Chapter 7: Competitive Strategy and the Industry Environment

1. Chapter 7: Competitive Strategy and the Industry Environment Text by Charles W. L. Hill Gareth R. Jones Multimedia Slides by Milton M. Pressley Univ. of New Orleans

2. Preview • Strategy in Fragmented Industries • Strategy in Embryonic and Growth Industries • Strategy in Mature Industries • Strategies to Deter Entry in Mature Markets • Strategies to Manage Rivalry in Mature Industries • Supply and Distribution in Mature Industries • Strategy in Declining Industries

3. RENTAL Strategy in Fragmented Industries • Fragmented Industry • Chaining • Franchising • Horizontal Merger

4. Strategy in Embryonic and Growth Industries • Embryonic Industries Xerox

5. Many Number of Competitors in the Market • Time Few High Innovator’s Profit Rate • Time Low Figure 7.1: How an Innovator’s Profits Can Be Competed Away

6. Strategy in Embryonic and Growth Industries (Continued) Strategies Available to Innovator: • Develop and Market the Innovation Itself • Develop and Market the Innovation Jointly • License the Innovation to Others

7. Strategy in Embryonic and Growth Industries (Continued) • Complementary Assets • Height of Barriers to Imitation • Capability of Competitors • R&D Skills • Access to Complementary Assets Choice of Strategy Depends On:

8. Does Innovator Have All Likely Height of Number of Strategy Required Barriers to Capable Complemen- Imitation Competitors tary Assets? Go It Alone Yes High Few Enter Into No High Limited Alliance License No Low Many Innovation Table 7.1: Strategies for Profiting from Innovation

9. Strategy in Mature Industries • Mature Industries

10. Figure 7.2: Strategies for Deterring Entry in Mature Industries Strategies for Deterring Entry Product Proliferation

11. Candlelight Dining Unoccupied Product Space Atmospheric McDonald’s Fast Food Average Gourmet Quality of Food Figure 7.3: Product Proliferation in the Restaurant Industry

12. Figure 7.2: Strategies for Deterring Entry in Mature Industries Strategies for Deterring Entry Product Proliferation Price Cutting

13. Figure 7.2: Strategies for Deterring Entry in Mature Industries Strategies for Deterring Entry Maintain Excess Capacity Product Proliferation Price Cutting

14. Strategies to Manage Rivalry in Mature Industries • Price Signaling • Price Leadership • Nonprice Competition

15. Products New Existing Existing Market Segments New Table 7.2: Four Nonprice Competitive Strategies

16. Products New Existing Market Penetration Existing Market Segments New Table 7.2: Four Nonprice Competitive Strategies

17. Products New Existing Product Development Market Penetration Existing Market Segments New Table 7.2: Four Nonprice Competitive Strategies

18. Products New Existing Product Development Market Penetration Existing Market Segments Market Development New Table 7.2: Four Nonprice Competitive Strategies

19. Products New Existing Product Development Market Penetration Existing Market Segments Product Proliferation Market Development New Table 7.2: Four Nonprice Competitive Strategies

20. Strategies to Manage Rivalry in Mature Industries (Continued) • Price Signaling • Price Leadership • Nonprice Competition • Capacity Control

21. Capacity Demand Units Time Figure 7.4: Changes in Industry Capacity and Demand

22. Strategies to Manage Rivalry in Mature Industries (Continued) Factors Causing Excess Capacity • Technological Factors • Industry Competitive Factors • Age of a Company’s Plant • Simultaneous Competitive Moves

23. Strategies to Manage Rivalry in Mature Industries (Continued) • Preempt Rivals • Indirect Coordination with Rivals Capacity Control Strategies

24. Supply and Distribution Strategy in Mature Industries • Vertical Integration

25. Supply and Distribution Strategy in Mature Industries • Vertical Integration • Contrast Relationship Between Suppliers and Distributors in: Vs.

26. Strategy in Declining Industries • Leadership • Niche • Harvest • Divestment

27. Figure 7.5: Factors That Determine the Intensity of Competition in Declining Industries Height of Exit Barriers Level of Fixed Costs Commodity Nature of Product Speed of Decline Intensity of Competition

28. High Intensity of Competition in Declining Industry Low Few Many Company Strengths Relative to Remaining Pockets of Demand Figure 7.6: Strategy Selection in a Declining Industry

29. High Intensity of Competition in Declining Industry Leadership or Niche Low Few Many Company Strengths Relative to Remaining Pockets of Demand Figure 7.6: Strategy Selection in a Declining Industry

30. High Niche or Harvest Intensity of Competition in Declining Industry Leadership or Niche Low Few Many Company Strengths Relative to Remaining Pockets of Demand Figure 7.6: Strategy Selection in a Declining Industry

31. High Niche or Harvest Intensity of Competition in Declining Industry Harvest or Divest Leadership or Niche Low Few Many Company Strengths Relative to Remaining Pockets of Demand Figure 7.6: Strategy Selection in a Declining Industry

32. Figure 7.7: A Harvest Strategy Start to Harvest Liquidate (+) Cash Flow Cash Flow O Market Share (-)

33. High Niche or Harvest Intensity of Competition in Declining Industry Harvest or Divest Leadership or Niche Low Few Many Company Strengths Relative to Remaining Pockets of Demand Figure 7.6: Strategy Selection in a Declining Industry

34. High Niche or Harvest Divest Intensity of Competition in Declining Industry Harvest or Divest Leadership or Niche Low Few Many Company Strengths Relative to Remaining Pockets of Demand Figure 7.6: Strategy Selection in a Declining Industry

35. STRATEGY IN FRAGMENTED INDUSTRIES STRATEGY IN EMBRYONIC AND GROWTH INDUSTRIES STRATEGY IN MATURE INDUSTRIES STRATEGIES TO DETER ENTRY IN MATURE MARKETSCONTINUED . . . Chapter Summary

36. STRATEGIES TO MANAGE RIVALRY IN MATURE INDUSTRIES SUPPLY AND DISTRIBUTION IN MATURE INDUSTRIES STRATEGY IN DECLINING INDUSTRIES Chapter Summary (Continued)