Académique Documents
Professionnel Documents
Culture Documents
Core
Competenc
y
Core
Competency
Strategy
Core
Competency
Strategy
Business
Level
Strategy
Strategic Logic At
Business Unit Level
A firms success is explained by two factors:
Attractiveness of the industry
Relative position of the firm within the industry
Relative profitability depends on
Nature of the firms competitive position
Ability to create sustainable competitive
advantage
Cost leadership
Product/ service differentiation
Strategic Logic At
firm success
Business Unit Level
relative position
industry structure
mgmt. choices
initial conditions
Advantage Creating
Resources
Contribute to Providing Value
for Customers
Are Unique
to the Firm
Sustainable
Competitive
Advantage
Breadth of
Competitive
Scope
Broad
Target
Market
Narrow
Target
Market
Cost
Uniqueness
Cost
Leadership
Differentiation
Focused
Low Cost
Focused
Differentiation
Cost Drivers
Scale
Institutional
Experience
Location
COSTS
Policy choices
Capacity
Utilisation
Linkages
Interrelationships
Timing
Integration
No-Frills
No-Frills
Product/Service
Product/Service
Product
ProductDesign
Design
Low-Cost
Low-Cost
Strategic Thrust
Thrust
Strategic
ScaleEconomies
Economies
Scale
Production/
Production/
Operations
Operations
Experience
ExperienceCurve
Curve
Advantages of a Cost
Leadership Strategy
Low-cost
Low-costadvantages
advantagesreduce
reducelikelihood
likelihoodof
ofpricing
pricing
pressure
pressurefrom
frombuyers
buyers
Sustained
Sustainedlow-cost
low-costadvantages
advantagesmay
maypush
pushrivals
rivalsinto
into
other
otherareas,
areas,lessening
lesseningprice
pricecompetition
competition
New
Newentrants
entrantsmust
mustface
facean
anentrenched
entrenchedcost
costleader
leader
without
withoutexperience
experienceto
toreplicate
replicatecost
costadvantages
advantages
Low-cost
Low-costadvantages
advantagesshould
shouldlessen
lessenattractiveness
attractivenessof
of
substitutes
substitutes
Higher
Highermargins
marginsallow
allowlow-cost
low-costproducers
producersto
to
withstand
withstandsupplier
suppliercost
costincreases
increases
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Primary Activities
M Service
A
R
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IN
Marketing
& Sales
Outbound
Logistics
Operations
Procurement
Inbound
Logistics
Support
Activities
Firm Infrastructure
Relatively Few
Management Layers to
Reduce Overhead
Firm Infrastructure
Consistent Policies to
Reduce Turnover Costs
Easy-to-Use Manufacturing
Technologies
M
A
R
G
IN
National Scale
Advertising
Interrelationships
with Sister Units
Primary Activities
M Service
A
R
G
IN
Located in Close
Proximity with
Suppliers
Organizational
Learning
Effective Product
Installations to
Reduce Frequency
and Severity
Products Priced to of Recalls
Generate Sales
Volume
Marketing
& Sales
Small, Highly
Trained Sales
Force
Outbound
Logistics
Efficient Plant
Delivery Schedule
Scale to Minimize that Reduces
Manufacturing
Costs
Costs
Selection of Low
Timing of Asset
Cost Transport
Purchases
Carriers
Operations
Highly Efficient
Systems to Link
Suppliers
Products with the
Firms Production
Processes
Inbound
Logistics
Support
Activities
Cost Effective
MIS Systems
Relatively Few
Management Layers to
Reduce Overhead
Firm Infrastructure
Highly Efficient
Systems
to Link
Effective Training Programs
toManagement
Improve Worker
Human Resource
Suppliers
Efficiency and Effectiveness
Products with the
Easy-to-Use Manufacturing
Investments in Technology in order
Firms
Production
Technologies
to Reduce
Costs Associated with
Technological Development
Manufacturing Processes
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Consistent Policies to
Reduce Turnover Costs
M
A
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Proximity with
Small, Highly
Sales
Suppliers Trained
Force
National Scale
Advertising
Organizational
Learning
Interrelationships
with Sister Units
Primary Activities
M Service
A
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IN
Located in Close
Proximity with
Suppliers
Marketing
& Sales
Effective Product
Installations to
Reduce Frequency
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Products Priced to of Recalls
Generate Sales
Volume
Outbound
Logistics
Efficient Plant
Delivery Schedule
Scale to Minimize that Reduces
Manufacturing
Costs
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Selection of Low
