1. Published by www.iiuc28a9.com
8
Tailoring Strategy
Chapter Title
to Fit Specific
Industry and
Company Situations
Md. Tarikul Islam
Lecturer in Marketing
16/e PPT IIUC, DC
Cell: 01716 388990
E-mail: russelmkg@yahoo.com
. .

2. Matching Strategy to
a Company’s Situation
Nature of industry
and competitive
Most important
conditions
drivers shaping a
firm’s strategic
options fall into Firm’s competitive
two categories capabilities,
market position,
best opportunities
8-2

3. Features of an Emerging Industry
 New and unproven market
 Proprietary technology
 Lack of consensus regarding which of
several competing technologies will win out
 Low entry barriers
 Experience curve effects may permit
cost reductions as volume builds
 Buyers are first-time users and marketing involves inducing
initial purchase and overcoming customer concerns
 First-generation products are expected to be rapidly
improved so buyers delay purchase until technology
matures
 Possible difficulties in securing raw materials
 Firms struggle to fund R&D, operations and build resource
capabilities for rapid growth
8-3

4. Strategy Options for Competing
in Emerging Industries
 Win early race for industry leadership by employing a bold,
creative strategy
 Push hard to perfect technology, improve product quality,
and develop attractive performance features
 Consider merging with or acquiring another firm to
 Gain added expertise
 Pool resource strengths
 When technological uncertainty clears and a dominant
technology emerges, try to capture any first-mover
advantages by moving quickly
 Form strategic alliances with
 Companies having related technological expertise or
 Key suppliers
8-4

5. Strategy Options for Competing
in Emerging Industries (continued)
 Pursue new customers and user applications
 Enter new geographical areas
 Makeit easy and cheap for first-time buyers to try
product
 Focus advertising emphasis on
 Increasing frequency of use
 Creating brand loyalty
 Use price cuts to attract price-sensitive buyers
8-5

6. Strategic Hurdles for Companies
in Emerging Industries
 Raising capital to finance initial operations until
 Sales and revenues take off
 Profits appear
 Cash flows turn positive
 Developing a strategy to ride the wave of industry
growth
 What market segments to pursue
 What competitive advantages to go after
 Managing the rapid expansion of facilities and sales to
position a company to contend for industry leadership
 Defending against competitors trying to horn in on the
company’s success
8-6

7. What Is the Key to Success for
Competing in Rapidly Growing Markets?
A company needs a strategy predicated on
growing faster than the market average so it
 Can boost its market share and
 Improve its competitive standing vis-à-vis rivals
8-7

8. Strategy Options for Competing
in Rapidly Growing Markets
 Drivedown costs per unit to enable price
reductions that attract droves of new customers
 Pursue rapid product innovation to
 Set a company’s product offering apart from rivals
 Incorporate attributes to appeal to growing numbers of
customers
 Gain access to additional distribution
channels and sales outlets
 Expand a company’s geographic coverage
 Expand product line to add models/styles to appeal
to a wider range of buyers
8-8

9. Industry Maturity: The Standout Features
 Slowing demand breeds stiffer competition
 More sophisticated buyers demand bargains
 Greater emphasis on cost and service
 “Topping out” problem in adding
production capacity
 Product innovation and new
end uses harder to come by
 International competition increases
 Industry profitability falls
 Mergers and acquisitions reduce number of rivals
8-9

10. Strategy Options for Competing
in a Mature Industry
 cut back marginal products and models
 Emphasize innovation in the value chain
 Strong focus on cost reduction
 Increase sales to present customers
 Purchase rivals at bargain prices
 Expand internationally
 Build new, more flexible competitive capabilities
8-10

11. Strategic Pitfalls in a Maturing Industry
 Employing a ho-hum strategy with no distinctive
features thus leaving firm “stuck in the middle”
 Being
slow to mount a defense against stiffening
competitive pressures
 Concentrating on short-term profits rather than
strengthening long-term competitiveness
 Being slow to respond to price-cutting
 Having too much excess capacity
 Overspending on marketing
 Failing to aggressively pursue cost reductions
8-11

12. Stagnant or Declining Industries:
The Standout Features
 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
 Competitivebattle ensues among industry
members for the available business
8-12

13. Strategy Options for Competing
in a Stagnant or Declining Industry
 Pursue focus strategy aimed at
fastest growing market segments
 Stress differentiation based on quality
improvement or product innovation
 Work diligently to drive costs down
 Cut marginal activities from value chain
 Use outsourcing
 Redesign internal processes to exploit e-commerce
 Consolidate under-utilized production facilities
 Add more distribution channels
 Close low-volume, high-cost distribution outlets
 Prune marginal products
8-13

14. End-Game Strategies
for Declining Industries
 An end-game strategy can take either of two paths
 Slow-exit strategy involving
 Gradual phasing down of operations
 Getting the most cash flow from the business
 Fast-exit strategy involving
 Disengaging from an industry during early stages of
decline
 Quick recovery of as much of a company’s investment as
possible
8-14

