MANAJEMEN STRATEGI (sessi 6)

TI-021

Rudy Wawolumaja

MENYESUAIKAN STRATEGI DGN SITUASI PERUSAHAAN

Sessi 6

Dosen :Rudy Wawolumaja / Universitas Kristen Maranatha

Competing in the marketplace is like war.

You have injuries and casualties, and the

best strategy wins.

John Collins

You do not choose to become global. The market chooses for

you; it forces your hand.

Alain Gomez

Outline• Strategies for Emerging Industries

• Strategies for High Velocity Markets

• Strategies for Maturing Industries

• Strategies for Declining Industries

• Strategies for Fragmented Industries

• Strategies for International Markets

• Strategies for Industry Leaders

• Strategies for Runner-up Firms

• Strategies for Weak Businesses

• Thirteen Commandments for Crafting Strategies

Most important

drivers shaping a

firm’s strategic

options fall into

two categories

Firm’s competitive

capabilities,

market position,

best opportunities

Nature of industry

and competitive

conditions

Overview: Matching Strategyto a Company’s Situation

Features of an Emerging Industry

• New and unproven market

• Proprietary technology

• Low entry barriers

• Experience curve effects may permitcost reductions as volume builds

• Buyers are first-time users

• Marketing involves inducing initial purchase and overcoming customer concerns

• Possible difficulties in securing raw materials

• Firms struggle to fund R&D, operations and build resource capabilities for rapid growth

Strategy Options for Competing in Emerging Industries

• Win early race for industry leadership by employing a bold, creative strategy

• Push hard to

– Perfect technology

– Improve product quality

– Develop attractive performance features

• Move quickly when technological uncertainty clears and a dominant technology emerges

• Form strategic alliances

• Capture potential first-mover advantages

Strategy Options for Competingin Emerging Industries (cont.)

• Pursue

– New customers and user applications

– Entry into new geographical areas

• Focus advertising emphasis on

– Increasing frequency of use

– Creating brand loyalty

• Use price cuts to attract price-sensitive buyers

• Prepare for entry of established firms when

industry future clears and risk lessens

Features of High Velocity Markets

• Rapid-fire technological change

• Short product life-cycles

• Rapidly evolving customer expectations

• Frequent launches of new competitive moves

• Entry of important new rivals

Strategy Options for Competingin High Velocity Markets

• Invest aggressively in R&D

• Develop quick response capabilities

– Match rivals

– Shift resources

– Adapt competencies

– Create new competitive capabilities

– Speed new products to market

• Use strategic partnerships to develop specialized expertise and capabilities

Keys to Success in Competingin High Velocity Markets

• Cutting-edge expertise

• Speed in responding to new developments

• Collaboration with others

• Agility

• Innovativeness

• Opportunism

• Resource flexibility

• First-to-marketcapabilities

Characteristics of Industry Maturity

• Slowing demand generates stiff competition

• More sophisticated buyers demand bargains

• Greater emphasis on cost and service

• “Topping out” problem in adding production capacity

• Product innovation and new end usesharder to come by

• International competition increases

• Industry profitability falls

• Mergers and acquisitions reduce the number of industry rivals

Strategy Options for Competingin a Mature Industry

• Prune product line

• Emphasize process innovation

• Strong focus on cost reduction

• Increase sales to present customers

• Purchase rivals at bargain prices

• Expand internationally

• Build new, more flexible competitive

capabilities

Competing in a Mature Industry: The Strategy Pitfalls and Mistakes

• Employing a ho-hum strategy with no stand-out or distinctive features thus leaving the company “stuck in the middle” with no good options for improving its position

• Concentrating on short-term profits rather than strengthening long-term competitiveness

• Being slow to adapt competencies to changing customer expectations

• Being slow to respond to price-cutting• Having too much excess capacity• Overspending on marketing• Failing to pursue cost reductions aggressively

Stagnant or Declining Industries: The Standout Features

• Demand grows more slowly than economy as whole (or even declines)

• Competitive pressures intensify--rivals battle for market share

• To grow and prosper, firm must take market share from rivals

• Industry consolidates to a smaller number of key players via mergers and acquisitions

Strategy Options for Competingin a Stagnant or Declining Industry

• Pursue focus strategy aimed at fastest growing market segments

• Stress differentiation based on quality improvement or product innovation

• Work diligently to drive costs down by

– Outsourcing

– Redesign internal processes

– Consolidate under-utilized production facilities

– Close low-volume, high-cost distribution outlets

– Cut marginal activities from value chain

Competing in a Stagnant Industry: The Strategic Mistakes

• Being overly optimistic about industry’s

future (believing things will get better)

