Description
the performance of firms in the same industry differ ? Why are some firms persistently more profitable? How does it relate to strategic posture of firms ? How to select a competitive strategy? It also include factors of competition.
STRUCTURAL ANALYSIS WITHIN INDUSTRIES
On the horns of dilemma
?
Why does the performance of firms in the same industry differ ?
? ? ?
Why are some firms persistently more profitable ? How does it relate to strategic posture of firms ? How to select a competitive strategy ?
Dimensions
»Specialization
»Brand Identification
»Pull v/s Push »Channel Selection »Quality »Technological Leadership. »Vertical Integration »Cost Position »Service »Price Policy »Leverage »Relationship With Parent Company »Relationship to Home and Host Government
Structural Analysis
Step 1:
?
Characterize all the strategies along various dimensions
Strategic Groups
?
?
?
?
? ?
A group of firms in an industry following the same or similar strategy along strategic dimensions. They exists due to various reasons like ... 1. Differing initial strength and weaknesses. 2. Differing time of entries. 3. Historical accidents. Once formed, firms in the same group resembles to one another closely MUST include firm’s relationship to its parent CAUTION: what degree of strategic difference is important All five forces wont have equal impact on different groups
Drawing Strategic Group Map
?
?
? ?
Identify two important competitive dimensions. Plot the firms on the two-variable map. Draw circles around the firms that are clustered together. Indicate potential movement of firms with arrows
A map of Strategic Groups
Strategic group maps provide a useful way to identify and assess strategic groups using selected competitive attributes
Entry Barriers
Entry Barriers ????
? Particular
strategic group that the entrant seeks to
join ? Firm’s relations to their parents ? It provides barriers to shifting strategic position from one strategic group to another
Mobility Barriers
Mobility Barriers ?????
? Different
levels of mobility barriers ? High mobility barriers? High profit potential ? Absence of mobility barriers ? Market shares can be very stable ? Mobility barriers can change ? Firms often change strategic groups ? Some firms face lower costs ? Diversified firms can enjoy reductions
Why strategic groups form and change??
1
2 3 • Firms develop differences in skills or resources • Firms differ in their goals or risk posture
• Historical development of an industry
Why strategic groups form and change?? (Contd.)
• Technological changes or changes in buyer’s behavior • Changes in the structure of the industry
4
5
Bargaining
Power
STRATEGY GROUPS
Implications for industry Rivalry Outbreaks of warfare
Four factors for competition
Outcomes
?
?
?
Different strategic approaches Competing for same customers and its implications Stability factor
Strategy Group Mapping & Intergroup Rivalry
Group D will be much less affected by industry rivalry. Group A competes with B and C who use different strategies to reach same customers. Groups E and F are smaller and follow similar
Determinants of Profitability
1 2 3 4 • Demand • Overall Potential • Mobility barriers • Bargaining power • Vulnerability of the firms • Exposure of firms
5
Firms’ position with its Strategic Group
Degree of competitio n
Scale of firm
Costs of entry
Large versus Small
Large vs Small
Large
?
? ?
?
Abundance of resources Economies of Scale Insulated from competition Were badly hit by the recession
Small ? Readiness to adaptation, greater flexibility ? Face greater competition ? Were able to better adapt to the challenges put across by the recession
Which type is more profitable?
?
Situations favoring Large firms
?
Firm part of strategic group protected by strong mobility barriers Strong bargaining position with respect to customers
Strong bargaining position with respect to suppliers
?
?
?
The IBM story
Which type is more profitable?
•
Examples : Brewery and Pharmaceuticals Industry, manufacturing of toiletries and television sets
–
Industries require economy of scales Require extensive national advertising Firms having a large parent organization
? Distribution
–
–
channels ? Vertical Integration ? Brand
Which type is more profitable?
?
Situations favoring smaller firms
?
Higher product differentiation
Greater technological progressiveness Superior service in targeted niche
?
?
?
Examples: Women’s clothing ,Handicrafts, Services Industry
Market Share
?
?