15. Features of High-Velocity Markets
 Rapid-fire technological change
 Short product life-cycles
 Entry of important new rivals
 Frequentlaunches of
new competitive moves
 Rapidlyevolving
customer expectations
8-15

16. Fig. 8.1: Meeting the Challenge of High-Velocity Change
8-16

17. Strategy Options for Competing
in High-Velocity Markets
 Invest aggressively in R&D
 Initiate fresh actions every few months
 Develop quick response capabilities
 Shift resources
 Adapt competencies
 Create new competitive capabilities
 Speed new products to market
 Use strategic partnerships to develop
specialized expertise and capabilities
 Keep products/services fresh and exciting
8-17

18. Keys to Success in Competing
in High Velocity Markets
 Cutting-edge expertise
 Speed in responding to new developments
 Collaboration with others
 Agility
 Innovativeness
 Opportunism
 Resource flexibility
 First-to-market capabilities
8-18

19. Competitive Features
of a Fragmented Industry
 Absence of market leaders with large market shares or widespread
buyer recognition
 Product/service is delivered to neighborhood
locations to be convenient to local residents
 Buyer demand is so diverse that many firms
are required to satisfy buyer needs
 Low entry barriers
 Absence of scale economies
 Market for industry’s product/service may be globalizing, thus
putting many companies across the world in same market arena
 Exploding technologies force firms to specialize just to keep up in
their area of expertise
 Industry is young and crowded with aspiring contenders, with no
firm having yet developed recognition to command a large market
share
8-19

20. Examples of Fragmented Industries
Book publishing
Landscaping and plant nurseries
Auto repair
Restaurant industry
Public accounting
Women’s dresses
Meat packing
Paperboard boxes
Hotels and motels
Furniture
8-20

21. Competing in a Fragmented Industry:
The Strategy Options
 Construct and operate “formula” facilities
 Become a low-cost operator
 Specialize by product type
 Specialize by customer type
 Focus on limited geographic area
8-21

22. Fig. 8.2: Three Strategy Horizons for Sustaining Rapid Growth
8-22

23. Risks of Pursuing
Multiple Strategy Horizons
 Firm should not pursue all options
to avoid stretching itself too thin
 Pursuit of medium- and long-jump
initiatives may cause firm to stray
too far from its core competencies
 Competitive advantage may be difficult to achieve
in medium- and long-jump businesses that do not
mesh well with firm’s present resource strengths
 Payoffs of long-jump initiatives may prove elusive
8-23

24. Strategies Based on a
Company’s Market Position
 Industry leaders
 Runner-up firms
 Weak or crisis-ridden firms
8-24

25. Industry Leaders:
The Defining Characteristics
 Strong to powerful market position
 Well-known reputation
 Proven strategy
strategic concern – How to sustain
 Key
dominant leadership position
8-25

26. Strategy Options: Industry Leaders
Stay-on-the-offensive strategy
Fortify-and-defend strategy
Muscle-flexing strategy
8-26

27. Stay-on-the-Offensive Strategies
 Be a first-mover, leading industry change
 Best defense is a good offense
 Concentrate on achieving a competitive advantage
and then widening the advantage over time
 Relentlessly pursue continuous improvement
and innovation, being first to market with
 Technological improvements
 New or better products
 More attractive performance features
 Customer service improvements
8-27

28. Stay-on-the-Offensive Strategies (continued)
 Aggressively seek out ways to
 Cut operating costs
 Establish competitive capabilities rivals cannot match
 Make it easier for potential customers to switch their purchases from
other firms to the leader’s own products
 Aggressively attack profit sanctuaries of important rivals
 Launch fresh initiatives to expand overall industry
demand
 Spur creation of new families of products
 Make product more suitable for consumers
in emerging-country markets
 Discover new uses for product
 Attract new users of product
 Promote more frequent use
 Grow faster than industry, taking market share from rivals
8-28

29. Fortify-and-Defend Strategy
Objectives
 Make it harder for new firms to enter and for
challengers to gain ground
 Hold onto present market share
 Strengthen current market position
 Protect competitive advantage
8-29

30. Fortify-and-Defend Strategy:
Strategic Options
 Increase advertising and R&D
 Provide higher levels of customer service
 Introduce more brands to match attributes of rivals
 Add personalized services to boost buyer loyalty
 Keep prices reasonable and quality attractive
 Build new capacity ahead of market demand
 Invest enough to remain cost competitive
 Patent feasible alternative technologies
 Sign exclusive contracts with best suppliers and
distributors
8-30

31. Muscle-Flexing Strategy
Objectives
 Play competitive hardball with smaller
rivals that threaten leader’s position
 Signal smaller rivals that moves to cut
into leader’s business will be hard fought
 Convince rivals they are better off playing
“follow-the-leader” or else attacking each
other rather the industry leader
8-31

