1 / 12

The Industry Environment

The Industry Environment. Different industry environments present different opportunities and threats. A company’s business model and strategies have to change to meet the environment. Companies must face the challenges of developing and maintaining a competitive strategy in:

joben
Download Presentation

The Industry Environment

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. The Industry Environment • Different industry environments present different opportunities and threats. • A company’s business model and strategies have to change to meet the environment. • Companies must face the challenges of developing and maintaining a competitive strategy in: • Fragmented Industries (Clear Channel) • Embryonic & Growth Industries ( How Prodigy...) • Mature Industries (Dell has to…) • Declining Industries (How to make money in…)► MBA-II, General

  2. Fragmented IndustriesClear Channel Creates a National Chain of Local Radio Stations • Reasons for fragmented industries • Low barriers to entry due to lack of economies of scale • Low entry barriers permit constant entry by new companies • Specialized customer needs require small job lots of products - no room for a mass-production • Diseconomies of scale • Strategies • Overcoming fragmentation: Chaining , Franchising , Horizontal Merger , IT and Internet • Coping up with fragmentation: Focused strategy►

  3. Market Characteristics: Embryonic and Growth Industries • Reasons for slow growth in market demand • Limited performance and poor quality of the first products • Customer unfamiliarity with what the new product can do for them • Poorly developed distribution channels • Lack of complementary products • High production costs • Growth→Mass markets typically start to develop when: • Technological progress makes a product easier to use and increases its value to the average customer; • Key complementary products are developed that do the same; • Companies find ways to reduce production costs allowing them to lower prices►

  4. Market Development and Customer Groups Both innovators and early adopters enter the market while the industry is in its embryonic state. Users forced to use PC Late PCs Users PCs Users , 1981, IBM standard Internet – Jeff Bezos of Amazaon, 1994 Software Engg - PCs

  5. Navigating Through the Life Cycle to Maturity • Embryonic stages – share building strategies • Development of distinctive competencies and competitive advantage • Requires capital to develop R&D and sales/service competencies • Growth stages – maintain relative competitive position • Strengthen business model to prepare to survive industry shakeout • Requires investment to keep up with rapid growth of the market • Shakeout stage – increase share during fierce competition • Invest in share-increasing strategies at expense of weak competitors • Weak companies should exit the industry during the harvest stage • Maturity stage – hold-and-maintain to defend business model • Dominant companies want to reap the reward of prior investments • A company’s investment depends on the level of competition and source of the company’s competitive advantage►

  6. Mature Industries • Evolution of mature industries • Industry becomes consolidated as a result of the fierce competition during the shakeout stage. • Business level strategy isbased on how established companies collectively try to reduce strength of competition. • Interdependent companies try to protect industry profitability. • Strategies • Deter entry into industry • Manage industry rivalry

  7. Strategies for Deterring Entry of Rivals Sending a Signal: to potential new entrants contemplating entry that new entry will be met with price cuts Warning of Retaliation: by increasing output and forcing down prices until market entry would be unprofitable to entrants Filling the Niches: making it difficult for new competitors to break into a new industry & establish a beachhead

  8. Strategies for Managing Industry Rivalry

  9. Declining Industries • Reasons: technological change, social trends, demographic shifts • Intensity of competition is greater when: • The decline is rapid versus slow and gradual. • The industry has high fixed costs. • The exit barriers are high. • The product is perceived as a commodity. • Not all industry segments typically decline at the same rate • Creating pockets of demand • Strategies: Leadership, Niche, Harvest , Divestment

  10. Strategy Selection in a Declining Industry • Choice of strategy is determined by: • Severity of the • industry decline • Company strength • relative to the • remaining pockets • of demand

  11. How to Make Money in the Vacuum Tube Business • Using internet to consolidate • Strategies • Price • Non-price • market penetration, as the firm moves into every segment of its industry MBA-II, General

  12. NIKE’S WINNING WAYS • Nike’s success story suggests that a company’s business model cannot remain static. • It shows how managers of a successful business model still need to continually formulate and implement new business-level strategies to sustain their firm’s competitive advantage as the industry environment changes► MBA-II, General

More Related