BUSINESS-LEVEL STRATEGIES AND INDUSTRY ENVIRONMENTSENVIRONMENTS RULESUSTAINING COMP ADVANT IN DIFF INDUSTRY ENVIRONMENTSFRAGMENTED INDUSTRY NEWOVERCOMING FRAGMENTATIONLEADING IN EVOLVING INDUSTRIES (THAT WILL BE CONCENTRATED)EMBRYONIC/EMERGING/GROWTH INDUSTRIESE/E/G INDUSTRIESTECHNOLOGY/S-CURVE HINGES PARTLY ON CUSTOMER DEMANDCROSSING THE CHASMTIPPING POINTTIPPING PTFACTORS AFFECTING RATE OF ADOPTIONRATES OF DIFFUSIONHOW SOON WILL RIVALS APPEAR?GO IT ALONE, PARTNER OR LICENSE?TIPPING PTS & VIRAL MRTNGB-L (PRODUCT/MARKET SEGMENT) STRATEGIES IN MATURE INDUSTRIESMATURE INDUSTRY STRATGIESCOMPETITIVE ADVANTAGESSTRATS TO MANAGE RIVALRYSTRATEGIES TO CONTROL SUPPLY & DISTRIBUTIONDOMINANT STRATEGYSTRATEGY IN DECLINING INDMATURE VS. DECLINING INDUSTRIESSTRATEGIES FOR DECLINING INDUSTRIESQUESTIONSMORE QUESTIONSBUSINESS-LEVEL STRATEGIES AND INDUSTRY ENVIRONMENTSBUSINESS 189 (chpt. 6)SPRING 2010DR. MARK FRUINENVIRONMENTS RULE•FIRMS MUST FIT THEIR STRATEGIES TO THE ENVIRONMENTS IN WHICH THEY EXIST•DONUT RING MODEL AS APPROXIMATION•BASIC LAW OF EVOLUTION = ADAPT OR DIE OUT–INDUSTRY ENVIRONMENT–COMPETITIVE ENVIRONMENT–INSTITUTIONAL ENVIRONMENT–MACRO-ECONOMIC ENVIRONMENT–ORGANIZATIONAL ENVIRONMENTSUSTAINING COMP ADVANT IN DIFF INDUSTRY ENVIRONMENTS•RECOGNIZE DIFF INDUSTRY ENVIRONMENTS•FRAGMENTED VERSUS CONCENTRATED INDUSTRIES–FRAGMENTED INDUSTRY STRATEGIES:•CONCENTRATED INDUSTRIES HAVE STAGES DRIVEN BY TECH & MRKT MATURATION–EMBRYONIC–GROWTH (EMERGING & SHAKEOUT)–MATURE –DECLININGFRAGMENTED INDUSTRY NEW •LARGE NUMBERS OF SMALL AND MED-SIZED COMPANIES•LOW BARRIERS TO ENTRY•HARD TO REALIZE ECONOMIES OF SCALE & SCOPE•BETWEEN GENERIC STRATEGIES, WHICH ONE APPLIES???–COST LEADERSHIP OR DIFFERENTIATION?OVERCOMING FRAGMENTATION•CHAINING STRATEGY (WAL-MART)•FRANCHISING (CENTURY 21, McD)•HORIZONTAL MERGER (BUDWEISER, NOW IN-BEV)•CONSOLIDATE W/ NEW TECH–AMAZON, eBAY, GOOGLE (?)•HIGH LEVELS OF PERSONAL/PROFESSIONAL SERVICE–HIGH END HEALTH CLUBS, LAW FIRMSLEADING IN EVOLVING INDUSTRIES (THAT WILL BE CONCENTRATED)•INDUSTRIES ARE COMPOSED OF SEGMENTS & DRIVEN BY TECHNOLOGY•SEGMENTS ARE DEFINED AS?–PRODUCT ____–CUSTOMER ____–LOCAL DIFFERENCES•UNDERSTAND WHAT’S HAPPENING IN INDUSTRY –TARGET PRODUCT/ MARKET SEGMENTS ACCORDINGLY–OF COURSE, HAVE TO TARGET WHERE INDUSTRY IS GOING RATHER THAN WHERE IT IS TODAYEMBRYONIC/EMERGING/GROWTHINDUSTRIES•EMBRYONIC INDUSTRY = WHEN TECH BEGINNING TO DEVELOP –TECH INNOVATION DRIVES INDUSTRY–WHICH INDUSTRIES EMBRYONIC TODAY?•EMERGING/GROWTH IND WHEN MARKET DEMAND BEGINS TO GROW RAPIDLY–MARKET DEMAND DRIVES INDUSTRY–OBVIOUSLY DEMAND GROWTH TAKES TIME–SOME FIRMS CATCH THE WAVE & SOME DON’TE/E/G INDUSTRIES•SLOW GROWTH AT FIRST BECAUSE–LIMITED PERFORMANCE/POOR QUALITY–CUSTOMERS UNFAMILIAR W/ NEW TECH–LACK COMPLEMENTARY PRODUCTS–PRODUCTION COSTS ARE HIGH •INDUSTRY GOES FROM EMBRYONIC -> HIGH GROWTH - WHY?–TECH PROGRESS MAKES PRODUCT EASIER TO USE & INCREASES THEIR VALUE–COMPLEMENTARY PRODUCTS APPEAR–PRODUCT/PROCESS COSTS GO DOWNTECHNOLOGY/S-CURVE HINGES PARTLY ON CUSTOMER DEMAND •INNOVATORS (1%)–TECHIES, GEEKS•EARLY ADOPTERS (5%)–ENGINEERS, ENTREPRENEURS•EARLY MAJORITY (24%)–PRAGMATISTS•LATE MAJORITY (45%)–STUCK IN THE MUD BUT NOT LUDDITES–EXTRA CREDIT: WHO ARE LUDDITES? •LAGGARDS (24%)CROSSING THE CHASM•GORDON MOORE, FORMER CEO OF INTEL & ORIGINATOR MOORE’S LAW (WHICH IS ?)