Chapter 5 Business Strategies in
Different Industry and Sectoral
Contexts
Alex Bregger
Mark Englehardt
Chase Barlow
Daniel Crawford
Overview
 The
Evolution of Personal Computers
 The Industry Life Cycle
 Strategy at different Stages of the Life
Cycle
 Strategy in Public Sector and not for profit
contexts
 Scenario Planning
The Purpose of this chapter is to help us to understand how
managers adapt their strategies to fit their environments, how they
go about predicting change and adapting their strategies to cope
with change.
The Evolution of Personal
Computers
 The
origins of the PC can be traced back
to the 1970s
 Early machines were built from kits
 Pre assembled machines came to the
market around 1975 by companies such
as Tandy, Commodore and Apple.
 The potential of this new market was soon
recognized and new firms started to pile
in.
The Evolution of Personal
Computers
 By
1981 the market was estimated at
$3000 million and there were 150
companies producing micro computers.
 The first movers captured and early lead
with apple 20%, Tandy 15%, and
Commodore 7%.
 The interesting this is that the leaders
adopted very different strategies.
The Evolution of Personal
Computers
 The
Industry hit a 2nd Phase in the early
1980s with the launch of IBMs PC
 IBM purchased key elements of the
product from third-party suppliers and
adopted an open strategy
 The PC was a hit and a bandwagon
effect was created.
The Evolution of Personal
Computers




The IBM PC became the “de facto standard”
computer.
But this open strategy allowed for this popular
product to be copied by the competition.
Once the clone products were out in the
market, consumers began to move away
from IBM.
Companies like Microsoft and Intel who
owned intellectual property of there products
began to see better returns.
The Evolution of Personal
Computers
 While
IBM adopted and open strategy ,
Apple did the opposite.
 Steve jobs did this by producing as much
as possible “in house”
 Manufactured end to end computer
systems, including add on equipment
suck as disk drives, keyboards, and
monitors.
Long-term Benefits
Costly short-term
The Evolution of Personal
Computers
 Lost
lead position by making
differentiated, highly expensive products
 Held on to a core of loyal customers, and
developed niche markets
 High profit margins allowed apple to
devote more money to research and
development.
 Research led to the development of iPod,
iPhone, and iPad.
The Status of the PC today
 Growth
in “cloud computing” has led to
new competitors in the PC market.
 Amazon offers rented storage space,
streaming movies, and TV shows.
 IBM sold its computing business to Chinese
Lenovo
 Dell, Hewlett-Packard, and Acer are
diversifying into new business areas
Strategy at different stages of
the life cycle
The Industry Life Cycle
 Introduction:
Sales are small, high costs,
low quality, customers are risk tolerant.
 Growth: accelerating market penetration
 Maturity: caused by increasing market
saturation, demand is wholly for
replacement
 Decline: industry becomes challenged by
new industries that produce superior
substitute products.
Introduction
 Rapid
increase in the number of firms
 “de novo” entrants
 “de alio” entrants
 High gross profits require heavy
investments in innovation
Growth
 Dominant
design usually emerges
 Market rapidly expands
 Significant financial resources are
essential
Maturity
 Growing
importance of a strong
competitive advantage
 Cost efficiency
 Number of firms begins to fall

“Shakeout” phases
Decline
 Can
be the result of several factors
 Causes key strategic issues such as…




Excess capacity
Lack of technical change and innovation
High average age of human and physical
resources
Aggressive price competition
Public and Non-Profit Sectors
Public Sector

Commonly defined in relation to
 Ownership
 Funding
(all/part of it is from gov’t)
 Interests they serve (national/public)

Provide public goods
 Flood
prevention systems
 Street lights
 National defense
Non-Profit Organizations
 Most



commonly found in areas of:
Education
Health Care
Social services
 Profits
are used to fund the goals of the
organization
Key Differences:
Public vs. Private Organizations
1)
Multiple, potentially
conflicting goals


2)
Public: competition
for resources &
fulfilling public needs
Private: shareholders
profit
Distinctive constraints
& Different levers


Public: must account
for public opinion
Private: minimize cost,
maximize profit
3) Absence of Market
Forces:

Public: not affected
by the harsh market
conditions of the
private sector
4) Monopoly Power


Public: state in control
unresponsive to
customer needs
Private: Regulations
protect consumers
from monopoly power
Key Differences:
Public vs. Private Organizations
5) Less Autonomy &
Flexibility:

Public: little freedom to
change the rules or
exercise personal
discretion as compared
to the private sector
6) Increased
Accountability


Public: subject to higher
scrutiny; highly vested in
public trust
Private: Accountable
mainly to shareholders
7) Less Predictability

Private: subject to
a highly fluctuating
market with
minimal
predictable
behavior
Stakeholder’s Analysis
“The process of identifying, understanding, &
prioritizing the needs of key stakeholders so
that they can participate in strategy
formation and the strategic direction of the
company”
Stakeholder Analysis
1)
2)
3)
Identification of the list
of potential
stakeholders – usually
involves a
brainstorming session
between informed
parties
Ranking Stakeholders
according to
importance and
influence
Identifying the criteria
that each stakeholder
is likely to use to judge
the organization’s
performance
4)
Deciding how well the
organization is doing
from its stakeholders
perspective
5)
Identifying what can be
done to satisfy each
stakeholder
6)
Identifying and
recording longer term
issues with individual
stakeholders and
stakeholders as a group
Scenario Planning
•
•
•
•
•

An organization’s ability to adapt to changes is
dependent on its capacity to anticipate changes in the
environment
Hard to predict the future
Using Scenario Analysis, a systematic way of thinking
about the future
Not necessarily a forecasting technique
Scenarios are stories that describe how the world might
look in the future
Constructing Scenarios
•
•
•
•
•
Herman Kahn, “hypothetical sequences of events for the
purpose of focusing attention on causal process and
decision points”
Construct several distinct, internally consistent narratives
5 to 25 years into the future (Shorter if fast-moving sector)
Use to review and test strategic options
Quantitative or qualitative (combination of both)
Steps in building and using
scenarios
1.
2.
3.
4.
5.
6.
7.
Defining purpose of analysis
Deciding on time horizon
Identifying key trends
Identifying key uncertainties
Creating the scenarios and checking that they are
internally consistent
Identifying indicator that might signal which
scenario in unfolding
Assessing the strategic implication of each
scenario
Scenario Analysis






Value of scenario analysis is not just in the results, but also
the process.
Tool to bring together different ideas and insights
Identifying potential opportunities and threats
Generate and evaluate alternative strategies
Encourage innovation and flexible thinking from
managers
“Evaluating the likely performance of different strategies
under different scenarios can help identify which
strategies are most robust and flexible and can
ultimately assist in contingency planning”
The World Wide Fund for Nature
(WWF)






Grown from small group of conservationist, to a global
network
Now employs around 5000 across the world
Particular success with ‘charismatic’ species in
campaigns
Later, their campaigns were seen as opportunistic and
crisis-driven
1986, changed name to emphasize that its remit was
broader than conservation a particular species and their
habitats
Expanded mission to reduction of wasteful consumption
and pollution
Worldwide Fund for Nature





1990s, problems began to emerge that
eventually resulted in the organization
reconsidering its structure and governance
arrangements
Originally, WWF was structured as network of
independent national organizations with central
secretariat in Switzerland
WWF International did not have authority to
enforce strategy, instead relied on the
cooperation of the national bodies
Procedures became more slow and increasingly
more bureaucratic as the organization grew in
size
In response, restructured WWF to achieve more
unified approach