Smaller firms tend to have a larger share in a specialized segment Large firms don’t have the maximum share in every segment, but lead overall
Leaders and Followers: Comparison of Profitability
?
Followers were more profitable in 15 of the 38 industries
?
Clothing , Footwear, Pottery, Meat Products, Carpets
?
Leaders were more profitable in the following Industries
? Soap,
Perfumes, Soft Drinks, Cutlery, Radio and Television, Drugs, Photographic Equipment
Strategic Group and Cost Position
?
Cost Position as a competitive strategy?
? Will
readily be able to penetrate other areas of strategy
? Differentiation ? Technology ? Superior
Service
? ?
Difficult to sustain Impossible to implement with any other startegy
Verdict
•
Would require a sacrifice in other areas of strategy, mainly due to conflicting functional policy May be crucial within a strategic group Overall it is not necessarily important within the industry The differential cost between low cost strategic group an the Industry is important
•
•
•
FORMULATION OF STRATEGY
FORMULATION OF STRATEGY
?
?
? ?
Choice of strategic group Trade-off between profit potential and the firm’s cost of entering it Matching a firm’s strengths and weakness Analyzing the opportunities and risk involved in strategy
STRENGTHS & WEAKNESSES
?
?
?
?
?
Strengths Factors that build the mobility barriers protecting its stretagic group Factors enhancing the bargaining power Greater scale relative to its strategic group Strong implementation abilities Ability of over coming the barriers of other group
Weaknesses
? ?
?
?
?
Factors that lowers the mobility barriers Factors worsening the bargaining power Smaller scale relative to its strategic group Weaker implementation ability Inability of overcoming the barriers of other group
OPPORTUNITIES
Create a new strategic group e.g.. Timex ? Shift to a more favorably situated strategic group ? Strengthen the structural position of existing group ? Strengthen the firm’s position within the strategic group
?
Risk
?
?
?
Risk of other firms entering its strategic group Risk of factors reducing the mobility barriers of the firm’s strategic groups Risks that accompany investments designed to improve the firm’s position by increasing mobility barriers
doc_286237755.pptx
the performance of firms in the same industry differ ? Why are some firms persistently more profitable? How does it relate to strategic posture of firms ? How to select a competitive strategy? It also include factors of competition.
STRUCTURAL ANALYSIS WITHIN INDUSTRIES
On the horns of dilemma
?
Why does the performance of firms in the same industry differ ?
? ? ?
Why are some firms persistently more profitable ? How does it relate to strategic posture of firms ? How to select a competitive strategy ?
Dimensions
»Specialization
»Brand Identification
»Pull v/s Push »Channel Selection »Quality »Technological Leadership. »Vertical Integration »Cost Position »Service »Price Policy »Leverage »Relationship With Parent Company »Relationship to Home and Host Government
Structural Analysis
Step 1:
?
Characterize all the strategies along various dimensions
Strategic Groups
?
?
?
?
? ?
A group of firms in an industry following the same or similar strategy along strategic dimensions. They exists due to various reasons like ... 1. Differing initial strength and weaknesses. 2. Differing time of entries. 3. Historical accidents. Once formed, firms in the same group resembles to one another closely MUST include firm’s relationship to its parent CAUTION: what degree of strategic difference is important All five forces wont have equal impact on different groups
Drawing Strategic Group Map
?
?
? ?
Identify two important competitive dimensions. Plot the firms on the two-variable map. Draw circles around the firms that are clustered together. Indicate potential movement of firms with arrows
A map of Strategic Groups
Strategic group maps provide a useful way to identify and assess strategic groups using selected competitive attributes
Entry Barriers
Entry Barriers ????
? Particular
strategic group that the entrant seeks to
join ? Firm’s relations to their parents ? It provides barriers to shifting strategic position from one strategic group to another
Mobility Barriers
Mobility Barriers ?????
? Different
levels of mobility barriers ? High mobility barriers? High profit potential ? Absence of mobility barriers ? Market shares can be very stable ? Mobility barriers can change ? Firms often change strategic groups ? Some firms face lower costs ? Diversified firms can enjoy reductions
Why strategic groups form and change??
