Business Strategies in Different Industry & Sectoral Contexts

1. Business Strategies in Different Industry & Sectoral Contexts Foundations of Strategy: Chapter 5 Team 5

2. Overview • All companies have to adapt to change • Driving forces that affect an industry environment: • External Forces + New Competitive Change = Change in an industry environment • Objective: Understand how managers adapt to and predict change

3. Industry Life Cycle • Supply-side equivalent of the Product Life Cycle • Likely to be of longer duration than that of a single product • 4 phases • Introduction/emergence • Growth • Maturity • Decline • Factors that drive ILC • Demand Growth • Production Knowledge

4. Demand Growth • Stage of the life cycle are defined by the changes in an industry’s growth rate over time • Introduction • Sales are small • Market penetration rate is low • Costs are higher and lower quality • Customers tend to be affluent and risk-tolerant • Growth • Accelerated market penetration • Technical improvements and increased efficiency

5. Demand Growth Cont’d • Maturity • Market saturation continues to increase • Decline • New industries produce new, superior products

6. Production & Diffusion of Knowledge • A new industry is created from new knowledge in the form of product innovation • Introduction: • Product technology advances rapidly • Sales are primarily aimed at enthusiasts and pioneers • Over the span of the life cycle: • Customers become increasingly informed and are able to judge various products better

7. Dominant Designs & Technical Standards • Dominant Design: product architecture that defines the look, functionality and production method. It is accepted as the industry standard; design may not be proprietary or hold a profit advantage • Overall configuration of a product or system • EX: Underwood Model 5 Typewriter

8. Dominant Designs & Technical Standards Cont’d • Technical Standard: technology or specification that is important for compatibility; intellectual property • Emerge when network effects arise – or a need for users to connect in some way

9. Strategy at different stages of the life cycle Introduction Growth Phase Maturity Phase Decline Phase

10. Introduction Phase • Number of firms in an industry increases rapidly during early stages • Basis of entry is product innovation • Subsequent success comes from winning the battle for technological leadership • Born Global Companies- derive significant competitive advantage from the use of resources and the sale of output in other countries

11. Growth Phase • As demand grows in the domestic market a dominant design usually emerges • Key challenge becomes scaling up • As the market expands, the firm needs to adapt its product design and manufacturing capability to large scale production

12. Maturity Phase • Cost efficiency through scale economies, low wages and low overheads become the key success factors • Industries go through “shakeout” phases during which firm failures increase sharplydepending on international competition • Special niche markets develop in the process

13. Decline phase • Decline can be a result of technological substitution • Key features of declining industries are: • Excess Capacity • Lack of technological change • High average age of both physical and human resources • Aggressive price competition

14. Public Sector Defined by: • Ownership • Funding • Public Goods • Market Failure • Interests Served

15. Not-for-profits Surplus funds are used to pursue organizational goals Education, Health Care, Social Services, Arts and Culture, Religion

16. Social Enterprises Have philanthropic goals Prioritize social responsibilities

18. Impacts on Strategy • Multiple, potentially conflicting goals • Distinctive constraints and different levers • An absence of market forces • Monopoly power • Less autonomy and flexibility • Increases accountability • Less predictability

19. Specific Impacts on Not-for-profits The employment of volunteers Fundraising

20. Oster’s Six Forces Model

21. Stakeholder Analysis • The process of identifying, understanding and priortising the needs of key stakeholders so that the questions of how stakeholders can participate in strategy formulation and how relationships with stakeholders are best managed can be addressed.

22. Key steps in Stakeholder Analysis • Identification of the list of potential stakeholders • Ranking stakeholders according to their importance and influence on the organization • Identifying the criteria that each stakeholder is likely to use to judge the organization’s performance. • Deciding how well the organization is doing from its stakeholders’ perspective. • Identifying what can be done to satisfy each stakeholder. • Identifying and recording longer term issues with individual stakeholders and as a group.

23. Scenario analysis • A systematic way of thinking about how the future might unfold that builds on what we know about current trends and signals.

24. Key Steps in building and using scenarios: • Defining the purpose of the analysis • Deciding on the time horizon • Identifying key trends • Identifying key uncertainties • Creating the scenarios and checking that they are internally consistent • Identifying indicators that might signal which scenario is unfolding • Assessing the strategic implications of each scenario