32. Muscle-Flexing Strategy:
Strategic Options
 Be quick to meet price cuts of rivals
 Counter with large-scale promotional campaigns if
rivals boost advertising
 Offer better deals to rivals’ major customers
 Dissuade distributors from carrying rivals’ products
 Provide
salespersons with documentation about
weaknesses of competing products
 Make attractive offers to key executives of rivals
 Use arm-twisting tactics to pressure present
customers not to use rivals’ products
8-32

33. Muscle-Flexing Strategy
Risks
 Running afoul of antitrust laws
 Alienating customers with bullying tactics
 Arousing adverse public opinion
8-33

34. Types of Runner-up Firms
 Market challengers
 Use offensive strategies to gain market share
 Focusers I’m
trying!
 Concentrate on serving a
limited portion of market
 Perennial runners-up
 Lack competitive strength to do
more than continue in trailing position
8-34

35. Obstacles Runner-Up
Firms Must Overcome
 When big size is a competitive asset, firms
with small market share face obstacles
in trying to strengthen their positions
 Less access to economies of scale
 Difficulty in gaining customer recognition
 Inability to afford mass media advertising
 Difficulty in funding capital requirements
8-35

36. Strategic Options
for Runner-Up Firms
 Whenbig size provides larger rivals with a cost
advantage, runner-up firms have two options
 Build market share
 Lower costs and prices to grow sales or
 Out-differentiate rivals in ways to grow sales
 Withdraw from market
8-36

37. Offensive Strategies for Runner-Up Firms:
Building Market Share
 Acquire smaller rivals to expand company’s market reach
and presence
 Find innovative ways to drive down costs
to win customers from higher-priced rivals
 Craft an attractive differentiation strategy
 Pioneer a leapfrog technological breakthrough
 Be first-to-market with new or better products and build
reputation for product leadership
 Outmaneuver slow-to-change market leaders in adapting
to evolving market conditions and customer needs
 Forge strategic alliances with key distributors, dealers, or
marketers of complementary products
8-37

38. Strategic Approaches for Runner-Up Firms
1. Vacant niche strategy
2. Specialist strategy
3. Superior product strategy
4. Distinctive image strategy
5. Content follower strategy
8-38

39. Vacant Niche Strategy
for Runner-Up Firms
 Focus strategy concentrated on end-use
applications market leaders have neglected
 Characteristics of an ideal vacant niche
 Sufficient size to be profitable
 Growth potential
 Well-suited to a firm’s capabilities
 Hard for leaders to serve
8-39

40. Specialist Strategy for Runner-Up Firms
 Strategy concentrated on
being a leader based on
 Specific technology
 Product uniqueness
 Expertise in
 Special-purpose products
 Specialized know-how
 Delivering distinctive customer services
8-40

41. Superior Product Strategy
for Runner-Up Firms
 Differentiation-based focused strategy based on
 Superior product quality or
 Unique product attributes
 Approaches
 Fine craftsmanship
 Prestige quality
 Frequent product innovations
 Close contact with customers to
gain input for better quality product
8-41

42. Distinctive Image Strategy
for Runner-Up Firms
 Strategy concentrated on ways to
stand out from rivals
 Approaches
 Reputation for charging lowest price
 Prestige quality at a good price
 Superior customer service
 Unique product attributes
 New product introductions
 Unusually creative advertising
8-42

43. Content Follower Strategy
for Runner-Up Firms
 Strategy involves avoiding
 Trend-setting moves and
 Aggressive moves to steal
customers from leaders
 Approaches
 Do not provoke competitive retaliation
 React and respond
 Defense rather than offense
 Keep same price as leaders
 Attempt to maintain market position
8-43

44. Weak Businesses: Strategic Options
 Launch an offensive turnaround strategy
(if resources 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)
8-44

45. Achieving a Turnaround:
The Strategic Options
 Sell off assets to generate cash and/or reduce debt
 Revise existing strategy
 Launch efforts to boost revenues
 Cut costs
 Combination of efforts
8-45

46. What Is a Harvest Strategy?
 Steers middle course between status quo and
exiting quickly
 Involves gradually sacrificing market position
in return for bigger near-term cash flow/profit
 Objectives
 Short-term - Generate largest
feasible cash flow
 Long-term - Exit market
8-46

47. Types of Harvest Options
 Reduce operating expenses to rock-bottom
 Hold reinvestment to minimum
 Place little priority on new capital investments
 Emphasize stringent internal cost controls
 Trim advertising and promotion expenses
 Do not replace employees who leave
 Shave equipment maintenance
8-47

48. When Should a Harvest
Strategy Be Considered?
 Industry’s long-term prospects are unattractive
 Building up business would be too costly
 Market share is increasingly costly to maintain
 Reduced levels of competitive effort will not trigger
immediate fall-off in sales
 Firm can re-deploy freed-up resources
in higher opportunity areas
 Business is not a major component of
diversified firm’s portfolio of businesses
8-48