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Strategy-A View from the Top Chapter 7-Business Unit Strategy: Contexts and Special Dimensions

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Strategy-A View from the Top Chapter 7-Business Unit Strategy: Contexts and Special Dimensions Crystal Hill Stephen Lechtenberg Anand McGee Allison Purtell – PowerPoint PPT presentation

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Title: Strategy-A View from the Top Chapter 7-Business Unit Strategy: Contexts and Special Dimensions


1
Strategy-A View from the Top Chapter 7-Business
Unit Strategy Contexts and Special Dimensions
  • Crystal Hill
  • Stephen Lechtenberg
  • Anand McGee
  • Allison Purtell
  • Jason Torres

2
Strategy in Emerging Industries
  • New Industries present new opportunities
  • Technologies are typically immature
  • Costs are typically high and unpredictable, entry
    barriers are low, supplier relationships are
    underdeveloped, and distribution channels are
    just emerging
  • Timing can be critical in determining strategic
    success-first mover advantage

3
Strategic Leadership in Emerging Markets
  • Need ability to shape the industry structure
    based on
  • Timing
  • Method of entry
  • Experience in similar situations
  • Leadership opportunities ability to control
    product or process development through
  • Superior technology
  • Quality or customer knowledge
  • Ability to leverage existing relationships with
    suppliers/distributors
  • Access to a core group of early, loyal customers

4
First Mover Advantage
  • Have the opportunity to shape customer
    expectations and define the competitive rules of
    the game
  • Examples
  • Microsoft Windows Operating System
  • Starbucks Saturation of the market Selling
    CDs, coffee merchandise, etc. in stores

5
Strategy in Growth Industries
  • Increased segmentation often accompanies the
    transition to market maturity
  • Cost control becomes an important element of
    strategy as unit margins shrink and new products
    and applications are harder to find
  • Process innovation important dimension
  • Competing companies that enter growth industries
    are labeled followers

6
Followers
  • Have the opportunity to evaluate
  • Alternative technologies
  • Delay investment in risky projects of plant
    capacity
  • Imitate or surpass superior product or technology
    offerings
  • Starbucks Selling coffee in grocery stores

7
Internal Development or Acquisition
  • Internal development-creating a new business in a
    somewhat unfamiliar competitive environment
  • Turn to existing players in
  • Joint Ventures
  • Alliances
  • Acquisitions
  • 2 issues analyzed as part of the decision
    process
  • What are the structural barriers to entry?
  • How will incumbent firms react to intrusion?

8
Strategy in Mature and Declining Industries
  • Choose a balance between differentiation and low
    cost postures and deciding whether to compete in
    multiple or single industry segments
  • Firms earn profits during long maturity stage
    when they
  • Concentrate on segments that offer chances for
    higher growth or higher return
  • Manage product and process innovation aimed at
    further differentiation, cost reduction, or
    rejuvenating segment growth
  • Streamline production and delivery to cut costs
  • Gradually harvest the business in preparation for
    strategic shift to more promising product or
    industries

9
Strategy in Mature and Declining Industries
  • Companies should avoid
  • An overly optimistic view of the industry or the
    companys position within it
  • A lack of strategic clarity shown by a failure to
    choose between a broad-based and a focused
    competitive approach
  • Investing too much for too little return
  • Trading market share for profitability in
    response to short-term performance pressures
  • Unwillingness to compete on price
  • Resistance to industry structural changes or new
    practices
  • Placing too much emphasis on new product
    development compared with improving existing ones
  • Retaining excess capacity
  • Take caution in exit decisions

10
Industry Evolution and Functional Priorities
  • Early Development
  • Slow growth in sales
  • Research and development emphasis
  • Rapid technological change in product
  • Emerging State
  • Success associated with technological skill and
    being the first in a new market
  • Marketing advantage has a widespread awareness
  • Rapid growth brings new competitors
  • Maturity Stage
  • Sales growth continues, but at a decreasing rate
  • Technological change in product design slows
  • Promotional and pricing advantages key internal
    strengths
  • Declining Stage
  • Strengths center on cost advantages and superior
    supplier and customer relationships

11
Strategy in Fragmented Industries
  • Fragmented industries - no company or group has
    enough market share to affect industry structure
    or outcomes.
  • To thrive in these markets, segment the market
    based on
  • Product, customer, type of order, or geographic
    area
  • Combined with no frills posture.