• Getting embroiled in a profitless battle for

market share with stubborn rivals

• Diverting resources

out of the business too

quickly

Competitive Features ofFragmented Industries

• No seller has a sizable market share (sometimes because the industry is so new that no large firms have yet emerged)

• Exploding technologies force firms to specialize just to keep up in their area of expertise

• Low entry barriers

• Absence of scale economies

• Buyers require small quantities of customized products (a condition that allows small firms to serve the special needs of a few buyers)

• Market is so big or diverse that it requires many firms to satisfy buyer needs

Examples of Fragmented Industries

Book publishing

Landscaping and plant nurseries

Auto repair

Restaurant industry

Public accounting

Women’s dresses

Meat packing

Paperboard boxes

Hotels and motels

Furniture

Competing in a Fragmented Industry: The Strategy Options

• Construct and operate “formula” facilities

• Become a low-cost operator

• Increase customer value via backward or

forward integration

• Specialize by product type

• Specialize by customer type

• Focus on limited geographic area

What Is the Motivationfor Competing Internationally?Gain access to

new customers

Capitalizeon resource

strengths andcompetencies

Need to

achieve

lower costsSpread

business risk

across wider

market base

Obtain access to

valuable natural

resources

Competitive Features ofInternational Markets

• Market differences among countries

• Cost variations among countries

• Fluctuating exchange rates

• Differences in host government trade policies

• Pattern of international competition

Market Differences Among Countries

• Buyer needs and habits

• Distribution channels

• Long-run growth potential

• Driving forces

• Competitive pressures

Cost Differences Among Countries

• Wage rates

• Worker productivity

• Natural resource availability

• Inflation rates

• Energy costs

• Tax rates

• Fluctuating currency exchange rates

=

Differences in HostGovernment Trade Policies

• Import tariffs or quotas

• Local content requirements

• Price control policies

• Other regulations

– Technical standards

– Product certification

– Minority ownership by local citizens

– Prior approval of capital spending projects

– Withdrawal of funds from country

Manufacturing Share vs. Market Share

• Firm with the biggest manufacturing share isbest able to fully capture scale economies

• Consequently manufacturing share is a better indicator than market share of the industry’s global low-cost producer

Pattern of International Competition

Multicountry

Competition

Global

Competition

Characteristics ofMulti-Country Competition

• Each country market is self-contained

• Competition in one country market is independent of competition in other country markets

• Rivals competing in one country market differ from set of rivals competing in another country market

• Rivals vie for national market leadership

• No “international” market, just a collection of country markets

Characteristics of Global Competition

• Competitive conditions across country markets are strongly linked together

– Many of same rivals compete in many of the same country markets

– Rivals vie for worldwide leadership

– A true international market

• A firm’s competitive position in one country is affected by its position in other countries

• A firm’s overall competitive advantage is based on its entire world-wide operations

Types of International Strategies

• Licensing

• Exporting

• Multicountry strategy

• Global low-cost strategy

• Global differentiation strategy

• Global focus strategy

• Global best-cost strategy

Multi-Country Strategy

• Strategy in each country market is matched to local market circumstances

• Different country strategies are called for when

– Buyers in one country want a product that is different from buyers in another country

– Host government regulations precludeuniform global approach

• Two drawbacks

1. Poses problems of transferring competencies across borders

2. Works against building a unified competitive advantage

Global Strategy

• Strategy for competing is similar in all country markets

• Involves

– Coordinating strategic moves globally

– Selling in many, if not all, nations where significant market exists

• Works best when products and buyer requirements are similar from country to country

Competitive Strategy Principle

A global strategy works best in

markets that are globally

competitive or beginning to globalize!

A multi-country strategy is

appropriate for industries

where multi-country

competition dominates!

Global Strategy andCompetitive Advantage

• Two avenues to gain competitive advantage

1. Locating activities among nations to lower costs or achieve greater product differentiation

2. Coordinating dispersed activities in ways domestic-only competitor cannot

Principle of Competitive Markets

With a global strategy, a firm can

pursue sustainable competitive

advantage by locating activities in

the most advantageous countries

and coordinating strategic actions

worldwide. A domestic-only

competitor forfeits such

opportunities!

Locating Activities toBuild a Global Advantage

• Two issues

– Whether to concentrate each activity

• In one or two countries or

• To disperse activities to different nations

– Where to locate activities (which country is best location for which activity?)

