Nguyn hu nam khnh ,

2.1.1 Strategic management in the early century During the early twentieth century, particularly in the USA and Europe, managers rather than academics began to explore and define the management task. F.W. Taylor in the USA and Henry Fayol in France are examples of senior industry figures who started to research and write on such issues. Taylor and Fayor were industrialists rather than academics,

holding senior positions in industry for some years. Around the same time, Henry Ford began experimenting to produce goods more cheaply and fulfill growing market demand. In the period 1908 - 15 he developed strategies that we still recognise today, and included those outlined in Exhibit 2.1. Henry Ford did not believe in mayor model variations and market segmentation, however, unlike his great rival from the 1920s, General Motors, headed by Alfred P. Sloan. Nor did Ford believe in the importance of middle and senior management. He actually sacked many of his senior managers and ultimately left his company in real difficulties when he died. Hence, his rival in the 1920s and beyond, General Motors, was ultimately more successful with other strategies that still exist today (see Exhibit 2.1).

th hi anh:
Exhibit 2.1 Early strategies still reconised today From the period 1908 - 15: Henry Ford
Innovative technology

Replacement of men by machines Search for new quality standards Constant cost-cutting through factory redesign
Passing on the cost reductions in the form of reduced prices for the

model T car From the period 1920-35: Alfred Sloan and colleagues Car models tailors for specific market niches Rapid model changes Structured management teams and reporting structures Separation of day-to-day management from the task of devising longer-term strategy

After the First World War became the great economic depression of the 1930s. This brought the need for a new order in international currency and, just as importantly, the desire for larger companies to gain economies of scale. However, much of this was confined to North America and competitive strategies was in it infancy.

Honh Th Linh La, nguyn vn thng:

2.1.2 Strategic management in the mid-twentieth century The Second World War brought its specialist demands for military equipment, coupled with more destruction across much of Europe and Japan; North and South America went largely unscathed. At this time, the Middle East and Far East still remained largely outside the scope of industrial development. This period was hardly the time for strategic management to influence events. Yet strategic game theory had its origins in developing effective British naval tactics when hunting for German U-boats. The late 1940s probably witnessed the period of the greatest power of North American industry and companies. It was also the real beginning of strategic management development and this then continued into the 1920s. it was accompanied by the reconstruction of industry across Europe and the beginnings of the Asian development period, particularly in Japan. Economist like Penrose were beginning to explore how firms grew, and human behaviorists like Cyert and March suggested that rational economic behaviors was an oversimplified way of considering company development.

By the late 1950s, writers such as Ansoff were beginning to develop strategic management concepts that would continue into the 1970s. During the 1960s the early concepts of what would later become one of the main approaches to strategic management prescriptive strategic management began to take shape, Ansoff argued that there were environmental factors which accelerated the development of strategic management. Two trends can be identified: 1 The accelerated rate of change. Strategic management provided a way of taking advantage of new opportunities. 2 The greater spread of wealth. Strategic management needed to find ways of identifying the opportunities provided by the spread of increasing wealth, especially in Europe. It was during this same period the early research was conducted which subsequently led to the development of the second main approach to strategic

management, emergent strategic management, although this really only came to prominence in the 1970s and 1980s.

L v hong mai, nguyn duy phng

2.1.3 Strategic management into the twenty-first century The 1970s saw the major oil price rises. They came as a result of the worlds increased need for the energy and Middle Eastern success in organizing an oil price cartel. The business environment was subject to a sudden and largely unpredicted that caused some strategic to reconsider the value of prediction in strategic management. The past 20 years have witnessed further environmental developments that are identified briefly in Table 2.1. These trends have had the following effects on strategic management:

Free market competition. According to various United Notions and World Bank studies, free market competition has been one element in supporting and encouraging growth in many newly developing countries. For example, greater market competition in China and India is considered to have led to increased wealth in those countries. Increasing importance of Asia/Pacific markets. Strategic management has moved out of being the preserve of North American and European countries. The lower labour costs and greater wealth in countries such as China, Korea and India have put pressure on Western and Japanese companies to cut costs or more to such countries. For example, in breakfast cereals, CP has opened factories in Asia to take advantage of low labour costs. Global and local interests. In addition to economic growth, the world market place has become more complex in cultural and social terms. Markets have become more international, thus making it necessary to balance global interests and local demand variations. For example, in breakfast cereals, CP has adapted its breakfast cereal products to local tastes within its basics worldwide branding. Need to empower and involve employees in strategic decision. The higher levels of training and deeper levels of skill of employees mean that they are no longer poorly trained and no longer have difficulties making a contribution to strategic management, especially in some Western countries. Greater speed of technical change and rise of the new forms of communication. Technology is changing more quickly and the development of new forms of communication, such as the internet, have

revolutionized strategy. For example, both Kellogg and Cereal Partners have developed websites.

Collapse of some companies for ethnical reasons. Ethical lapses in some companies, such as Enron in the USA, have led to renewed emphasis on ethical issues in the development and conduct of strategic management.

H th thanh huyn:
Key strategic priciples Strategic management responds to the environment existing or developing at that time.