1
2 3 • Firms develop differences in skills or resources • Firms differ in their goals or risk posture
• Historical development of an industry
Why strategic groups form and change?? (Contd.)
• Technological changes or changes in buyer’s behavior • Changes in the structure of the industry
4
5
Bargaining
Power
STRATEGY GROUPS
Implications for industry Rivalry Outbreaks of warfare
Four factors for competition
Outcomes
?
?
?
Different strategic approaches Competing for same customers and its implications Stability factor
Strategy Group Mapping & Intergroup Rivalry
Group D will be much less affected by industry rivalry. Group A competes with B and C who use different strategies to reach same customers. Groups E and F are smaller and follow similar
Determinants of Profitability
1 2 3 4 • Demand • Overall Potential • Mobility barriers • Bargaining power • Vulnerability of the firms • Exposure of firms
5
Firms’ position with its Strategic Group
Degree of competitio n
Scale of firm
Costs of entry
Large versus Small
Large vs Small
Large
?
? ?
?
Abundance of resources Economies of Scale Insulated from competition Were badly hit by the recession
Small ? Readiness to adaptation, greater flexibility ? Face greater competition ? Were able to better adapt to the challenges put across by the recession
Which type is more profitable?
?
Situations favoring Large firms
?
Firm part of strategic group protected by strong mobility barriers Strong bargaining position with respect to customers
Strong bargaining position with respect to suppliers
?
?
?
The IBM story
Which type is more profitable?
•
Examples : Brewery and Pharmaceuticals Industry, manufacturing of toiletries and television sets
–
Industries require economy of scales Require extensive national advertising Firms having a large parent organization
? Distribution
–
–
channels ? Vertical Integration ? Brand
Which type is more profitable?
?
Situations favoring smaller firms
?
Higher product differentiation
Greater technological progressiveness Superior service in targeted niche
?
?
?
Examples: Women’s clothing ,Handicrafts, Services Industry
Market Share
?
?
Smaller firms tend to have a larger share in a specialized segment Large firms don’t have the maximum share in every segment, but lead overall
Leaders and Followers: Comparison of Profitability
?
Followers were more profitable in 15 of the 38 industries
?
Clothing , Footwear, Pottery, Meat Products, Carpets
?
Leaders were more profitable in the following Industries
? Soap,
Perfumes, Soft Drinks, Cutlery, Radio and Television, Drugs, Photographic Equipment
Strategic Group and Cost Position
?
Cost Position as a competitive strategy?
? Will
readily be able to penetrate other areas of strategy
? Differentiation ? Technology ? Superior
Service
? ?
Difficult to sustain Impossible to implement with any other startegy
Verdict
•
Would require a sacrifice in other areas of strategy, mainly due to conflicting functional policy May be crucial within a strategic group Overall it is not necessarily important within the industry The differential cost between low cost strategic group an the Industry is important
•
•
•
FORMULATION OF STRATEGY
FORMULATION OF STRATEGY
?
?
? ?
Choice of strategic group Trade-off between profit potential and the firm’s cost of entering it Matching a firm’s strengths and weakness Analyzing the opportunities and risk involved in strategy
STRENGTHS & WEAKNESSES
?
?
?
?
?
Strengths Factors that build the mobility barriers protecting its stretagic group Factors enhancing the bargaining power Greater scale relative to its strategic group Strong implementation abilities Ability of over coming the barriers of other group
Weaknesses
? ?
?
?
?
Factors that lowers the mobility barriers Factors worsening the bargaining power Smaller scale relative to its strategic group Weaker implementation ability Inability of overcoming the barriers of other group
OPPORTUNITIES
Create a new strategic group e.g.. Timex ? Shift to a more favorably situated strategic group ? Strengthen the structural position of existing group ? Strengthen the firm’s position within the strategic group
?
Risk
?
?
?
Risk of other firms entering its strategic group Risk of factors reducing the mobility barriers of the firm’s strategic groups Risks that accompany investments designed to improve the firm’s position by increasing mobility barriers
doc_286237755.pptx