1 / 21

Topic 6

Topic 6. Industry Environments Rationalizing Diversification and Integration Behavioral Considerations Affecting Strategic Choice. Different Industry Environments??.

melina
Download Presentation

Topic 6

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. Topic 6 Industry Environments Rationalizing Diversification and Integration Behavioral Considerations Affecting Strategic Choice

  2. Different Industry Environments?? • You also may want to evaluatedifferent strategiesto build competitive advantages …. given the fact that you may be operating in any one of a number ofdifferent industry environments

  3. “Typical” Industry Settings • Emerging Industries • Industries Transitioning to Maturity • Mature and Declining Industries • Fragmented Industries • Global Industries

  4. Characteristics of Markets in Emerging Industries • Proprietary technology and technological uncertainty • Competitor uncertainty due to inadequate information • High initial cost structure • Few entry barriers*** • First-time buyers require initial inducements

  5. Strategic Options/Opportunities forEmerging Industries • shape industry’s structure • rapidly improve product quality • establish favorable relations with key suppliers** • acquire a core group of loyal customers • forecast future competitors

  6. Characteristics of Maturing Industries • Intense competition for market share • Increased sales to experienced, repeat buyers • New products and new applications harder to come by • Increase in international competition • Declining profitability

  7. Strategic Options forMaturing Industries • Prune the product line • Emphasize cost reductions • Focus on selecting loyal buyers • Pursue horizontal integration • Expand internationally

  8. Characteristics of alreadyMature/Declining Industries • Demand grows more slowly than economy, or even declines • Slowing growth is caused by • Technological substitution • Demographic shifts • Shifts in consumer needs

  9. Strategic Options foralreadyMature/Declining Industries • Focus on key market segmentsoffering growth opportunity • Emphasizeproduct innovationandquality improvement • Emphasizeproduction and distribution efficiency • Graduallyharvestthe business

  10. Characteristics of Fragmented Industries • No firm has a significant market share • No firm can significantly influence industry outcomes • Examples • Professional services • Retailing • Wood and metal fabrication • Agricultural products • Funeral industry

  11. Strategic Options forFragmented Industries • Tightly managed decentralization • Standardized, efficient, low-cost facilities at multiple locations • Specialization(Product type, customer type, type of order, geographic areas) • Bare bones/no frills

  12. Strategic Options: Pursuing Global Market Coverage … • export products • License foreign firms • foreign-based plants and distribution

  13. Questions Related to Diversification and Integration #1 • Are there opportunities for sharing infrastructure and capabilities?

  14. Critical Elements for Shared Opportunities to Be Meaningful • Shared opportunities must be a significant portion of the value chain of businesses involved • Businesses involved must truly have shared needs or there is no basis for synergy in the first place

  15. Questions Related to Diversification and Integration #2 2. Are we capitalizing on our core competencies?

  16. Evaluating the Role of Core Competencies Is each core competency providing a relevant competitive advantage to the intended businesses? Are businesses in the portfolio related in ways that make the company’s core competence(s) beneficial? Are our combination of competencies unique or difficult to create?

  17. Questions Related to Diversification and Integration #3 • Does the company’s business portfolio balance financial resources? • A number of portfolio techniques

  18. The BCG Growth-Share Matrix Cash Generation (Market Share) High Low Market share: Dividing point is usually … only the two-three largest competitors in any market fall into the high market share region Star Problem Child High Cash Use (Growth Rate) Low Cash Cow Dog Growth Rate: Dividing point is usually the GNP’s growth rate

  19. Behavioral Considerations Affecting Strategic Choice • Role of current strategy • What is the amount of time and resources invested in previous strategies? • How close are new strategies to the old? • How successful were previous strategies? • Degree of firm’s external dependence • How powerful are firm’s owners, customers, competitors, unions, and its government? • How flexible is firm with its environment?

  20. Behavioral Considerations Affecting Strategic Choice • Attitudes toward risk • Risk-oriented managers prefer offensive, opportunistic strategies • Risk-averse managers prefer defensive, conservative strategies • Managerial priorities different from stockholder interests • Agency theory suggests managers frequently place their own interests above those of their shareholders

  21. Behavioral Considerations Affecting Strategic Choice • Internal political considerations • Major sources of company power are CEO, key subunits, and key departments • Power can affect corporate decisions over analytical considerations • Competitive reaction • Probable impact of competitor response must be considered during strategy design process • Competitor response can alter the success of strategy

More Related