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STRATEGY AND ENVIRONMENT FIT. Matching Strategy to External Environment International Markets (Chapter 7) Stage of Industry Life Cycle Turbulent, High-Velocity Markets Fragmented Industries Matching Strategy to Internal Environment / Company Situation Industry Leaders Runner-Up Firms

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strategy and environment fit
STRATEGY AND ENVIRONMENT FIT

Matching Strategy to External Environment

  • International Markets (Chapter 7)
  • Stage of Industry Life Cycle
  • Turbulent, High-Velocity Markets
  • Fragmented Industries

Matching Strategy to Internal Environment / Company Situation

  • Industry Leaders
  • Runner-Up Firms
  • Weak Businesses
overview matching strategy to a company s situation
Overview: Matching Strategyto a Company’s Situation
  • Nature of industry and competitive conditions

Most important drivers shaping a firm’s strategic options fall into two categories

  • Firm’s competitive capabilities, market position, best opportunities
emerging industry characteristics
Emerging Industry - Characteristics
  • Formative stage of industry
  • New and unproven market/No rules of competition
  • Proprietary technology
  • No consensus concerning production technologies
  • Low entry barriers
  • Strong experience curve effects
  • Buyers are first-time users
  • Buyers may delay purchase until technology matures
  • Building reputation is important
  • Possible difficulties in securing raw materials
  • Access to capital critical
  • Variety of strategies being pursued
  • Mergers/acquisitions
emerging industry strategy options
Emerging Industry - Strategy Options
  • Choose a Competitive Strategy
  • Other Strategic Actions to Consider
    • Push to perfect technology, product, and product features
    • Consider merger/acquisition
    • Capture first-mover advantages
    • Acquire or form alliances with other companies
    • Pursue new customers, new user applications and enter new geographic areas
    • Make it easy and cheap for first-time buyers to try product
    • Try to build brand loyalty
    • Use price cuts to attract additional buyers
    • Form strategic alliances with suppliers
rapidly growing markets
Rapidly Growing Markets
  • Frequent launches of new competitive moves
  • Contains survivors
  • Firms are more established
  • Less variety of strategies
  • Strategic groups begin to form
  • Profits take off
  • Customers more sophisticated
  • Entry barriers emerge
rapidly growing markets6
Rapidly Growing Markets
  • Strategic Options:
    • Must try to grow faster than the market
    • Drive down costs
    • Pursue rapid product innovation
    • Gain access to distribution channels and sales outlets
    • Expand geographic coverage
    • Expand product line
characteristics of industry maturity
Characteristics of Industry Maturity
  • Slowing growth in demand = stiffer competition
  • More sophisticated buyers demand bargains
  • Greater emphasis on cost and service
  • Slowdowns in capacity expansion
  • New product innovation de-emphasized
  • New process innovation emphasized
  • International competition increases
  • Industry profitability falls
  • Industry consolidation – mergers/acquisitions
  • Contains survivors
  • Fewer larger firms
strategies for maturing industries
Strategies for Maturing Industries
  • Possible Strategies
    • Pruning marginal products and models
    • Improving value chain efficiency
    • Trimming costs
    • Increasing sales to present customers
    • Acquiring rival firms at bargain prices
    • Expanding internationally
    • Building new or more flexible capabilities
stagnant or declining industries
Stagnant or Declining Industries
  • Demand grows more slowly than economy as whole (or even declines)
  • Advancing technology gives rise to better-performing substitute products
  • Customer group shrinks
  • Changing lifestyles and buyer tastes
  • Rising costs of complementary products
  • Competitive pressures intensify--rivals battle for market share
  • To grow and prosper, firm must take market share from rivals
  • Industry consolidates to a smaller number of key players via mergers and acquisitions
  • Limited strategic options
stagnant or declining industries10
Stagnant or Declining Industries
  • Possible Strategies
    • 3 Best Strategic Alternatives
      • Focus on fastest-growing or slowest-decaying market segments
      • Stress differentiation based on quality improvement and product innovation
      • Strive to drive costs down and become industry’s low cost leader
    • End-Game Strategies
      • Slow-exit
      • Fast-exit
turbulent high velocity markets
Turbulent, High-Velocity Markets
  • Rapid technological change
  • Short product life-cycles
  • Entry of important new rivals
  • Lots of competitive maneuvering by rivals
  • Fast evolving customer requirements and expectations
  • Swirling market conditions
turbulent high velocity markets12
Turbulent, High-Velocity Markets
  • Possible Strategies
    • Need to figure out how to deal with change
    • Invest aggressively in R&D to stay on the leading edge of technological know-how
    • Keep the companies products and services fresh and exciting enough to stand out in the midst of all the change that is taking place
    • Develop quick-response capability
    • Rely on strategic partnerships with outside suppliers and with companies making tie-in products
    • Initiate fresh actions every few months
competitive features of fragmented industries
Competitive Features ofFragmented Industries
  • Absence of market leaders with large market shares or widespread market recognition
  • Product/service is delivered locally
  • Buyer demand is so diverse that many firms are required to satisfy buyer needs
  • Low entry barriers
  • Absence of scale economies
  • Buyers require small amounts of customized or made-to-order products
  • Limited geographical area can be served
strategic options for fragmented industries
Strategic Options for Fragmented Industries
  • Possible Strategies
    • Constructing and operating formula facilities
    • Becoming a low-cost operator
    • Specializing by product type
    • Specialization by customer type
    • Focusing on a limited geographic area
strategies based on a company s market position
Strategies Based on a Company’s Market Position

Industry leaders

Runner-up firms

Weak or crisis-ridden firms

industry leaders
Industry leaders
  • Industry Leaders have:
    • Strong to powerful market positions
    • Well-known reputations
    • Proven strategies
  • Strategic Options
    • Stay-on-the-offensive
    • Fortify-and-defend
    • Muscle-flexing
runner up firms
Runner-up Firms
  • Types of Runner-up Firms:
    • Market challengers
      • Use offensive strategies to gain market share
    • Focusers
      • Concentrate on serving a limited portion of market
    • Perennial runners-up
      • Lack competitive strength to do more than continue in trailing position
weak businesses
Weak Businesses
  • Strategic Options:
    • Launch an offensive turnaround strategy (if resource permit)
    • Employ a fortify-and-defend strategy (to the extent resources permit)
    • Pursue a fast-exit strategy
    • Adopt a harvest strategy (a slow-exit type of end-game strategy)
    • Liquidation