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Competitive Advantage in Mature Industries. Key success factors in mature industries Strategic Implementation: Structure, Systems, Style Strategies for declining industries. OUTLINE. Competitive Advantage in Retailing : Retailers with the High est and Lowest Valuation Ratios.

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Competitive advantage in mature industries l.jpg
Competitive Advantage in Mature Industries

  • Key success factors in mature industries

  • Strategic Implementation: Structure, Systems, Style

  • Strategies for declining industries

OUTLINE


Competitive advantage in retailing retailers with the high est and lowest valuation ratios l.jpg
Competitive Advantage in Retailing: Retailers with the Highest and Lowest Valuation Ratios

Toys-R-Us 0.6 11.3

J.C. Penny (US) 0.732.3

Federated Dept.Stores (US) 1.1 15.4

J. Sainsbury (UK) 1.129.8

Ito-Yokado (Japan) 1.128.0

Ahold 1.2 78.3

Safeway plc (UK) 1.3 29.8

Pinault-Printemps

-Redoute (France) 1.4 32.2

Sears Roebuck (US) 1.441.4

DixonsGroup (UK) 1.4 8.0

Albertson’s (US) 1.5 35.6

May Department Stores (US) 1.7 11.9

Office Depot (US) 1.7 11.4

CVS 1.9 24.2

Kingfisher (UK) 2.0 17.6

TOP 15ValuationSales

Ratio ($,bil.)

Amazon.com (US) n.a. 3.9

Caremark Rx (US) 18.0 6.8

Expedia 16.6 0.6

Autozone (US) 13.1 5.3

Hennes & Mauritz (Swe.) 10.5 5.9

Next (UK) 10.1 3.6

Bed, Bath & Beyond (US) 8.5 3.7

Woolworth (Australia) 8.0 16.0

Gap (US) 4.1 14.5

TJX (US) 6.9 12.0

Inditex (Spain) 6.8 4.7

Wal-Mart (US) 5.7 244.5

Radio Shack 5.6 4.6

Family Dollar Stores 5.1 4.2

Best Buy (US) 5.0 20.9

BOTTOM 15ValuationSales

Ratio($, bil.)


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Key Success Factors in Mature Industries

  • Opportunities for sustainable -- limited potential for differentiation

    competitive advantage are -- technology stable and well diffused

    limited -- ease of entry due to well developed industry infrastructure and powerful distributors

    -- international competition : domestic cost advantage vulnerable

  • Sources of -- Economies of scale

    cost advantage -- Low-cost inputs

    -- Low overheads

  • Segment and customer -- As general industry environment selection deteriorates, important to locate attractive segments and woo good

    customers.

  • Sources of differentiation -- Emphasis on image differentiation and advantage differentiation through complementary

    services.

  • Sources of innovation -- Limited opportunity for product and

    process innovation but considerable

    opportunity for strategic innovation


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Sources of Strategic Innovation in Mature Industries

  • Reconfiguring the value chain: - Benetton and Zara in clothing

  • - Southwest & Ryanair in airlines

    • - Dell in PCs

  • Redefining markets and products - Swatch in watches - Starbucks in coffee shops

  • - Barnes & Noble in book retailing

  • Innovative approaches to - Virgin Atlantic in air travel

  • differentiation - Sephora in cosmetics retailing

  • Who are the strategic innovators?

  • New entrants -CNN in news broadcasting

    • - Nucor in the U.S. steel industry

  • Existing firms on the periphery -Sun Records in rock ‘n roll music

  • Firms from adjacent industries - Prudential Insurance in banking(Egg)

  • Why not leading incumbents?

  • They are constrained by “industry recipes,” relationships with existing

  • customers, investments in resources & capabilities linked to past

  • strategies.


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Product, Process, and Strategic Innovation over the Life Cycle

Product

innovation

Strategic

innovation

RATE OF INNOVATION

Process

innovation

TIME


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Strategy Implementation in Mature Industries:The Traditional Model

STRATEGY - Pursuit of cost efficiency through mass production

STRUCTURE - Functional departments

- Line and staff distinction

- Job specialization

CONTROLS - Quantitative, short-term performance targets

- Hierarchical monitoring and control

- Standard, formalized operating procedures,

reporting, and management by exception.

INCENTIVES - Emphasis on financial incentives linked to

individual performance

TOP - Primary functions are control and

MANAGEMENT strategic decision making

- Two main styles: politician and autocrat


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The Competitive Environment of ModelDeclining Industries

  • Features - Excess capacity

    of declining - Lack of technological change

    industries - Consolidation (but some new entry as new firms exit)

    - Old machines and employees

  • Smooth adjustment - Predictability of decline

    of capacity Durable assets

    depends upon Costs of closure

    - Barriers to exitManagement

    commitment

    - Strategies of surviving firms

{


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Strategy Options in Declining Industries Model

LEADERSHIP Establish dominant market position -encourage exit of rivals

-buy market share through acquisition

-acquire capacity

-demonstrate commitment

-dispel optimism about the industry’s future

-raise the stakes

NICHE Identify an attractive segment and dominate it.

HARVEST Maximize cash flow from existing sources

DIVEST Get out while there is still a market for industry assets


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Strategy ModelAlternatives for a Declining Industry

COMPANY’S COMPETITIVE POSITION

Strengths in Lacks strength in

remaining demand remaining demand

pockets pocket

Favorable LEADERSHIP HARVEST

INDUSTRY to or or

STRUCTURE decline NICHE DIVEST

Unfavorable NICHE DIVEST

to or QUICKLY

decline HARVEST