Strategy Issues in Industries and
Life Cycle Stages
Chapter 8
Strategic Management:Value Creation, Sustainability, and Performance, 3e, 2014
Learning Objectives
1.
Stages of industry life cycle and their
impact on business strategy.
2.
Implications of competing in fragmented or
concentrated industries.
3.
Value chain activities appropriate for
organizational life cycle stages.
4.
Risks of first mover strategy.
5.
International strategy considerations.
Industries Evolve
Opportunity recognition
 New knowledge about value creation
 Growth in demand (and supply)

Industry Stages
Introduction – innovative new companies
 Growth – increased demand, standardization
 Maturity – slowed demand, commoditization
 Decline – substitutes abound
 Renewal – new customers, new segments

 Redefine industry boundaries
 Disaggregate bocks of value chain activity
 Redefine value
 Shift to complements
Competing in Consolidated Industries

Usually occurs during Growth and Maturity
stages.

Usually scale (cost containment) addresses
increasing standardization.

Focused differentiation can also work
 Mobility barriers inhibit large companies
 Anti-trust concerns hinder large companies
 Large companies blind to niche opportunities
 Large companies subject to margin pressure,
cannot always divert resources
Competing in Fragmented Industries

Usually occurs
 When entry barriers are low, or
 Where value creation is locally-based (so that
consolidation is ineffective)

Unbundling or disaggregating value chain
activity into new configurations
 Redefining how and where value is delivered,
i.e change the game
 Industry "roll-ups" – creating corporate value
while maintaining local presence
Organizational Life Cycles

Conception – innovation, strategy, finance

Commercialization – production, hiring, and
organizational issues
Growth – scaling up, marketing, culture, pace
of change and chaos
 Maturity – profitability, internal controls

First Mover Strategy

Not always successful
First Mover Advantages

Timing advantages
 Set the standard
 "Installed base" – creates switching costs
 Reputation
 Preemption

Size advantages
 Scale
 Experience curve
 Scope
 Network
First Mover Risks

Expensive to pioneer new domain

Technology uncertainty – standard may
ultimately be different

Demand uncertainty – "Will they buy?"

Inertia – reluctance to modify approaches as
the industry develops ("sunk cost")
Dealing with Fast Growth

Growth at 20+ % per year

Organizational problems: chaos, paperwork,
customer attention, competitive attention

"Solutions"
 Use vision, mission, principles to unify
 Carefully examine value chain activities
What's strategically critical, what's not
Emphasis on internal coordination of activities
 Consider restructuring (Chapter 11)
Strategic Renewal
Usually needed at the Maturity Stage
 "Solutions"

 Build opportunity recognition capabilities
 Reconfigure resources to develop new
operational capabilities that can be leveraged
 Develop new products / services at "platform"
level – a foundation for future variations
 Optioned investments in innovation – a
portfolio approach
 Retool culture and incentives to embrace
change
International / Global Strategy

Growth into international markets is a
strategic choice among alternatives

Common motivations
 New geographic revenue opportunities
 Leverage value chain and resources
 Spread risk
 Achieve location-based advantages (where
value creation is enhance by local presence)
Leveraging Value Chain
Four International Strategies
Global

Value added in upstream activities
 Efficiency through scale & scope
 Minor country-to-country variations
Transnational

Multi-Domestic

Centralized
Single Country

Value added downstream near customer
 Efficiency through scale & scope is important
 Variations across countries are meaningful
Value added downstream near customer
 No pressure to be efficient
 Variations across countries are significant
Value added in upstream activities
 No pressure on efficiency
 Occurs where markets are protected or
government controlled