Concentrating vs. Dispersing Activities to Build Global Advantage

• Activities should be concentrated when

– Scale economies or experience curve effects need to be captured

– Coordination of related activities is enhanced

• Activities should be dispersed when

– They need to be performed close to buyers

– Transportation costs, scale diseconomies, or trade barriers make centralization expensive

– Buffers for fluctuating exchange rates, supply interruptions, and adverse politics are needed

Coordinating Activities toBuild a Global Advantage

• Achieve dominating depth in a competitively valuable area by transferring competencies, capabilities, resource strengths from one country to another

• Shift production from one location to another to take advantage of most favorable cost or trade conditions or exchange rates

• Enhance brand reputation by incorporating same differentiating attributes in its products in all markets where it competes

• Choose when and where to challenge rivals

Achieving Global Competitivenessvia Strategic Alliances

• Allows firms to compete on a

– More global scale and

– Preserve their independence

• Types of alliances

– Joint research efforts

– Technology-sharing

– Joint use of production facilities

– Marketing one another’s products

– Joint manufacturing or assembly

Benefits of Strategic Alliances

• Gain scale economies in production and/or marketing

• Fill gaps in technical expertise or knowledge of local markets

• Share distribution facilities and dealer networks

• Direct combined competitive energies toward defeating mutual rivals

Pitfalls of Strategic Alliances• Becoming too dependent on another firm for

essential expertise over the long-term

• Different motives and conflicting objectives

• Time consuming

• Language and cultural barriers

• Mistrust when collaborating in competitively sensitive areas

• Clash of egos and company cultures

Guidelines in FormingStrategic Alliances

• Pick a compatible partner

• Choose ally whose strengths complement firm’s products and customers

• Learn thoroughly and rapidly about partner’s technology and management

• Do not share competitively sensitive information

• View alliance as temporary, not permanent

How Strategic Intent VariesAmong Industry Competitors

• GLOBAL DOMINANCE

Pursue global strategy

• DOMINANCE IN HOME MARKET

Defend home country market while pursuing international sales in foreign markets

• MULTINATIONAL

Pursue multicountry strategy

• DOMESTIC-ONLY

Focus on home country market

What Are Profit Sanctuaries?

• Country markets where firm

– Has a strong or protected market position and

– Derives substantial profits

• Generally, a firm’s most strategically crucial profitsanctuary is its home market

Profit sanctuaries are a valuable competitive asset in

global industries

Concept: Critical Markets

• Critical markets are country markets that

– Are profit sanctuaries of one or more key competitors in the industry (or have the potential to become a sanctuary)

– Have big sales volumes

– Include prestigious customers whose business it is strategically important to have

– Offer exceptionally good profit margins

Concept: Cross-Subsidization• Involves supporting competitive efforts in one

market with resources/profits diverted from operations in other markets

• Competitive power of cross-subsidization results from a global firm’s ability to

– Charge lower prices or otherwise launch a strategic offensive to lure away a domestic firm’s customers and cover losses with profits earned in other critical markets

Competitive Strategy Principle

To defend against aggressive multinational competitors intent on global dominance, a

domestic-only competitor usually has to

– Abandon its domestic focus

– Become a multinational competitor

– Craft a multinational competitive strategy

Why a Global Competitor CanDefeat a Domestic-Only Firm

• A one-country firm is hard-pressed to defend its

market share in the long-term against a global firm

intent on global dominance because

• Global or multicountry rivals can use profits earned

elsewhere to subsidize price cutting in domestic

firm’s profit sanctuary

– If domestic firm retaliates with matching price cuts it erodes its own profitability in its only profit sanctuary

Characteristics of Industry Leaders

• Stronger-than-average to powerful position

• Well-known reputation

• Proven strategies

• Strategic concern -- How to sustain dominant leadership position

Strategy Options: Industry Leaders

Stay-on-the-offensive strategy

Fortify-and-defend strategy

Follow-the-leader strategy

Stay-on-the-Offensive Strategies

• Best defense is a good offense

• Be a first-mover

• Relentlessly pursue continuous improvement and innovation

• Force rivals to scramble to keep up

• Launch initiatives to keep rivals off balance

• Grow faster than industry, taking market share from rivals

Objectives:Fortify-and-Defend Strategy

• Make it harder for new firms to enter and for challengers to gain ground

• Hold onto present market share

• Strengthen current market position

• Protect competitive advantage

Fortify-and-Defend: Strategic Options

• Increase advertising and R&D

• Provide higher levels of customer service

• Introduce more brands to match attributes of rivals

• Add personalized services to boost buyer loyalty

• Keep prices reasonable and quality attractive

• Build new capacity ahead of market demand

• Invest enough to remain cost competitive

• Patent feasible alternative technologies

• Sign exclusive contracts with best suppliers and distributors

Objectives: Follow-the-Leader Strategy

• Use competitive muscle to encourage runner-up firms to be content followers

• Signal smaller rivals that moves to cut into leader’s business will be hard fought

Follow-the-Leader: Strategic Options

• Be quick to meet competitive price cuts

• Counter with large-scale promotional campaigns if challengers boost advertising

• Offer better deals to major customers of maverick firms

• Dissuade distributors from carrying rivals’ products

• Attempt to attack key executives of rivals

• Use “hard ball” measures to signal aggressive small firms who should lead

Types of Runner-up Firms

• Market challengers

– Employ offensive strategies to gain market share

• Content followers

– Willing to coast in current position because profits are adequate

I’m trying!

