Business Strategies in Different Industry & Sectoral Contexts Foundations of Strategy: Chapter 5 Team 5
Jan 01, 2016
Business Strategies in Different Industry & Sectoral ContextsFoundations of Strategy: Chapter 5
Team 5
Overview
All companies have to adapt to change Driving forces that affect an industry
environment: External Forces + New Competitive
Change = Change in an industry environment
Objective: Understand how managers adapt to and predict change
Industry Life Cycle
Supply-side equivalent of the Product Life Cycle Likely to be of longer duration than that of a single
product 4 phases
› Introduction/emergence› Growth› Maturity› Decline
Factors that drive ILC› Demand Growth› Production Knowledge
Demand Growth
Stage of the life cycle are defined by the changes in an industry’s growth rate over time
Introduction› Sales are small› Market penetration rate is low› Costs are higher and lower quality › Customers tend to be affluent and risk-tolerant
Growth› Accelerated market penetration› Technical improvements and increased efficiency
Demand Growth Cont’d
Maturity › Market saturation continues to increase
Decline› New industries produce new, superior
products
Production & Diffusion of Knowledge
A new industry is created from new knowledge in the form of product innovation
Introduction:› Product technology advances rapidly› Sales are primarily aimed at enthusiasts and
pioneers Over the span of the life cycle:
› Customers become increasingly informed and are able to judge various products better
Dominant Designs & Technical Standards
Dominant Design: product architecture that defines the look, functionality and production method. It is accepted as the industry standard; design may not be proprietary or hold a profit advantage
Overall configuration of a product or system
EX: Underwood Model 5 Typewriter
Dominant Designs & Technical Standards Cont’d
Technical Standard: technology or specification that is important for compatibility; intellectual property
Emerge when network effects arise – or a need for users to connect in some way
Strategy at different stages of the life cycle
•Introduction•Growth Phase•Maturity Phase•Decline Phase
Introduction Phase
Number of firms in an industry increases rapidly during early stages
Basis of entry is product innovation Subsequent success comes from winning
the battle for technological leadership Born Global Companies- derive
significant competitive advantage from the use of resources and the sale of output in other countries
Growth Phase
As demand grows in the domestic market a dominant design usually emerges
Key challenge becomes scaling up As the market expands, the firm needs
to adapt its product design and manufacturing capability to large scale production
Maturity Phase
Cost efficiency through scale economies, low wages and low overheads become the key success factors
Industries go through “shakeout” phases during which firm failures increase sharply depending on international competition
Special niche markets develop in the process
Decline phase
Decline can be a result of technological substitution
Key features of declining industries are:› Excess Capacity› Lack of technological change› High average age of both physical and
human resources› Aggressive price competition
Not-for-profits
Surplus funds are used to pursue organizational goals
Education, Health Care, Social Services, Arts and Culture, Religion
Organizational type
Ownership Funding/Revenue Source
Interests Served
Government Department
Public Government Public
State-owned Enterprise
Public Sales of goods and services/government
Public
Charity Trustees Donations/Government
The focus of the organization’s mission
Public-private partnership
Public and Private
Sales of goods and services/government
Public and Private
Social Enterprise
Private or Trustees
Sales of goods and services
The focus of the organization’s mission
Private Enterprise
Private Sales of goods and services
Private
Impacts on Strategy
Multiple, potentially conflicting goals Distinctive constraints and different
levers An absence of market forces Monopoly power Less autonomy and flexibility Increases accountability Less predictability
Oster’s Six Forces Model
Relations among existing
organizations
Threat of new
entrants
User groups
New substitut
es
Supplier industry
Funding groups
Stakeholder Analysis
The process of identifying, understanding and priortising the needs of key stakeholders so that the questions of how stakeholders can participate in strategy formulation and how relationships with stakeholders are best managed can be addressed.
Key steps in Stakeholder Analysis
1. Identification of the list of potential stakeholders2. Ranking stakeholders according to their
importance and influence on the organization3. Identifying the criteria that each stakeholder is
likely to use to judge the organization’s performance.
4. Deciding how well the organization is doing from its stakeholders’ perspective.
5. Identifying what can be done to satisfy each stakeholder.
6. Identifying and recording longer term issues with individual stakeholders and as a group.
Scenario analysis
A systematic way of thinking about how the future might unfold that builds on what we know about current trends and signals.
Key Steps in building and using scenarios:
Defining the purpose of the analysis Deciding on the time horizon Identifying key trends Identifying key uncertainties Creating the scenarios and checking that
they are internally consistent Identifying indicators that might signal
which scenario is unfolding Assessing the strategic implications of
each scenario