Ch. 5: Business Strategies in Different Industries

Cristian Marsico - Larry Griffin - Beau Gould

Teresita Pinon

Opening Case:• 1981 PC Industry value

3.0B with 150 companies.• Apple had about 20% of

the market.• IBM reacted; started PC

projects in Florida• Open strategy for third-

party complimentary products

• Fast complementary products growth led to many imitators

• Reduced barriers to entry for the industry

• Apple developed in-house only without third-party

• Over the following years, PC’s become more complex but gain more popularity

• IBMs MS/DOS operating system became the industry standard

Industry Life CycleProduct Life Cycle - born, grow, maturity, decline, die

Industry Life Cycle - supply-side equivalent of the product life cycle

•Stages: Introduction, growth, maturity, decline

Two FactorsDemand Growth - The life cycle stages are determined by sales, rate of market penetration, market saturation, and substitutes

Production & Diffusion of Knowledge - Product innovation and knowledge diffusion are major influences on industry evolution

Dominant Designs and Technical Standards

Dominant Design - Product architecture that defines the look, functionality, production method, and acceptance in the industryTechnical Standards - Technology or specification that is important for compatibility

•Technical standards emerge where there are network effects (need for users to connect)

From Product to Process Innovation

•Once in the Growth phase, there is a shift from a radical to a more incremental product innovation.

•From design to manufacturing firms seek to reduce costs and increase product reliability

•For successful market penetration, process improvements, design modifications, and scale economies are applied

Life cycles •Duration of life cycles are becoming more

compressed. (Especially in E-commerce)•Patterns in evolution differ across

industries•Industries are in different life cycle

stages in different countries

Introduction Phase“De novo” - new entrants (Apple)

“De alio” - firms looking to diversify (Commodore)

Born global companies (Eyeview)

Growth Phase

• Demand

• Dominant design

• Financial resources

Maturity Phase

• Competitive advantage

• Cost efficiency

• ‘Shakeouts’

Decline Phase• Causes: technology, preferences, demographic

shifts, foreign competition

• Key features: excess capacity, lack of technical change (no new products), high average age or physical and human resources, aggressive price competition

Key Success Factors• 1. INTRO: Capabilities in product development,

manufacturing, marketing & distribution

• 2. GROWTH: Scaling up

• 3. MATURITY: Cost efficiency - scale economies, low wages and low overhead costs

• 4. DECLINE: Planning for the future

Strategy for the Public Sector• Ownership is vested in

the government• Funded at least partially

by the government• Act in national or public

interest▫ Public goods

Differences Between Public/Private

1.Multiple, potentially conflicting goals2.Distinctive constraints/levers3.Absence of market forces4.Monopoly power5.Less autonomy and flexibility6.Increased accountability7.Less predictability

Strategy for Not-for-profits• Organisations that do not

distribute surplus funds• Pursuing a philanthropic

goal• Do not always act in the

shareholders best interest

Social enterprise - for profit organization with a philanthropic pursuit

Characteristics of Not-for-profitsNot-for-profits share many of the same characteristics with public orgs, but also face:

1.The need for employment of volunteers

2.FundraisingHowever, they differ in that they do not:

3.Have monopoly power4.Direct political influence

Realogy and Public/Not-for-profit

Public Sector•Texas Real Estate Commission•Federal Housing Administration

Not-for-profits•Texas Association of Realtors•National Association of Realtors•International Valuation Standards

Council

Stakeholder Analysis•Helps to identify importance of different

groups of stakeholders•Aids in strategy development for

company

Creating A Stakeholder Analysis

1. Brainstorm2. Categorize3. Analyze

Board of Directors(Manage Closely)

Employees(Keep Informed)

Customers(Keep Satisfied)

General Public(Minimal Effort)

Scenario Planning1.Define purpose/time horizon2.Identify trends3.Identify uncertainties4.Construct scenarios5.Identify scenario indicators6.Assess strategic implications

Conclusion•Industry Life Cycles•Key Success Factors•Strategies for Differing

Industries/Sectors•Stakeholder Analysis