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BusinessPolicyNotes06 - Chapter 6 Competitive Strategy and...

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Chapter 6 Competitive Strategy and the Industry Environment 151
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STRATEGIC MANAGEMENT Lecture 6 Dr. John Kraft Opening Case ·:·Nike's Winning Ways 3 1 3 2 The Industry Environment There is the need to continually fonnulate and implement business-level strategies to sustain competitive advantage over time in different industry environments. .:. Different industry environments present different opportunities and threats. .:. A company's business model and strategies have to change to meet the environmenl •:. Companies must face the challenges of developing and maintaining a competitive strategy in: Fragmented Industries Mature Industries Embryonic Industries Declining Industries Fragmented Industries A fragmented industry is one composedof a large numberof smalland medium-sizedcompanies. .:. Reasons for fragmented industries Low barriers to entry due to lack of economies of scale Low entry barriers permit constent entry by new companies Specialized customer needs require small job lots of products - no roomfor a mas5-produclion _~: ...,. ...~ Diseconomies of scale ~' ••. . .:. Strategies .•.• • Chaining - nelwor1<s rXlinkedoutletsto achievecostleadership Franchising - for rapidgrowthwith provenbusinessconcepts. reputation,managementskillsand economiesof scale Horizontal Merger - acquisitionto obtaineconomiesand growth IT and Internet - to devele>new businessmodels 3 3 3 • The Industry Environment ·:·Positioning a company to sustain competitive advantage over time in different kinds of industry environments ·:·Oifferent industry environments present different opportunities and threats ·:·A company's business model has to change to meet the environment Strategy in Action ·:·Clear Channel Creates a National Chain of Local Radio Stations 3 5 152 3 • 1
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Embryonic and Growth Industries An embryonic industry is one that is just beginning to develop when technological innovation creates new market or product opportunities. A growth industry is one in which first- time demand is expanding rapidly as ~ G il many new customers enter the market. 1P' ~'1r Strategy is detennined by market demand Innovators and ear1yadopters have different needs from the ear1yand late major1ly Company must be prepared to cross the chasm between the ear1yadopters and the later majority Companies must understand the factors that affect a market's growth rate - in order to tailor the business model to the changing industry environment 3 7 Market Development and Customer Groups Embryonic Market Characteristics: Embryonic and Growth Industries .:. Reasons for slow growth in market demand Umited perfonnance and poor quality of the first products Customer unfamiliar1ly with what the new product can do for them Poor1y developed distribution channels Lack of complementary products High production costs .:. 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
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This note was uploaded on 05/12/2010 for the course MAN 6721 taught by Professor Kraft during the Spring '10 term at University of Florida.

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BusinessPolicyNotes06 - Chapter 6 Competitive Strategy and...

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