To accompany contemprory strategy analysis concepts techiniques application chapter12slides

Competitive Advantage in Mature Industries Competitive Advantage in Mature Industries • Key success factors in mature industries • Strategic Implementation: Structure, Systems, Style •

Competitive Advantage in

Mature Industries

Competitive Advantage in

Mature Industries

• Key success factors in mature industries

• Strategic Implementation: Structure, Systems,

Style

• Strategies for declining industries

OUTLINE

Competitive Advantage in Retailing: Retailers with

the Highest and Lowest Valuation Ratios

Competitive Advantage in Retailing: Retailers with

the Highest and Lowest Valuation Ratios

TOP 15 Valuation Sales

Ratio ($,bil.)

Amazon.com (US) n.a 3.9

Caremark Rx (US) 18.0 6.8

Expedia 16.6 0.6

Autozone (US) 13.1 5.3

Hennes & Mauritz (Swe.) 10.5 5.9

Next (UK) 10.1 3.6

Bed, Bath & Beyond (US) 8.5 3.7

Woolworth (Australia) 8.0 16.0

Gap (US) 4.1 14.5

TJX (US) 6.9 12.0

Inditex (Spain) 6.8 4.7

Wal-Mart (US) 5.7 244.5

Radio Shack 5.6 4.6

Family Dollar Stores 5.1 4.2

Best Buy (US) 5.0 20.9

Toys-R-Us 0.6 11.3 J.C Penny (US) 0.7 32.3 Federated Dept Stores (US) 1.1 15.4

J Sainsbury (UK) 1.1 29.8 Ito-Yokado (Japan) 1.1 28.0 Ahold 1.2 78.3 Safeway plc (UK) 1.3 29.8 Pinault-Printemps

-Redoute (France) 1.4 32.2 Sears Roebuck (US) 1.4 41.4 Dixons Group (UK) 1.4 8.0 Albertson’s (US) 1.5 35.6 May Department Stores (US) 1.7 11.9 Office Depot (US) 1.7 11.4 CVS 1.9 24.2 Kingfisher (UK) 2.0 17.6

BOTTOM 15 Valuation Sales

Ratio ($, bil.)

Key Success Factors in Mature Industries

• Opportunities for sustainable limited potential for differentiation

competitive advantage are technology stable and well diffused limited ease of entry due to well developed

industry infrastructure and powerful distributors

international competition : domestic

cost advantage vulnerable

• Sources of Economies of scale

Low overheads

• Segment and customer As general industry environment

attractive segments and woo good

customers

• Sources of differentiation Emphasis on image differentiation and

advantage differentiation through complementary

services.

• Sources of innovation Limited opportunity for product and

process innovation but considerable opportunity for strategic innovation

Sources of Strategic Innovation in Mature Industries

• Reconfiguring the value chain: - Benetton and Zara in clothing

- Southwest & Ryanair in airlines

- Dell in PCs

• Redefining markets and products - Swatch in watches

- Starbucks in coffee shops

- Barnes & Noble in book retailing

• Innovative approaches to - Virgin Atlantic in air travel

differentiation - Sephora in cosmetics retailing

Who are the strategic innovators?

• New entrants - CNN in news broadcasting

- Nucor in the U.S steel industry

• Existing firms on the periphery -Sun Records in rock ‘n roll music

• Firms from adjacent industries - Prudential Insurance in banking (Egg)

Why not leading incumbents?

• They are constrained by “industry recipes,” relationships with existing customers, investments in resources & capabilities linked to past

strategies.

Process innovation

Strategic innovation

Product

innovation

Product, Process, and Strategic

Innovation over the Life Cycle

Product, Process, and Strategic

Innovation over the Life Cycle

Strategy Implementation in Mature

Industries:The Traditional Model

Strategy Implementation in Mature

Industries:The Traditional Model

STRATEGY - Pursuit of cost efficiency through

mass production

- Line and staff distinction

- Job specialization CONTROLS - Quantitative, short-term performance targets

- Hierarchical monitoring and control

- Standard, formalized operating procedures, reporting, and management by exception INCENTIVES - Emphasis on financial incentives linked to

individual performance

MANAGEMENT strategic decision making

- Two main styles: politician and autocrat

The Competitive Environment of

Declining Industries

The Competitive Environment of

Declining Industries

 Features - Excess capacity

of declining - Lack of technological change

industries - Consolidation (but some new entry

as new firms exit)

- Old machines and employees

 Smooth adjustment - Predictability of decline

depends upon Costs of closure

- Barriers to exit Management

commitment

- Strategies of surviving firms

{

Strategy Options in Declining

Industries

Strategy Options in Declining

Industries

LEADERSHIP Establish dominant market position

-encourage exit of rivals -buy market share through acquisition -acquire capacity

-demonstrate commitment -dispel optimism about the industry’s future -raise the stakes

NICHE Identify an attractive segment and dominate it.

HARVEST Maximize cash flow from existing sources

DIVEST Get out while there is still a market for industry assets

COMPANY’S COMPETITIVE POSITION

Strengths in Lacks strength in remaining demand remaining demand pockets pocket

Favorable LEADERSHIP HARVEST

Unfavorable NICHE DIVEST

to or QUICKLY

decline HARVEST

Strategy Alternatives for a Declining Industry