Strategy-A View from the Top

Chapter 7-Business Unit

Strategy: Contexts and Special
Dimensions
Crystal Hill
Stephen Lechtenberg
Anand McGee
Allison Purtell
Jason Torres


Strategy in Emerging Industries
New Industries present new opportunities
Technologies are typically immature

Costs are typically high and unpredictable, entry
barriers are low, supplier relationships are
underdeveloped, and distribution channels are just
emerging

Timing can be critical in determining strategic success-
first mover advantage

Strategic Leadership in Emerging
Markets
Need ability to shape the industry structure based on:
Timing
Method of entry
Experience in similar situations

Leadership opportunities: ability to control product or
process development through:
Superior technology
Quality or customer knowledge
Ability to leverage existing relationships with
suppliers/distributors
Access to a core group of early, loyal customers
First Mover Advantage
Have the opportunity to shape customer
expectations and define the competitive rules of
the game
Examples:
Microsoft: Windows Operating System
Starbucks: Saturation of the market; Selling CDs,
coffee merchandise, etc. in stores
Strategy in Growth Industries
Increased segmentation often accompanies the
transition to market maturity

Cost control becomes an important element of strategy
as unit margins shrink and new products and
applications are harder to find
Process innovation important dimension

Competing companies that enter growth industries are
labeled followers
Followers
Have the opportunity to evaluate:
Alternative technologies
Delay investment in risky projects of plant capacity
Imitate or surpass superior product or technology
offerings

Starbucks: Selling coffee in grocery stores
Internal Development or Acquisition
Internal development-creating a new business in a
somewhat unfamiliar competitive environment

Turn to existing players in:
Joint Ventures
Alliances
Acquisitions

2 issues analyzed as part of the decision process:
What are the structural barriers to entry?
How will incumbent firms react to intrusion?

Strategy in Mature and Declining
Industries
Choose a balance between differentiation and low cost postures
and deciding whether to compete in multiple or single industry
segments

Firms earn profits during long maturity stage when they:
Concentrate on segments that offer chances for higher growth or higher
return
Manage product and process innovation aimed at further differentiation,
cost reduction, or rejuvenating segment growth
Streamline production and delivery to cut costs
Gradually harvest the business in preparation for strategic shift to more
promising product or industries
Strategy in Mature and Declining
Industries
Companies should avoid:
An overly optimistic view of the industry or the companys position
within it
A lack of strategic clarity shown by a failure to choose between a broad-
based and a focused competitive approach
Investing too much for too little return
Trading market share for profitability in response to short-term
performance pressures
Unwillingness to compete on price
Resistance to industry structural changes or new practices
Placing too much emphasis on new product development compared with
improving existing ones
Retaining excess capacity

Take caution in exit decisions
Industry Evolution and Functional Priorities
Early Development
Slow growth in sales
Research and development emphasis
Rapid technological change in product
Emerging State
Success associated with technological skill and being the first in a new market
Marketing advantage has a widespread awareness
Rapid growth brings new competitors
Maturity Stage
Sales growth continues, but at a decreasing rate
Technological change in product design slows
Promotional and pricing advantages key internal strengths
Declining Stage
Strengths center on cost advantages and superior supplier and customer
relationships
Strategy in Fragmented
Industries
Fragmented industries - no company or group
has enough market share to affect industry
structure or outcomes.
To thrive in these markets, segment the market
based on:
Product, customer, type of order, or geographic area
Combined with no frills posture.
Strategy in Deregulating
Industries
Artificial constraints are lifted and new players
are allowed to enter.
Deregulating environments undergo change twice:
when market is opened and 5 years later.
Can be good and bad for companies
Dealing with Challenges in
Deregulated Markets
Four distinct strategic postures:
1.) Broad based distributors that offer a wide range of products
2.) Low cost entrants that develop into niche players
3.) Focus segment marketers that emphasize the companys
value
4.) Shared utilities that focus on market based economies of
scales available to smaller competitors.
Pricing in Newly Deregulated
Industries
When new competitors enter, the market
demands reduced prices.
Results from efficiencies and competitive effects
Startups are inefficient and shared markets
reduce efficiencies of scale and scope.
How to Adjust Prices Correctly
1.) Measure up against the most relevant
competitors.
2.) Switch prices but dont allow a price gap
3.) Pay attention to valued customers
4.) Keep costs high enough to be able to run
your business
Strategy in Hypercompetitive
Industries
Characterized by intense rivalry
Successful strategies often are based on taking
the competitor by surprise and then moving on
as the competition tries to recover
Hypercompetitive Markets
Rapid innovation and speed
Superior short-term strategic focus
Market awareness
Competitive Reactions Under
Extreme Competition
6 Actions
Retool strategy and restore its importance
Manage transition economics
Fight aggregation with disaggregation
Seek out new demand and new growth
Use a portfolio of initiatives to increase speed and
flexibility
Count on strategic risk
Business Unit Strategy: Special
Dimensions
Speed
Newest and least understood
Pace of progress that a company displays in
responding to current or anticipated business needs
Speed Merchants
Strategy built on rapid pace converting core
competencies into competitive advantages which
alter competitive landscapes in their favor

Pressures to Speed
Speed is universally popular
Speed-oriented companies are rewarded with
loyalty and commitment.
Suppliers will bear extra costs and
responsibilities.
Sources for Increasing Speed
Customers
Demand responsiveness
Need for creating a new basis for competitive
advantage
Innovation, development, manufacturing, distribution
Competitive Pressures
with increasing competition, speed must be maximized
Industry Shifts
Speed is important in industries with short product life
cycles
Requirements of Speed
Executives must foster a fast culture.
Actions must be taken on the following issues:
Refocusing the business mission
Creating a speed-compatible culture
Upgrading communication
Refocusing business process reengineering
Committing to new performance metrics
Requirements of Speed (cont.)
Refocusing the business mission
Board and officers articulate a long-term vision for a speed oriented company.
Creating a speed-compatible culture
Facilitate speed by nurturing an organizational culture that is conductive to speed and
adopt and evaluation system.
Upgrading communication
Upgrading methods for clear and timely communication.
Refocusing business process reengineering
Reorganize to eliminate barriers that create distance between employees and
customers.
Committing to new performance metrics
Metrics include: sales volume, customer satisfaction, processing time, cost
controls, and marketing specifics.

Methods to Speed
Internal analysis to determine where speed exists
and where is does not.
Eliminate speed gaps.
Three categories:
Streamlining Operations
Upgrading Technology
Forming Partnerships
Methods to Speed (cont.)
Streamlining Operations
Speed-enhanced ability to obtain quick post-
implementation feedback from the marketplace
Upgrading Technology
Use of latest IT to create speed. Goal is to connect
manufacturers with retailers to enhance information
sharing.
Forming Partnerships
Sharing business burdens is a way to shorten time
needed to improve market responsiveness.
Ex: Ford, General Motors, and Chrystler

Creating Value Through Innovation
Strategy requires Innovation
Clayton Christensen disruptive and sustaining
innovation
Computer hardware industry
GE

Fostering Innovation
3Ms unparalleled culture:
1) Top level comittment
2) Long term focus
3) Flexible organization
4) Loose and tight planning and control
5) Appropriate incentives
Performance and Profitability
Performance
Booz Allen Hamilton
Boston Consulting Group

Profitability
Unsatisfied with returns
Mismanagement of the Innovation process
Measurement Metrics