Competitive Advantage in Mature IndustriesCompetitive Advantage in Retailing: Retailers with the Highest and Lowest Valuation RatiosKey Success Factors in Mature IndustriesSources of Strategic Innovation in Mature IndustriesProduct, Process, and Strategic Innovation over the Life CycleStrategy Implementation in Mature Industries:The Traditional ModelThe Competitive Environment of Declining IndustriesStrategy Options in Declining IndustriesStrategy Alternatives for a Declining IndustryCompetitive Advantage in Mature IndustriesCompetitive Advantage in Mature Industries•Key success factors in mature industries•Strategic Implementation: Structure, Systems, Style•Strategies for declining industriesOUTLINECompetitive Advantage in Retailing: Retailers with the Highest and Lowest Valuation RatiosCompetitive Advantage in Retailing: Retailers with the Highest and Lowest Valuation RatiosTOP 15 Valuation Sales Ratio ($,bil.)Amazon.com (US) n.a. 3.9Caremark Rx (US) 18.0 6.8Expedia 16.6 0.6Autozone (US) 13.1 5.3Hennes & Mauritz (Swe.) 10.5 5.9Next (UK) 10.1 3.6Bed, Bath & Beyond (US) 8.5 3.7Woolworth (Australia) 8.0 16.0Gap (US) 4.1 14.5TJX (US) 6.9 12.0Inditex (Spain) 6.8 4.7Wal-Mart (US) 5.7 244.5 Radio Shack 5.6 4.6Family Dollar Stores 5.1 4.2Best Buy (US) 5.0 20.9 Toys-R-Us 0.6 11.3J.C. Penny (US) 0.7 32.3Federated Dept. Stores (US) 1.1 15.4J. Sainsbury (UK) 1.1 29.8 Ito-Yokado (Japan) 1.1 28.0Ahold 1.2 78.3Safeway plc (UK) 1.3 29.8Pinault-Printemps-Redoute (France) 1.4 32.2Sears Roebuck (US) 1.4 41.4Dixons Group (UK) 1.4 8.0Albertson’s (US) 1.5 35.6May Department Stores (US) 1.7 11.9Office Depot (US) 1.7 11.4CVS 1.9 24.2Kingfisher (UK) 2.0 17.6BOTTOM 15 Valuation Sales Ratio ($, bil.)Key Success Factors in Mature IndustriesKey Success Factors in Mature Industries•Opportunities for sustainable -- limited potential for differentiationcompetitive advantage are -- technology stable and well diffusedlimited -- ease of entry due to well developed industry infrastructure and powerful distributors -- international competition : domestic cost advantage vulnerable•Sources of -- Economies of scalecost advantage -- Low-cost inputs -- Low overheads•Segment and customer -- As general industry environment selection deteriorates, important to locate attractive segments and woo good customers. •Sources of differentiation -- Emphasis on image differentiation and advantage differentiation through complementary services.•Sources of innovation -- Limited opportunity for product and process innovation but considerable opportunity for strategic innovationSources of Strategic Innovation in Mature IndustriesSources of Strategic Innovation in Mature Industries• Reconfiguring the value chain: - Benetton and Zara in clothing - Southwest & Ryanair in airlines - Dell in PCs• Redefining markets and products - Swatch in watches - Starbucks in coffee shops - Barnes & Noble in book retailing• Innovative approaches to - Virgin Atlantic in air travel differentiation - Sephora in cosmetics retailing Who are the strategic innovators?• New entrants - CNN in news broadcasting - Nucor in the U.S. steel industry• Existing firms on the periphery -Sun Records in rock ‘n roll music • Firms from adjacent industries - Prudential Insurance in banking (Egg)Why not leading incumbents?• They are constrained by “industry recipes,” relationships with existing customers, investments in resources & capabilities linked to past strategies.TIMERATE OF INNOVATIONProcessinnovationStrategicinnovationProductinnovationProduct, Process, and Strategic Innovation over the Life CycleProduct, Process, and Strategic Innovation over the Life CycleStrategy Implementation in Mature Industries:The Traditional ModelStrategy Implementation in Mature Industries:The Traditional ModelSTRATEGY - Pursuit of cost efficiency through mass productionSTRUCTURE - Functional departments- Line and staff distinction- Job specializationCONTROLS - Quantitative, short-term performance targets- Hierarchical monitoring and control- Standard, formalized operating procedures, reporting, and management by exception.INCENTIVES - Emphasis on financial incentives linked to individual performanceTOP - Primary functions are control and MANAGEMENT strategic decision making- Two main styles: politician and autocratThe Competitive Environment of Declining IndustriesThe Competitive Environment of Declining IndustriesFeatures - Excess capacityof declining - Lack of technological changeindustries - Consolidation (but some new entry as new firms exit)- Old machines and employeesSmooth adjustment - Predictability of declineof capacity Durable assetsdepends upon Costs of closure- Barriers to exit Managementcommitment- Strategies of surviving firms{Strategy Options in Declining IndustriesStrategy Options in Declining IndustriesLEADERSHIP Establish dominant market position-encourage exit of rivals-buy market share through acquisition-acquire capacity-demonstrate commitment-dispel optimism about the industry’s future-raise the stakesNICHE Identify an attractive segment and dominate it.HARVEST Maximize cash flow from existing sourcesDIVEST Get out while there is still a market for industry assetsCOMPANY’S COMPETITIVE POSITIONStrengths in Lacks strength in remaining demand remaining demand pockets pocket Favorable LEADERSHIP HARVEST INDUSTRY to or orSTRUCTURE decline NICHE DIVEST Unfavorable NICHE DIVEST to or QUICKLY decline HARVESTStrategy Alternatives for a Declining IndustryStrategy Alternatives for a Declining