Timing of Asset
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Purchases
Carriers
Operations
Highly Efficient
Systems to Link
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Processes
Inbound
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MIS Systems
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Reduce Frequency
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Products Priced to of Recalls
Generate Sales
Volume
Marketing
& Sales
Raw Materials
Inbound
Logistics
Support
Activities
Cost Effective
MIS Systems
Efficient Plant
Scale to Minimize
Infrastructure
Mfg. Costs
Simplified Planning
Practices to Reduce
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National Scale
Advertising
Relatively Few
Management Layers to
Reduce Overhead
Firm Infrastructure
Delivery Schedule
that Reduces Costs
M
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Sizes
Raw Materials
Located in Close
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Suppliers
National Scale
Advertising
Organizational
Learning
Interrelationships
with Sister Units
Primary Activities
Marketing
& Sales
Small, Highly
Trained Sales
Force
Outbound
Outbound
Logistics
Logistics
Efficient Plant
Delivery Schedule
Scale to Minimize that Reduces
Manufacturing
Costs
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Selection of Low
Timing of Asset
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Effective Product
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Frequency
with
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Units
M Service
A
R
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IN
Consistent Policies to
Reduce Turnover Costs
Inbound
Logistics
Support
Activities
Cost Effective
MIS Systems
and Severity
Products Priced to of Recalls
Generate Sales
Volume
Firm Infrastructure
Easy-to-Use Manufacturing
Technologies
Located in Close
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Suppliers
National Scale
Advertising
Organizational
Learning
Interrelationships
with Sister Units
Primary Activities
Products
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A
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Effective Product
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Small, Highly
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Outbound
Logistics
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Delivery Schedule
Scale to Minimize that Reduces
Manufacturing
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Selection of Low
Timing of Asset
Cost Transport
Purchases
Carriers
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Highly Efficient
Systems to Link
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Products with the
Firms Production
Processes
Small, Highly
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M Service
A
R
G
IN
Simplified Planning
Practices to Reduce
Planning Costs
Consistent Policies to
Reduce Turnover Costs
Inbound
Logistics
Support
Activities
Cost Effective
MIS Systems
Relatively Few
Management Layers to
Reduce Overhead
Firm Infrastructure
Service
Effective Product
Effective Training ProgramsInstallations to
Consistent Policies to
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Improve Worker
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IN
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Primary Activities
Service
M Service
A
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IN
Located in Close
Proximity with
Suppliers
Organizational
Learning
Effective Product
Installations to
Reduce Frequency
and Severity
Products Priced to of Recalls
Generate Sales
Volume
Marketing
& Sales
Small, Highly
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Outbound
Logistics
Efficient Plant
Delivery Schedule
Scale to Minimize that Reduces
Manufacturing
Costs
Costs
Selection of Low
Timing of Asset
Cost Transport
Purchases
Carriers
Operations
Highly Efficient
Systems to Link
Suppliers
Products with the
Firms Production
Processes
Inbound
Logistics
Support
Activities
Cost Effective
MIS Systems
Relatively Few
Management Layers to
Reduce Overhead
Firm Infrastructure
Consistent Policies to
Reduce Turnover Costs
Easy-to-Use Manufacturing
Technologies
M
A
R
G
IN
Procurement
Interrelationships
with Sister Units
Primary Activities
M Service
A
R
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IN