The early twentieth century was characterized by the increased use of science and technology. This was reflected in the greater structuring of management and strategy. Mass production of quality products became possible. In the mid-twentieth century, there were six distinct pressures on strategic management: free market competition; greater knowledge and training of managers and employees; greater speed of chage and rise of new forms of communication; greater recognition of ethical issues in strategic management. all six elements in the environment have directed the development of strategic management.

Nguyn th ngc hiu, nguyn minh c

3.5 ANALYSING THE STAGES OF MARKET GROWTH 3.5.1 Industry life cycle The natural of strategic management will change as industries move along the life cycle. In the introductory phase, organisations attempt to develop interest in the product. As the industry moves towards growth, competitors are attracted by its potential and enter the market: from a strategic perspective, competition increases. As all the available customers are satisfied by the product, growth slows down and the market becomesmature. Although growth has slowed, new competitor may still be attracted into the market: each company then has to compete harder for its market share, which becomes more fragmented-that is the market share is broken down into smaller parts. Sales enter a period of decline. Figure 3.4: stages of the industry life cycle IntroductionGrowthMaturityDecline

Industry sale

Time To explore the strategic implications, it is useful to start by identifying what stage and industry has reached in terms of its development. For its stage in the cycle there are a number of commonly accepted strategies (see Table 3.3). In the case of ice cream customers in Case 3.2, the introduction phase will be used to present the product or service to new customers perhaps a premium ice cream flavor to those who have never tasted it. By contrast, the maturity phase assumes that most customers are aware of the product and little new trial is required perhaps a small tub traditional chocolate ice cream. As in others areas of strategic management, there are differing views regarding the choice of appropriate strategies for each phase of the industry life cycle. Table 3.3 represents the conventional views of the appropriate strategy for a particular stage in the industrys evolution. In strategic management, however, there are often good arguments for doing theunconventional, so this list would be seen as a starting point for analyzing the dynamics of an industry. The most innovative strategy might well come by doing something different and breaking the mound. As an example of the conventional views of such an analysis, the industry life cycle suggests that in the early stages of industrys development there may be more opportunities for new and radical R&D. when an industry is more mature, rather less investment is needed in R&D. However, the unconventional view argues that it is a mature industry that requires new growth and therefore R&D or some other strategic initiative. In the ice cream case, a market leader in traditional in traditional ice cream may benefit from investment in more modern facilities to reduce costs further. This suggests that, even in a mature phase of a market, heavy investment is often necessary to remain competitive in the market. It is for this reason that the life cycle concept can best be seen as a starting point for growth analysis. nguyenIt is important to note in the development of strategy the two consequences of the industry life cycle that can have the significant impact on industries:
1. Advantage of early entry. There is substantial empirical evidence that the

first company into a new market has the most substantial strategic advantage. For example Aaker quoted a study of 500 mature industrial

businesses showing that pioneer firms average a market share of 29 percent, early followers 21 percent and the late entrants 15 percent. Although there are clearly risks in early market entry, there may also be long-term advantages that deserve careful consideration in strategic development. 2. Industry market share fragmentation. In the early years, markets that are growth fast attract new entrants. This is both natural and inevitable. The consequence as markets reach maturity is that each new company is fighting for market share and the market becomes more fragmented. Again, this has important implications for strategy because it suggests that mature markets need revised strategies-perhaps associated with a segment of the market (see chapter 5). For strategic purposes, it may be better to examinedifferent segments of an industry, rather than the market as a whole, as different segments may be at different stages of the industry life cycle and may require different strategies (see the European ice cream industry example in case 3.2). For example, it is possible to take a totally different industry such as the global travel industry and apply the same thinking: in recent years, some special-interest holidays, such as wildlife and photography, were still growing strongly whereas standard beach-and-sun holidays were in the mature stage of the life cycle.

Nguyn th thanh thy:

Table 3.3: The industry life cycle and its strategy implications-a conventional view

Introduction phase Customers strategy -Early customers may experiment with product and will accept some unreliability -Need to explain nature of innovation R&D strategy -High

Growth phase -Growing group of customers. -Quality and reliability important for growth

Maturity phase -Mass market -Little new trial of product or service -Brand switching

Decline phase -Know the product well -Select on the basis of price rather than innovation

-Seek extensions before competition -React to competition with marketing expenditure and initiatives

-Low

Company strategy

-Seek to dominate market -R&D and production particularly important to ensure product quality

-Expensive to increase market share if not already market leader -Seek cost reductions

-Cost control particularly important

Impact on profitability

-High price, but probably making a loss due to investment in new category

-Profits should emerge here but prices may well decline as competitors enter market

-Profits under pressure from need for continuing investment coupled with continued distributor and competitive pressure -Competition largely on advertising and

-Price competition and low growth may lead to losses or need to cut costs drastically to maintain profitability -Competition based primarily on

Competitor strategy

-Keep interest in new category

-Market entry (if not before)

-Attempt to replicate new product

-Attempt to innovate and invest in category

quality -Lower product differentiation -Lower product change

price -Some companies may seek to exit the industry