–MANY COMPANIES CANNOT TRANSITION FROM EMBRYONIC TO GROWTH MARKETS•THERE MAY BE TWO OR THREE “CHASMS”–THEY FAIL TO DEVELOP MASS MARKETS NEEDED TO GROW PRODUCT–FAIL ON PROD FEATURES AND/OR CUST CHAR–APPLE (I) AS FIRM THAT FELL IN THE CHASM?TIPPING POINT•BIG CHANGES CAN HAPPEN SUDDENLY–THINGS BUILD UP & BUILD UP, AND THEN BANG!•TIPPING POINT THEORY FROM EPIDEMIOLOGY–STATE OF CONTAGIOUSNESS–GRADUAL, ALMOST IMPERCEPTIBLE CHANGE RAPIDLY ACCELERATES AT A CERTAIN POINT–CRITICAL MASS CAN UNLEASH EPIDEMIC MOVEMENT: SUDDENLY EVERYONE’S INFECTEDTIPPING PT •EPIDEMICS ARE A FUNCTION OF:–THE PEOPLE WHO TRANSMIT INFECTION (INFECTIOUS AGENTS)–INFECTIOUS AGENT ITSELF (HOW VIRULENT; HOW TRANSMITTED?)–ENVIRONMENT IN WHICH INFECTIOUS AGENT OPERATES (HUMAN BEINGS ARE MORE SENSITIVE IN CERTAIN ENVIRONMENTS THAN OTHERS; CERTAIN ENVIR MORE CONDUCTIVE)•SUPPORT FOR IRAQ WAR (ESP. W/ DEMO CONGRESS)•ATTITUDES TOWARD GLOBAL WARMING •LIKELIHOOD OF BUYING A PRIUS (BEFORE & NOW)FACTORS AFFECTING RATE OF ADOPTION•PRODUCT’S RELATIVE ADVANTAGES•COMPATIBILITY WITH EXISTING NEEDS AND HABITS; SWITCHING COSTS•COMPLEXITY/DEGREE OF DIFFICULTY IN UNDERSTANDING AND/OR USING•TRIALABILITY•OBSERVABILITY•EXISTENCE OF COMPLEMENTARY PRODRATES OF DIFFUSION•DIFFERENCES BETWEEN 45 DEGREE RATES OF DIFFUSION & NEARLY 90 DEGREE RATES?–AUTOS, ELECTRICITY & TELEPHONE @ 45 DEGREES–VS. TELEVISION, VCR & CELL PHONE @ 90 DEGREES•WHICH IS MORE IMPORTANT IN DRIVING DIFFUSION - FIRMS OR TECHNOLOGIES?–PUSH OR PULL?•CAN ANYTHING DIFFUSE MORE RAPIDLY THAN CELL PHONES?–RATE OF DIFFUSION DEPENDS ON?•?•?•?HOW SOON WILL RIVALS APPEAR?•HOW IMPORTANT ARE COMPLEMENTARY ASSETS & HOW MANY SOURCES OF COMPLEMENTARY ASSETS AVAILABLE?•HEIGHT OF BARRIERS TO IMITATION IN PRODUCTS & PROCESSES?•HOW MANY CAPABLE RIVALS?•GO IT ALONE, LICENSE OR PARTNER?GO IT ALONE, PARTNER OR LICENSE?•EASE OF IMITATION/REPLICATION (INCLUDING REVERSE ENGINEERING)–EASY/NOT-SO-EASY•IMPORTANCE OF COMPLEMENTARY ASSETS/RESOURCES/TECHNOLOGIES–IMPORTANT/NOT-SO-IMPORTANT•NUMBER OF CAPABLE COMPETITORS–FEW vs MANY–DOMESTIC vs GLOBALTIPPING PTS & VIRAL MRTNG•SOME PEOPLE ARE VERY INFLUENTIAL•LEAD ADOPTERS/LEAD SUPPLIERS, FOR EXAMPLE•SOME PEOPLE CAN “INFECT/AFFECT” MANY OTHERS (ESP. IF YOU USE A TECHNOLOGY WITH SCALE, SCOPE & LEVERAGE, LIKE INTERNET)–RECENT EXAMPLES: OBAMA & PRES CAMPAIGN–ANGELA JOLIE AND MADONNA ON ADOPTING CHILDREN FROM AFRICAB-L (PRODUCT/MARKET SEGMENT) STRATEGIES IN MATURE INDUSTRIES•B-L STRATEGIES ABOUT HOW FIRMS COLLEC TI V ELY REDUCE STRENGTH OF COMPETITION (IN MATURE INDUSTRIES)–STRATEGIES TO DETER ENTRY–STRATEGIES TO MANAGE RIVALRY–STRATEGIES TO CONTROL SUPPLY AND DISTRIBUTION•THEY’VE MADE IT & NOW THEY WANT TO COLLECT ON THE FRUITS OF THEIR EFFORTSMATURE INDUSTRY STRATGIES•REMEMBER PRODUCT DIFFERENCES ARE ACHIEVED IN 4 WAYS IN FUNCTIONAL SENSE–EFFICIENCY, QUALITY, INNOVATION & CUSTOMER RESP/SAT•STRATEGIES TO DETER ENTRY–PRODUCT