Small, Highly
Trained Sales
Force
Marketing
& Sales
Outbound
Logistics
Efficient Plant
Delivery Schedule
Scale to Minimize that Reduces
Manufacturing
Costs
Costs
Selection of Low
Timing of Asset
Cost Transport
Purchases
Carriers
Operations
Highly Efficient
Systems to Link
Suppliers
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Firms Production
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Inbound
Logistics
Support
Activities
Cost Effective
MIS Systems
Frequent Evaluation
Processes to Monitor
Suppliers Performances
National Scale
Advertising
Relatively Few
Management Layers to
Reduce Overhead
Firm Infrastructure
Consistent Policies to
Reduce Turnover Costs
Easy-to-Use Manufacturing
Technologies
M
A
R
G
IN
Efficient Plant
Delivery Schedule
Scale to Minimize that Reduces
Manufacturing
Costs
Costs
Selection of Low
Timing of Asset
Cost Transport
Purchases
Carriers
Small, Highly
Trained Sales
Force
Effective Product
Installations to
Reduce Frequency
and Severity
Products Priced to of Recalls
Generate Sales
Volume
Located in Close
Proximity with
Suppliers
National Scale
Advertising
Organizational
Learning
Marketing
& Sales
Outbound
Logistics
Easy-to-Use
Manufacturing
Technologies
Operations
Technological Development
M Service
A
R
G
IN
Highly Efficient
Systems to Link
Suppliers
Products with the
Firms Production
Processes
Inbound
Logistics
Support
Activities
Cost Effective
MIS Systems
Investments in Technology in
order to Reduce Costs Associated
with Manufacturing Processes
Interrelationships
with Sister Units
Primary Activities
Relatively Few
Management Layers to
Reduce Overhead
Firm Infrastructure
Consistent Policies to
Reduce Turnover Costs
Easy-to-Use Manufacturing
Technologies
M
A
R
G
IN
Human Procurement
Resource Management
Located in Close
Proximity with
Suppliers
Cost Transport
Carriers
Generate Sales
Volume
National Scale
Advertising
Organizational
Learning
Interrelationships
with Sister Units
Primary Activities
M Service
A
R
G
IN
Effective Product
Effective Training Programs
Installations to
to Improve Worker Reduce Frequency
and Severity
Efficiency and Effectiveness
Selection of Low Products Priced to of Recalls
Delivery Schedule Small, Highly
that Reduces
Trained Sales
Costs
Force
Marketing
& Sales
Operations
Highly Efficient
Efficientto
Plant
Consistent
Policies
Systems to Link
Scale to Minimize
Reduce
Costs
SuppliersTurnover
Manufacturing
Outbound
Logistics
Inbound
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Support
Activities
Cost Effective
MIS Systems
Relatively Few
Management Layers to
Reduce Overhead
Firm Infrastructure
Consistent Policies to
Reduce Turnover Costs
Easy-to-Use Manufacturing
Technologies
M
A
R
G
IN
Located in Close
Proximity with
Suppliers
National Scale
Advertising
Organizational
Learning
Interrelationships
with Sister Units
Primary Activities
Installations to
Reduce Frequency
and Severity
Products Priced to of Recalls
Generate Sales
Volume
Marketing
& Sales
Trained Sales
Force
Outbound
Logistics
Operations
Systems to Link
Suppliers
Products with the
Firms Production
Processes
M Service
A
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IN
CostSystems
Effective
Simplified
Planning
Relatively Few
and Procedures to find
the
Frequent Evaluation Processes to
Cost Products toProcurement
Purchase
Suppliers Performances
MIS Lowest
Systems
Practices Monitor
to Reduce
Management Layers
Raw Materials
Planning
Costs
Overhead
Highly Efficient
Efficient Plant
Delivery
Schedule Small, Highly to Reduce
Effective Product
Inbound
Logistics
Support
Activities
Cost Effective
MIS Systems
New
New
Way:
Way
Ranch
Cattle
Ship on the
Hoof to Rail
Center
(Chicago)
Locate large
automated
plants near
ranches
Slaughter
into sides
of beef
Process into
Boxed Cuts at
plants
Boxed
Cuts at
Markets
Ship cuts
already
Boxed to
Markets
Product features
Asset utilization
Performance
Interrelationships
- Order processing
and distribution
Wage levels
Service levels
Process technology
Product features
Hiring, training, motivation
Bargaining
Power of
Buyers
substitutes first
* Buy patents developed by
potential substitutes
Bargaining
Power of
Buyers
Can mitigate Buyer Power by:
Threat of
Substitute
Products
Bargaining
Power of
Suppliers
Threat of
New
Entrants
Bargaining
Power of
Buyers
Products
back to firm
Bargaining
Power of
Suppliers
Rivalry Among
