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Business-Level Strategy and the Industry Environment (Strategy in a…
Business-Level Strategy and the Industry Environment
Strategy in a fragmented industry
Fragmented industry
Reason for fragmentation
A lack of scale economies may mean that there are few, if any, cost advantages to large size.
Brand loyalty in the industry may primarily be local
The lack of scale economies and national brand loyalty implies low entry bar- riers.
Forms of competitive strategy
Chaining: a network of outlets interconnected by IT that functions as one large company.
Horizontal merger: to merge with or acquire competitors, combining them together into a single larger enterprise.
Franchising: (franchisor, franchisees)
The right to use the franchisor’s name, reputation, and business model in return for a franchise fee
Strategy in mature industries
Strategies to Deter entry
Product proliferation: Catering to the needs of customers in all market segments to deter entry by competitors
Limit Price: Charging a price that is lower than that required to maximize profits in the short run
Strategic commitments: Investments that signal an incumbent’s long-term commitment to a market.
Strategies to Manage Rivalry
Price Signaling
Price leadership
Nonprice Competitive strategies
Market penetration
Product development
Market development
Product proliferation
Capacity control
Strategies in declining industries
Severity of Decline: competition tends to intensify in a declining industry, and pro t rates tend to fall. :chart_with_downwards_trend:
Choose a strategy
Leadership: dominant :trophy: :signal_strength:
Niche :silhouettes: :money_with_wings: :money_mouth_face::arrow_down:
Harvest: :arrow_heading_down: cost structure and extract :moneybag:
Divestment :man_in_business_suit_levitating::writing_hand: :scroll:
Strategies in embryonic and growth industries
Mass market
Large numbers of customers enter the market.
Ongoing technological progress makes a product easier to use, and increases its value
Complementary products increase its value
Companies in the industry work to find ways to reduce the costs of producing the new products
Customer Groups
Innovators
Early adopters
Early majority
Late majority
Laggards
¨Innovators and early adopters have very different customer needs from the early majority¨
" A company can also extend the product life cycle by finding new uses or markets for their products." (Suttle, n.d.).
Suttle, R (n.d.). Product Life Cycle Analysis & Price Strategies. Recuperado de
http://smallbusiness.chron.com/product-life-cycle-analysis-price-strategies-3281.html
