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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 Thereis 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 isonecomposedofa large numberofsmallandmedium-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 - noroomfor amas5-produclion _~: ..., .... ~ Diseconomies of scale ~' ••.. .:. Strategies .•.• • Chaining - nelwor1<s rXlinkedoutletsto achievecostleadership Franchising - for rapidgrowthwith provenbusinessconcepts. reputation,managementskillsandeconomiesof scale • Horizontal Merger - acquisitionto obtaineconomiesandgrowth • 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 Poor1ydeveloped 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.
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