Competing Firms
in Industry
Bargaining
Power of
Buyers
Can mitigate Buyer Power by:
Threat of
Substitute
Products
Breadth of
Competitive
Scope
Broad
Target
Market
Narrow
Target
Market
Cost
Leadership
Uniqueness
Breadth of
Competitive
Scope
Broad
Target
Market
Narrow
Target
Market
Cost
Uniqueness
Cost
Leadership
Differentiation
A successful differentiation
strategy should
Generate
Customer
Value
Provide
Perceived
Value
Be Difficult
to Copy
Uniqueness Drivers
Product
Differentiation
Pricing
Differentiation
Distribution
Differentiation
UNIQUENESS
Promotional
Differentiation
Brand
Differentiation
Evaluating A Businesss
Differentiation
Opportunities
A. Skills and Resources Fostering Differentiation
Advantages of a
Differentiation Strategy
Rivalry
Rivalryisisreduced
reducedwhen
whenaabusiness
businesssuccessful
successful
differentiates
differentiatesitself
itself
Buyers
Buyersare
areless
lesssensitive
sensitiveto
toprices
pricesfor
foreffectively
effectively
differentiated
differentiatedproducts
products
Brand
Brandloyalty
loyaltyisishard
hardfor
fornew
newentrants
entrantsto
to
overcome
overcome
M
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IN
Primary Activities
M Service
A
R
G
IN
Marketing
& Sales
Outbound
Logistics
Operations
Procurement
Inbound
Logistics
Support
Activities
Firm Infrastructure
A companywide
emphasis on producing
high quality products
Compensation programs
intended to encourage worker
creativity and productivity
Superior
personnel
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M
A
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Strong
capability in
basic research
G
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Procurement
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product deliveries relationships
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Rapid responses
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unique
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specifications
Outbound
Logistics
Accurate and
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procedures
Premium
Pricing
M Service
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R
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Consistent
manufacturing of
attractive
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incoming raw
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Pricing
M Service
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Compensation programs
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Inbound
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replacement parts
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Rapid and timely personal
product deliveries relationships
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M Service
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Accurate and
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manufacturing of
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Superior
handling of
incoming raw
materials to
minimize
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improve the
quality of the
final product
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ogies to produce highly
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improve the
quality of the
final product
Operations
Inbound
Logistics
Compensation
programs
Superior
Consistent
handling
of
manufacturing
of
which
encourage
worker
incoming raw
attractive
products
materials and
to
creativity
productivity
Outbound
Logistics
A companywide
emphasis on producing
high quality products
Compensation programs
intended to encourage worker
creativity and productivity
Superior
personnel
training
M
A
R
Strong
capability in
basic research
G
IN
ation among
stocking of
functions in R&D, replacement parts
Marketing and
Product
Development
Marketing
& Sales
Rapid responses
to customers
unique
manufacturing
specifications
Outbound
Logistics
Operations
handling of
incoming raw
materials to
minimize
damage and
improve the
quality of the
final product
Extensive
Rapid and timely personal
product deliveries relationships
to customers
with buyers
Primary Activities
M Service
A
R
G
IN
Highly
developed InformationPurchase of highest
A companywide
emphasis
Systems and procedures used to find
quality
the highest
rawProcurement
materials
replacement parts
Systems
toquality
better
understand
on producing high quality
