Competitive Strategy In Fragmented Industries Presentation Transcript

1. Competitive Strategy... in fragmented industries Dr. Jean-J acques Lagref, 2012 2. What is Competitive Strategy? Competitive strategy involves positioning a business to maximise its value and strength. 3. What drives Competitive Strategy needs? Changes : Political, Economical, Technological, Environmental, Legal Today more than ever, rapid environment changes might occur. Observing those changes is necessary but not sufficient anymore. 4. The most recurrent Failure "Despite the clear need for sophisticated competitor analysis in strategy formulation, such competitive analysis is sometimes not done explicitly or comprehensively in practice. Dangerous assumptions like "competitors cannot be systematically analyzed" or "we know all about our competitors because we compete with them every day" These are wrong " Ref: Michael E. Porter in "Competitive Strategy" book. 5. What is the common status in industry? Many companies do not collect systematic information on competitors and thus act on the basis of informal impressions and intuition gained through isolated, fragmented pieces of information. The objective of a competitor analysis is to anticipate and understand each strategy change a competitor might take, each competitor other firms could initiate to face a strategic move. The purposes are to answer the questions what is the meaning of that competitor's strategic move and how seriously should we take it? or Who should we pick a fight with in the industry and with what sequence of moves? Ref: Michael E. Porter in "Competitive Strategy" book. 6. The absolute Value: Anticipating from Monitoring Forecasting or anticipating capabilities emerge from the combination of the monitoring activity and the expertise gained (technology, market...). In addition to studying of existing competitors, the exercise may be extended: to forecasting emerging or potential competitors to forecasting valuable Mergers&Acquisitions to detect firms candidates for alliances 7. Building a Competitive Advantage: How? Monitoring, anticipating competitors movements and strategies are not easy tasks. But, they are not easy for every organisations world-wide. In fact, it is in this complexity that lies the advantage. Mastering CI processes is a necessity and it requires best in class methods. In depth competitor analysis requires a great deal of reliable data and demand a subsequent hard work. 8. CS: creator of value in Fragmented Industries. What is a fragmented industry? The term fragmented industries is meant for many firms competing in an industry in which no firm has a significant market share and is able to strongly influence the industry outcome. 9. Why so many industries are fragmented ? Many reasons like: + low entry barriers + low level of product innovation + strong competition + absence of economy of scale + various market needs + high product customisation + government prohibition of concentration Consequences: - low margins, business at risk - no advantages of size in dealing wt buyers or suppliers - expensive logistics

10. Strategic Solutions 1 based on Competitive Intelligence A - Overcoming the weaknesses of the fragmentation: Industry consolidation to create economies of scale. Focus on manufacturing saving costs. Innovation focuses on the production processes. Make acquisitions for reaching a critical size, provided a correct integration and management. Early recognition of industry trends will provide early consolidation opportunities. Grow earlier and faster than competitors would do to dominate the market. Critical Competitive Intelligence information are needed at each level. 11. Strategic Solutions 2 based on Competitive Intelligence B - Transforming the weakness of fragmentation into Strength Ex1: computer manufacturers have moved to computer service providers ( IBM ) Ex2: 3D-Printing manufacturers are moving to service providers (3D Systems) Many fragmented industries produce products or services that are commodities and thus difficult to differentiate. A smart driven Innovation Program is a unique solution to grow a differentiated business in a sustainable manner. In addition, the specialisation of the products will allow the firm to gain bargaining power with suppliers. Competitive Intelligence is central to seize opportunities and innovate successfully.