competitors’ weaknesses. Strategic leaders will also implement an expansion strategy to penetrate international markets. Maturity When price becomes more of an elastic variable, the industry has entered the maturity stage of the life cycle. Strategic leaders need to design and implement programs that allow for economies of scale to be obtained. As the industry moves further into the maturity stage, price becomes an important key buying criterion. In addition to actions that achieve scale economies, strategic leaders need to design and implement total quality management (TQM) initiatives that reduce costs. While a firm’s domestic market may be mature, the firm may be able to obtain higher margins in international markets within the same industry. International markets 322
may be at earlier stages of the industry life cycle than the firm’s domestic market. As such, firms may enjoy the benefits of the growth stage of industry evolution in some international markets. This expansion may permit strategic leaders to obtain additional funds to expand into other international markets. Decline As firms begin to exit the industry and/or go out of business, the industry has reached the decline stage. This stage is characterized by decreasing sales and margins. Product line profitability studies need to be continually reviewed. Unprofitable lines need to be eliminated. Strategic leaders need to determine the best allocation of resources. Leaders may reallocate resources to developing international markets that are at earlier stages of the life cycle. This process of industry and international expansion is what sustains firms in the long run. Strategic leaders may allocate resources to create new industries; this begins a new industry life cycle. The entire process will then follow a new life cycle. 323
Discussion Questions 1.Define strategic leadership. 2.Identify the primary stakeholders of strategic leaders. 3.Why have some strategic leaders engaged in greed and corruption? 4.Explain how strategic leaders analyze competition. 5. What should strategic leaders do when their firm enters the maturity stage of the industry’s life cycle? Why? 6.Explain what decisions strategic leaders need to make at each stage of the industry life cycle. 7.Explain why strategic leaders need to develop long-term relationships. 324
1. Rumelt, R., Schendel, D. and Teece, D. 1991. Strategic management and economics. Strategic Management Journal . 12(winter): 5-29. 2. Dess, G., Lumpkin, G., and Eisner, A. 2005. Strategic management . McGraw-Hill Irwin. Boston, MA. 3. Ireland R. and Hitt M. 2005. Achieving and maintaining strategic competitiveness in the 21 st century: the role of strategic leadership. Academy of Management Executive , 13: 63-77. 4. Penrose E. 1959. A theory of growth of the firm . John Wiley & Sons: New York.
You've reached the end of your free preview.
Want to read all 445 pages?
- Spring '18
- Charles Mills
- ........., Bankruptcy in the United States