c Industry maturity does not imply a lack of opportunity; noIndustry maturity does

not imply a lack of opportunity; nor does maturity imply an absence of

technological change.

c But«industry maturity tends to reduce the number of opportunities for CA and

shift these limited opportunities from differentiation-based factors to cost-based
factors.

c Less scope for differentiation due to greater buyer knowledge, product

standardization & less product innovation.

c Diffusion/imitation of process technology makes cost advantages difficult

to obtain and sustain.

c Highly developed industry infrastructure and powerful distributors make it

easier to attack niches.

c Low-cost overseas competitors and exchange rate movements make cost

advantage difficult.

c Cost Advantage: 3 Drivers

c ë



: The increased standardization that
accompanies maturity assists the exploitation of scale economies.

c j

: Unionization can hurt existing orgs. Firms that

acquire equipment cheaply can gain cost advantages (economy,
stock market)

c j


: Excess overhead costs in mature firms can be
pervasive and institutionalized and their elimination may require
³shock therapy.´

c Although cost efficiency may not always provide competitive advantage, cost
inefficiency can be fatal.

c Hambrick & Schecter suggest 3 strategies for turnaround:

c !

: aggressive cost reduction through
reduction of excess capacity; halting investment in equipment;
cutbacks in R&D, marketing, inventory, etc.
 c  
 

: refocusing on profitable
segments and core competencies.

c è 

 
: minor rather than major
adjustments; a combination of the above.

c Turnaround strategies almost always involve changes in the top management

team.

c Segment and Customer Selection:

c Even unattractive industries may offer profitable niche markets. Not only
do growth rates of demand vary between segments, but the structure of
segments with regard to concentration, buyer power, and potential for
differentiation varies considerably.

c The logic of segment focus implies disaggregation of markets ± to the

individual level. IT increasingly makes it possible to ID customers that are
most profitable.

c This may allow firms to target attractive customers and transform less
valuable customers into more valuabInnovation:

c Innovation:

c The quest for differentiation requires innovation: new approaches to

uniqueness in terms of features, image, distribution, and bundling ±
beyond technical innovation«toward strategic innovation.

c Value chain analysis can help ± potential for reconfiguration of the

sequence of activities.

c Strategic innovation may involve redefining markets:

c Embracing new customer groups

c Adding products and services that perform new but related functions
(Arco, B&N)

c Baden Fuller & Stopford ± reconciliation of multiple (often opposing) goals in

order to create new options:

c Maturity is a state of mind«not a state of business.

 c It is the firm that matters«not the industry.

c Reconcile alternatives: quality at low cost; variety at low cost;

speed at low cost; etc.

c Be selective ± a firm¶s market scope needs to be limited by its

resources and capabilities.

c Create an entrepreneurial (intra) with freedom to experiment and

the capacity to learn.

c Sequence the strategic and organizational development.

Galvanize top management commitment; simplify by

eliminating outdated/unnecessary activities/control systems;
build the strategic capabilities needed; maintain momentum.

c Organizational Inertia

c Competency Traps

c Industry recipes

c Managerial ability to change

c ³Somewhere out there there¶s a bullet with your company¶s name on it.
Somewhere out there is a competitor, unborn and unknown, that will render your
strategy obsolete.´

c Efficiency through bureaucracy:

c Dynamic environments require organic org forms characterized by

decentralization, loosely defined roles, and high levels of lateral
communication.
 c Stable environments require mechanistic org forms characterized
by centralization, well-defined roles, and predominantly vertical
communication.

Efficiency is achieved through standardized routines, division

of labor and close management control.

Bureaucratic orgs are prominent among the large

enterprises found in most mature industries.

c The past two decades have seen growing unpopularity with bureaucracy (even in
mature industries):

c Increased environmental turbulence

c Increased emphasis on innovation

c New process technologies (CIM and automation increase the need for job
flexibility)

c Alienation and conflict (created by bureaucracies)

c Changes in bureaucracies include less hierarchy, faster decision-making, and

open communication & collaboration:

c Strategic planning now goes deeper in the org.

c Decision-making has shifted downward with shrinking corporate

staffs.

c Less emphasis on E and more emphasis on CR.

c Increased emphasis on teams and more permeable boundaries

c Wider use of ³aligning´ incentives.

c Less emphasis on controls and supervision

c Org forms in emerging and mature industries are closing the gap.
 c The key features of declining industries are:

c Excess capacity

c Lack of technical change (stable product and process technology)

c Declining number of competitors, but some entry as new firms get assets
³on sale.´

c High average age of resources.

c Aggressive price competition.

c The ease with which capacity can be adjusted to declining demand depends
upon:

c The predictability of decline.

c Barriers to exit:

c Asset specificity

c Exit costs (severance, broken contracts, etc.)

c Managerial commitment (emotional/moral reasons)

c Single product

c Strategies of surviving firms (dictates your actions in terms of divestiture or

acquisition)




 
   

c Leadership:

c Acquire competitors or encourage competitors to leave (then,

perhaps, acquire their assets). Harvest strategies work better if
you¶re the leader.
c Find a Niche:

c Find a stable/growing segment and pursue leadership in the

segment.

c Harvest:

c Halt investment and maximize cash flow; rationalize channels,

models, customers.

c Divest:

c Early recognition is a must.