Industry Structure
Fragmented industry: Industries in which
a large number of small or small to medium
sized firms operate and no one has a
dominant market share.

Industries of this type: Service
industries like retailing, fabrics,
commercial printing; Dry Cleaning
(PurpleTie example in trying to—
unsuccessfully—consolidate)
Emerging Industry: newly created or
newly re-created industries formed by
technological innovations, changes in
demand, the emergence of new customer
needs, etc.

Opportunities
 Consolidation: consolidate the industry into a smaller number of
firms (purchase firms).
 Example: Service Corporation International (SCI) funeral home
industry; Dry Cleaning services
 Entrepreneurial firms exploiting opportunities: Blockbuster
consolidated the video rental industry (consider them now,
though); Air conditioning industries; Starbucks in coffee
restaurants; Kinko’s in copying; Krispie Kreme in doughnuts
 First-mover advantages (there are also potentially
disadvantages—second-mover advantages)
3 sources of 1st mover advantages:
1. Technology leadership: include firms making early
investments in certain technologies in an industry. Can generate
Industries of this type: microprocessor
advantages b/c may obtain a low-cost position due to economies
industry, PCs, medical imaging
of scale and may obtain patent protections.
industry, etc.
2. Strategically valuable assets: are resources to successfully
compete in an industry. Those able to acquire will create
barriers for other firms (e.g., diamond industry)
3. Creation of customer switching costs: occurs when customers
make investments in order to use a firm’s particularly products/
services and changing firms is simply too costly (e.g., Microsoft)

Entrepreneurial firms exploiting opportunities: eBay and
internet auctions; Cisco and routers
Mature Industry: characterized by
1) slowing growth in industry demand,
2) development of experienced repeat
customers,
3) slowdown in increases in production
capacity,
4) slowdown in introductions of new
products/services,
5) increase of int’l competition,
6) overall reduction in profitability of firms
in industry
 Product refinement: Innovation to current products that focuses
on extending and improving current offerings (e.g., additives in
motor oil to keep oil cleaner longer)
 Investment in service quality: To differentiate product offerings,
firms often turn toward the quality of customer services (e.g., a
convenience food industry reason for slower growth in fast food is
due to “casual dining” like Chili’s and Applebee’s)
 Process Innovation: innovations that reduce manufacturing costs,
increase product quality, and streamline management are
important (e.g., US automobile industry to compete with Japanese
firms)


Industries of this type: home
detergents, motor oil, kitchen appliances
Entrepreneurial firms exploiting opportunities: Wal-Mart in
retailing; JetBlue in airlines; Silk Soymilk in milk industry
Industry Structure
Opportunities
Declining Industry: An industry that has
 Market Leadership: Wait out shakeout period and enjoy a more
experienced an absolute decline in unit sales
benign environment—should try to gain majority of market share
over a sustained period of time
(e.g., Defense industry)
 Niche: narrow scope of operations and focus on a narrow segment
 Industries of this type: Defense
of the declining industry
industry—even in accounting for Gulf
 Harvest: Engage in a long, systematic withdrawal from the
and Iraq Wars; video rental industry
industry, extracting as much value as possible during withdrawal
period.
 Divestment: Like a harvest strategy, but happens very quickly
Global Industry: An industry that is
experiencing significant international sales
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
Entrepreneurial firms exploiting opportunities: Nucor in
steel—exploiting the steel in the minimill industry—smaller and
produce a narrower range of products…they are energy efficient
and high-quality.
o
o
Can pursue a multidomestic or global strategy
Multidomestic strategy: compete for market share on a
country-by-country basis and vary their product or service
offerings to meet demands of the local market (e.g., Fast Food
Industry)
Global Strategy: Use the same basic approach in all foreign
markets (e.g., Athletic Shoes industry)
Industries of this type: Athletic shoes;
Fast food
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