COMPETITIVE STRATEGY AND INDUSTRY ENVIRONMENT

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COMPETITIVE STRATEGY AND INDUSTRY ENVIRONMENT

• DR. MARK FRUIN
• BUSINESS 290/291

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SUSTAIN COMPETITIVE ADVAN DIFF INDUSTRY
ENVIRONMENTS

• RECOGNIZE DIFFERENT INDUSTRY ENVIRONMENTS
• FRAGMENTED INDUSTRIES VERSUS
• EMBRYONIC
• GROWTH (EMERGING)
• MATURE
• DECLINING
• (HIGH-TECH)

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FRAGMENTED INDUSTRIES

• A LARGE NUMBER OF SMALL AND MED-SIZED COMPANIES
• RESTAURANTS, HAIR SALONS, DRY CLEAN
• LOW BARRIERS TO ENTRY
• HARD TO REALIZE ECONOMIES OF SCALE SCOPE
• BETWEEN GENERIC STRATEGIES, WHICH ONE APPLIES?

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OVERCOMING FRAGMENTATION

• CHAINING STRATEGY (WAL-MART)
• FRANCHISING (CENTURY 21, McD)
• HORIZONTAL MERGER (BUDWEISER)
• CONSOLIDATE W/ NEW TECH
• AMAZON, eBAY
• CONSOLIDATE W/ HIGH LEVELS OF PERSONAL/PROFESSIONA
  L SERVICE
• HIGH END HEALTH CLUBS, LAW FIRMS

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EMBRYONIC/EMERGING/GROWTHINDUSTRIES

• EMBRYONIC INDUSTRY - JUST BEGINNING TO DEVELOP
• TECH INNOVATION DRIVES INDUSTRY
• EMERGING/GROWTH INDUSTRY WHEN MARKET DEMAND GROWS
  RAPIDLY
• MARKET DEMAND DRIVES INDUSTRY

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E/E/G INDUSTRIES

• SLOW GROWTH AT FIRST BECAUSE
• LIMITED PERFORMANCE/POOR QUALITY
• CUSTOMERS UNFAMILIAR W/ NEW TECH
• LACK COMPLEMENTARY PROD
• PRODUCTION COSTS HIGH
• AS INDUSTRY MOVES FROM EMBRYONIC TO GROWTH
• TECH PROGRESS MAKES PRODUCT EASIER TO USE
  INCREASES VALUE
• COMPLEMENTARY PRODUCTS APPEAR
• PRODUCT/PROCESS COSTS GO DOWN

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TECHNOLOGY OR S-CURVE REFLECTS CUSTOMER DEMAND

• INNOVATORS (?)
• TECHIES, GEEKS
• EARLY ADOPTERS (?)
• ENGINEERS, ENTREPRENEURS
• EARLY MAJORITY (?)
• PRAGMATISTS
• LATE MAJORITY (?)
• STUCK IN THE MUDS BUT NOT LUDDITES
• LAGGARDS (?)

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CROSSING THE CHASM

• GORDON MOORE, FORMER CEO OF INTEL ORIGINATOR OF
  MOORES LAW
• MANY COMPANIES CANNOT TRANSITION FROM EMBRYONIC
  TO GROWTH MARKETS
• FAIL TO DEVELOP MASS MARKETS NEEDED TO GROW
  PRODUCT (PUSH, NOT PULL)
• APPLE AS FIRM THAT FELL IN THE CHASM?

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FACTORS AFFECTING RATE OF ADOPTION NEW PROD

• PRODUCTS RELATIVE ADVANTAGE
• COMPATIBILITY WITH EXISTING NEEDS AND HABITS
• COMPLEXITY OR DEGREE OF DIFFICULTY IN
  UNDERSTANDING/USING
• TRIALABILITY
• OBSERVABILITY
• EXISTENCE OF COMPLEMENTARY PROD

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HOW SOON WILL RIVALS APPEAR?

• ARE COMPLEMENTARY ASSETS IMPORTANT HOW MANY
  SOURCES?
• HEIGHT OF BARRIERS TO IMITATION IN PRODUCTS
  PROCESSES?
• HOW MANY CAPABLE RIVALS?
• GO IT ALONE, LICENSE OR PARTNER?

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MATURE INDUSTRY STRATGIES

• STRATEGIES TO DETER ENTRY
• PRODUCT PROLIFERATION
• FILL ALL THE NICHES
• PRICE CUTTING
• NEW FIRMS TYPICALLY HAVE HIGHER COSTS
• MAINTAINING EXCESS CAPACITY
• PUT NEW ENTRANTS ON NOTICE THAT YOURE WILLING
  ABLE TO RAMP UP PROD

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STRATEGIES TO MANAGE RIVALRY IN MATURE IND

• PRICE SIGNALING
• CREDIBLE WILLINGNESS TO CUT PRICES
• PRICE LEADERSHIP
• TAKE LEADERSHIP IN SETTING PRICES OR RESPOND
  RAPIDLY WHEN OTHERS DO
• NON-PRICE COMPETITION
• PRODUCT DIFFERENTIATION
• MARKET PENETRATION (E.G., ADVERTISING)
• PRODUCT DEVELOPMENT
• MARKET DEVELOPMENT
• PRODUCT PROLIFERATION

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STRATEGY IN DECLINING IND

• ONCE DEMAND STARTS TO FALL, AN INDUSTRY IS IN
  DECLINE
• INTENSITY OF COMPETITION IN DECLINING INDUSTRIES
  VARIES WITH
• RATE OF DECLINE
• HEIGHT OF EXIT BARRIERS
• AMOUNT OF SUNK COSTS
• IF PRODUCTS ARE DIFFERENTIATED OR NOT

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STRATEGIES FOR DECLINING INDUSTRIES

• LEADERSHIP STRATEGY
• BUY OUT RIVALS, PICK UP MKT SHARE
• NICHE STRATEGY
• FIND PROFITABLE SEGMENTS
• HARVEST STRATEGY
• OPTIMIZE CASH FLOW AS EXIT INDUSTRY
• DIVESTMENT STRATEGY
• SELL OUT FAST (BEFORE OTHERS CATCH ON)