailoring ppt

Documents

fit specific industry

leverage existing resources

industry leaders

product innovation

competitive capabilities

strategic moves

emerging industries

company situations