Strategic Options forRunner-up Firms: Case # 1

Where large size yields significantly lower unit costs giving large-share firms a cost advantage, two options exist

1. Build market share

• Become a lower-cost producer

• Pursue a differentiation strategy

2. Withdraw from business

Rule of Offensive Strategy

Runner-up firms should avoid

attacking a leader head-on with an

imitative strategy, regardless of

resources and staying power an

underdog may have!

Strategic Options forRunner-up Firms: Case # 2

• Where large size does not yield a cost advantage, runner-up firms have six strategy options:

1. Vacant niche strategy

2. Specialist strategy

3. “Ours is better than theirs” strategy

4. Content follower strategy

5. Growth via acquisition strategy

6. Distinctive image strategy

Overcoming Obstaclesof Small Size

• Where big size is a competitive asset, firms with low market share face obstacles

– Less access to economies of scale

– Difficulty in gaining customer recognition

– Inability to afford mass media advertising

– Difficulty in funding capital requirements

Overcoming Obstaclesof Small Size: Strategic Options

• Focus on a few segments where strengths can yield a

competitive edge

• Develop technical expertise highly valued by customers

• Aggressively pursue development of new products for customers in target segments

• Use innovative entrepreneurial approaches to out-manage slow-to-change leaders

Weak Businesses: Strategic Options

• Launch a strategic offensive

• Play aggressive defense

• Pursue immediate abandonment

• Adopt a harvest strategy

What Is a Harvest Strategy?

• Steers middle course between status quo and exiting quickly

• Involves gradually sacrificing market position in return for bigger near-term cash flow/profit

• Objectives

– Short-term - Generate largest feasible cash flow

– Long-term - Exit market

Types of Harvesting Options

• Reduce operating budget to rock-bottom

• Hold reinvestment to minimum

• Emphasize stringent internal cost controls

• Place little priority on new capital investments

• Raise price gradually

• Trim promotional expenses

• Reduce quality in non-visible ways

• Curtail non-essential customer services

• Shave equipment maintenance

When ShouldHarvesting Be Considered?

• Industry’s long-term prospects are unattractive

• Building up business would be too costly

• Market share is increasingly costly to maintain

• Reduced levels of competitive effort will not trigger immediate fall-off in sales

• Firm can re-deploy freed-up resources in higher opportunity areas

• Business is not a major component of diversified firm’s portfolio of businesses

• Business does not contribute other desired features to overall business portfolio

Achieving a Turnaround: The Strategic Options

• Revise existing strategy

• Launch efforts to boost revenues

• Cut costs

• Sell off assets to generate cash and/or reduce debt

• Combination of efforts

13 Commandments for Crafting Successful Business Strategies

1. Always put top priority on crafting and executing strategic moves that enhance a firm’s competitive position for the long-term and that serve to establish it as an industry leader.

2. Understand that a clear, consistent competitive strategy, when well-crafted and well-executed, builds reputation and recognizable industry position whereas a strategy aimed solely at capturing momentary market opportunities yields fleeting benefits.

3. Endeavor not to get “stuck back in the pack” with no coherent long-term strategy or distinctive competitive position, and little prospect of climbing into the ranks of the industry leaders.

4. Invest in creating a sustainable competitive advantage, for it is a most dependable contributor to above-average profitability.

13 Commandments for Crafting Successful Business Strategies

5. Play aggressive offense to build competitive advantage and aggressive defense to protect it.

6. Avoid strategies capable of succeeding only in the best of circumstances.

7. Avoid rigidly prescribed or inflexible strategies --changing market conditions may render it quickly obsolete.

13 Commandments for Crafting Successful Business Strategies

13 Commandments for Crafting Successful Business Strategies

8. Don’t underestimate the reactions and the commitment of rival firms.

9. Be wary of attacking strong, resourceful rivals without first having solid competitive advantage and ample financial strength.

10. Consider that attacking competitive weakness is usually more profitable than attacking competitive strength.

13 Commandments for Crafting Successful Business Strategies

11. Be judicious in cutting prices without an established cost advantage.

12. Be aware that aggressive strategic moves to wrest crucial market share away from rivals often provoke aggressive retaliation in the form of a marketing “arms race” and/or price wars.

13. Employ bold strategic moves in pursuing differentiation strategies so as to open up very meaningful gaps in quality or service or advertising or other product attributes.