12
Strategy in Deregulating Industries
  • Artificial constraints are lifted and new players
    are allowed to enter.
  • Deregulating environments undergo change twice
    when market is opened and 5 years later.
  • Can be good and bad for companies

13
Dealing with Challenges in Deregulated Markets
  • Four distinct strategic postures
  • 1.) Broad based distributors that offer a wide
    range of products
  • 2.) Low cost entrants that develop into niche
    players
  • 3.) Focus segment marketers that emphasize the
    companys value
  • 4.) Shared utilities that focus on market based
    economies of scales available to smaller
    competitors.

14
Pricing in Newly Deregulated Industries
  • When new competitors enter, the market demands
    reduced prices.
  • Results from efficiencies and competitive effects
  • Startups are inefficient and shared markets
    reduce efficiencies of scale and scope.

15
How to Adjust Prices Correctly
  • 1.) Measure up against the most relevant
    competitors.
  • 2.) Switch prices but dont allow a price gap
  • 3.) Pay attention to valued customers
  • 4.) Keep costs high enough to be able to run your
    business

16
Strategy in Hypercompetitive Industries
  • Characterized by intense rivalry
  • Successful strategies often are based on taking
    the competitor by surprise and then moving on as
    the competition tries to recover
  • Hypercompetitive Markets
  • Rapid innovation and speed
  • Superior short-term strategic focus
  • Market awareness

17
Competitive Reactions Under Extreme Competition
  • 6 Actions
  • Retool strategy and restore its importance
  • Manage transition economics
  • Fight aggregation with disaggregation
  • Seek out new demand and new growth
  • Use a portfolio of initiatives to increase speed
    and flexibility
  • Count on strategic risk

18
Business Unit Strategy Special Dimensions
  • Speed
  • Newest and least understood
  • Pace of progress that a company displays in
    responding to current or anticipated business
    needs
  • Speed Merchants
  • Strategy built on rapid pace converting core
    competencies into competitive advantages which
    alter competitive landscapes in their favor

19
Pressures to Speed
  • Speed is universally popular
  • Speed-oriented companies are rewarded with
    loyalty and commitment.
  • Suppliers will bear extra costs and
    responsibilities.

20
Sources for Increasing Speed
  • Customers
  • Demand responsiveness
  • Need for creating a new basis for competitive
    advantage
  • Innovation, development, manufacturing,
    distribution
  • Competitive Pressures
  • with increasing competition, speed must be
    maximized
  • Industry Shifts
  • Speed is important in industries with short
    product life cycles

21
Requirements of Speed
  • Executives must foster a fast culture.
  • Actions must be taken on the following issues
  • Refocusing the business mission
  • Creating a speed-compatible culture
  • Upgrading communication
  • Refocusing business process reengineering
  • Committing to new performance metrics

22
Requirements of Speed (cont.)
  • Refocusing the business mission
  • Board and officers articulate a long-term vision
    for a speed oriented company.
  • Creating a speed-compatible culture
  • Facilitate speed by nurturing an organizational
    culture that is conductive to speed and adopt and
    evaluation system.
  • Upgrading communication
  • Upgrading methods for clear and timely
    communication.
  • Refocusing business process reengineering
  • Reorganize to eliminate barriers that create
    distance between employees and customers.
  • Committing to new performance metrics
  • Metrics include sales volume, customer
    satisfaction, processing time, cost controls, and
    marketing specifics.

23
Methods to Speed
  • Internal analysis to determine where speed exists
    and where is does not.
  • Eliminate speed gaps.
  • Three categories
  • Streamlining Operations
  • Upgrading Technology
  • Forming Partnerships

24
Methods to Speed (cont.)
  • Streamlining Operations
  • Speed-enhanced ability to obtain quick
    post-implementation feedback from the marketplace
  • Upgrading Technology
  • Use of latest IT to create speed. Goal is to
    connect manufacturers with retailers to enhance
    information sharing.
  • Forming Partnerships
  • Sharing business burdens is a way to shorten time
    needed to improve market responsiveness.
  • Ex Ford, General Motors, and Chrystler

25
Creating Value Through Innovation
  • Strategy requires Innovation
  • Clayton Christensen disruptive and sustaining
    innovation
  • Computer hardware industry
  • GE

26
Fostering Innovation
  • 3Ms unparalleled culture
  • Top level comittment
  • Long term focus
  • Flexible organization
  • Loose and tight planning and control
  • Appropriate incentives

27
Performance and Profitability
  • Performance
  • Booz Allen Hamilton
  • Boston Consulting Group
  • Profitability
  • Unsatisfied with returns
  • Mismanagement of the Innovation process
  • Measurement Metrics
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