customers
purchasing
preferences
products
Strong
Coordin- Complete field
Consistent
Accurate and
Superior
Inbound
Logistics
Support
Activities
Firm Infrastructure
Premium
Pricing
Heineken beer
Raw materials
Steinway pianos
Intel microprocessors
Technological superiority
Caterpillar tractors
Drivers of Differentiation
Examples:
Or be equal to performance
at lower prices
Bargaining
Power of
Buyers
Or be equal to performance
at lower prices
Bargaining
Power of
Suppliers
Bargaining
Power of
Suppliers
Or be equal to performance
at lower prices
to
* Absorbing price increases dueBargaining
Power of
higher margins
Suppliers
Threat of
Substitute
Products
Threat of
New
Entrants
Brand
loyalty
New
products
must
*
surpass proven products
overcomes
much
Or be equal
to performance
*price
competition
at lower prices
Bargaining
Power of
Buyers
Well positioned relative to
Substitutes because:
*
Rivalry Among
Competing Firms
in Industry
Threat of
Substitute
Products
Bargaining
Power of
Suppliers
Key Risks of
Differentiation
Imitation
Imitationnarrows
narrowsperceived
perceiveddifferentiation,
differentiation,
rendering
renderingdifferentiation
differentiationmeaningless
meaningless
Technological
Technologicalchanges
changesthat
thatnullify
nullifypast
past
investments
investmentsor
orlearning
learning
Cost
Costdifference
differencebetween
betweenlow-cost
low-costcompetitors
competitorsand
and
the
thedifferentiated
differentiatedbusiness
businessbecomes
becomestoo
toogreat
greatfor
for
differentiation
differentiationto
tohold
holdbrand
brandloyalty
loyalty
Operational
Effectiveness
Customer
Intimacy
Product
Leadership
Creating a Competitive
Advantage Based on Speed
Has become a major source of competitive
advantage for many firms
Breadth of
Competitive
Scope
Broad
Target
Market
Narrow
Target
Market
Cost
Uniqueness
Cost
Leadership
Differentiation
Breadth of
Competitive
Scope
Cost
Uniqueness
Broad
Target
Market
Cost
Leadership
Differentiation
Narrow
Target
Market
Focused
Low Cost
Focused
Differentiation
Breadth of
Competitive
Scope
Broad
Target
Market
Narrow
Target
Market
Uniqueness
Cost
DifferenLeadership
tiation
Integrated
Low Cost/
Differentiation
Focused
Focused
DifferenLow Cost
tiation
Southwest Airlines
Low Cost
Use a single aircraft model
(Boeing 737)
Use secondary airports
Fly short routes
No meals
15 minute turnaround time
No reserved seats
No travel agent reservations
Differentiation
Focus on customer
satisfaction
High level of employee
dedication
New flight services for
business travelers
(phones and faxes)
Focus
Focus
Product
Productfocus
focus
Segment
Segmentfocus
focus
Geographic
Geographicfocus
focus
Differentiation
Differentiation
Ingredient
Ingredientor
orcomponent
component
Superior
Superiorproduct
productoffering
offering
Added
Addedservice
service
Broad
Broadproduct
productline
line
Quality
Quality
Brand
Brandname
name
Strategic
Thrust
Synergy
Synergy
Enhancecustomer
customervalue
value
Enhance
Reduceoperation
operationcost
cost
Reduce
Reducerequired
requiredinvestment
investment
Reduce
Figure 10.6
LowCost
Cost
Low
No-frillsproduct
product
No-frills
Productdesign
design
Product
Production/Operations
Production/Operations
Scaleeconomies
economies
Scale
Experiencecurve
curve
Experience
The
ThePreemptive
PreemptiveMove
Move
Product
Product
Production
Productionsystem
system
Gain
Gaincustomer
customer
loyalty/commitment
loyalty/commitment
Distribution/service
Distribution/service
Industry Environments
and Strategy Choices
Emerging
EmergingIndustries
Industries
Industries
IndustriesTransitioning
Transitioningto
toMaturity
Maturity
Mature
Matureand
andDeclining
DecliningIndustries
Industries
Fragmented
FragmentedIndustries
Industries
Global
GlobalIndustries
Industries
Characteristics of
Markets in Emerging
Industries
Proprietary technology and technological uncertainty
Competitor uncertainty regarding inadequate
information
High initial cost structure
Few entry barriers
First-time buyers require initial inducement
Inability to easily obtain raw materials and components
Need for high-risk capital
Characteristics of Industries
Transitioning to Maturity
Intense competition for market share
Increased sales to experienced, repeat buyers
Greater emphasis on cost and service
Declining profitability
Characteristics of
Mature/Declining Industries
Demand grows more slowly than economy,
or even declines
Slowing growth is caused by
Technological substitution
Demographic shifts
Shifts in consumer needs
Internal
(redirected
resources
within the
firm)
Turnaround or
retrenchment
Divestiture
Liquidation
II
III
Concentrated growth
Market development
Product development
Innovation
Vertical integration
Conglomerate diversification
External
(acquisition
I
or merger for
IV
resource
capability)
Horizontal integration
Concentric diversification
Joint venture
Maximize strengths
1. Reformulation of
concentrated growth
2. Horizontal integration
3. Divestiture
4. Liquidation
Strong
Weak
I II
competitive
competitive
IV III
position
position
1. Concentric
1. Turnaround or retrenchment
diversification
2. Concentric diversification
2. Conglomerate
3. Conglomerate diversification
diversification
4. Divestiture
3. Joint venture
5. Liquidation
Slow market growth
Types of Grand
Strategies
Concentrated Growth
Conglomerate Diversification
Concentrated Growth
Conglomerate Diversification
Market
MarketDevelopment
Development
Turnaround
Turnaround
Product
ProductDevelopment
Development
Divestiture
Divestiture
Innovation
Innovation
Liquidation
Liquidation
Horizontal
HorizontalIntegration
Integration
Bankruptcy
Bankruptcy
Vertical
VerticalIntegration
Integration
Joint
JointVentures
Ventures
Concentric
ConcentricDiversification
Diversification
Strategic
StrategicAlliances
Alliances
Consortia
Consortia
Characteristics of a
Concentrated Growth
Strategy
Conditions Favoring a
Concentrated Growth Strategy
Firms
Firmsindustry
industryisisresistant
resistanttotomajor
majortechnological
technological
advancements
advancements
Firms
Firmstargeted
targetedmarkets
marketsare
arenot
notproduct
productsaturated
saturated
Firms
Firmsmarkets
marketsare
aresufficiently
sufficientlydistinctive
distinctivetotodissuade
dissuade
competitors
in
adjacent
markets
from
entering
competitors in adjacent markets from enteringfirms
firmssegment
segment
Firms
Firmsinputs
inputsare
arestable
stableininprice
priceand
andquantity
quantityand
andavailable
availableinin
amounts
amountsand
andatattimes
timesneeded
needed
Firms
Firmsindustry
industryisisstable
stable
Firms
Firmscompetitive
competitiveadvantages
advantagesare
arebased
basedon
onefficient
efficientproduction
production
or
ordistribution
distributionchannels
channels
Success
Successofofmarket
marketgeneralists
generalists
Innovation Strategy
Screening
One successful
new product
20
15
Business analysis
Commercialization
Development
Testing
10
5
10
20
30
40
50
60
70
80
90
100
Strategies of Horizontal
and Vertical Integration
Horizontal integration
Based on growth via acquisition of one or more similar firms
operating at the same stage of the production-marketing chain
Involves eliminating competitors, providing acquiring firm with
access to new markets
Vertical integration
Involves acquiring firms
To supply acquiring firm with inputs - backward integration
or
Are customers for firms outputs - forward integration
Textile producer
Shirt manufacturer
Shirt manufacturer
Clothing store
Clothing store
Motivations Related to
Diversification Strategies
Increase firms stock value
Increase growth rate of firm
Investment is better use of funds than using them for internal
growth
Improve stability of earnings and sales
Balance or fill out product line
Diversify product line
Acquire a needed resource quickly
Achieve tax savings
Increase efficiency and profitability
Diversification
Strategies
Concentric diversification
Involves acquisition of businesses related to acquiring firm in
terms of technology, markets, or products
Conglomerate diversification
Involves acquisition of a business because it represents a
promising investment opportunity
Primary motivation is profit pattern of venture
Difference between the approaches
Concentric diversification emphasizes commonality whereas
conglomerate diversification emphasizes profits for each
individual unit
Turnaround Strategy
Involves a concerted effort over
a period of time to fortify a
firms distinctive competencies,
returning it to profitability
Severity
Turnaround response
Retrenchment phase
Recovery phase
(operating)
Declining
sales or
margins
Cost
reduction
Stability
Low
Efficiency
maintenance
Recovery
Internal
factors
High
External
factors
Imminent
bankruptcy
Asset
reduction
Entrepreneurial
reconfiguration
(strategic)