Integrated Bachelor’s and Master’s Degree Program
In Accounting and Business Management (IBMP)
Faculty of Commerce and Accountancy, Thammasat University
กธ. 322 กลยุทธ์ และการดาเนินธุรกิจระดับโลก
BI. 322 Global Business and Strategy
Mr. Gavintorn Atthakor
Email: gavin.boat@gmail.com
Strategy?
BI 322 Global Business & Strategy – Class 1
1
A Global View…
Comparison of Various Continents
%
100%
147.5 Bn
192
6,397
7.7
9.9
14
727
13.2
13.2
46
80%
Australia/Ociania 32
380
501
17.8
12
60%
24.3
878
Australia/Oceania
23
Europe
40%
30.0
53
Antarctica
3,879
South America
North America
20%
44.6
44
Africa
Asia
0%
Area
(Million Sq. Km.)
# of Countries
Population
(Million)
Note: As of 2006
Source: WorldAtlas.com
BI 322 Global Business & Strategy – Class 1
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Largest and Most Populous Countries of the World
Top 5 Countries By Population
Rank
Country
Top 5 Countries By Area
Population
(Mil.)
Rank
Country
Area
(Mil. Sq. Km)
1
China
1,306
1
Russia
17.0
2
India
1,080
2
Canada
9.9
3
USA
296
3
USA
9.6
4
Indonesia
242
4
China
9.5
5
Brazil
186
5
Brazil
8.5
19
Thailand
65
49
Thailand
0.5
Note: As of 2006
Source: WorldAtlas.com
BI 322 Global Business & Strategy – Class 1
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Who Cares About Ranking by Population and Area?
Who’s the RICHEST Country??
So how do we define WEALTH??
GDP (Gross Domestic Product)
BI 322 Global Business & Strategy – Class 1
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What is GDP?
The gross domestic product (GDP) or gross domestic income (GDI) is one of the
measures of national income and output for a given country's economy. GDP is defined as
the total market value of all final goods and services produced within the country in a
given period of time
GDP = C + I + G + (X-M)
Where
C = Consumption
I = Investment
G = Government Spending
X = Export
M = Imports
BI 322 Global Business & Strategy – Class 1
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So “Who is The Richest?”
“International Dollar”
$ Billion
GDP (PPP) By Country (Top 30)
15,000
13,811
12,500
10,000
7,500
7,055
5,000
4,284
3,092
2,728
2,500
#23 Thailand
2,088
2,047
1,777
2,062
1,346
1,178
1,834
1,405
1,199
Country
922 841 777 733
622 602 554 523 519 463 410 404 370 366 355 334
0
a
A na a n
ia
ce
si
ny
US hi ap Ind ma us ran
C
1
J
R
F
er
2
3
G
Note: As of 2007
Source: World Bank
UK
t
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a
a
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o
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ia ran lia ds nd
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e
u
Ve
o
a
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S
But USA and China has a lot of productive units (people),
What’s the GDP per Capita?
BI 322 Global Business & Strategy – Class 1
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GDP per Capita
Thousands
“International Dollar”
$’000
GDP (PPP) Per Capita By Country (Top 30)
90
80
79
70
60
53
50
40
#69 Thailand
$8,138
50
46
43
40
38
38 37
36 36
36 35 34
34
34
34
33
33
33
31
31
30
30
27
27
26
26
25
23
23
20
10
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Sa
Country
C
Note: As of 2007
Source: World Bank
BI 322 Global Business & Strategy – Class 1
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Purchasing Power Parity (PPP)
Purchasing power parity is an economic technique used when attempting to determine
the relative values of two currencies.
•
PPP takes into account this lower cost of living and adjusts for it as though all
income was spent locally.
•
The PPP exchange rate (“real exchange rate”) equalizes the purchasing power of
different currencies in their home countries for a given basket of goods.
•
PPP is based on the assumption that in an ideally efficient market, identical goods
should have only one price.
E.g. The Big Max Index and the iPod Index
BI 322 Global Business & Strategy – Class 1
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Big Mac Index
Source: Economist July 2008
BI 322 Global Business & Strategy – Class 1
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A Pictorial View of PPP
Note: As of 2007
Source: World Bank
BI 322 Global Business & Strategy – Class 1
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Developed Markets
Australia
Greece
Portugal
Austria
Hong Kong
Singapore
Belgium
Ireland
Spain
Canada
Italy
Sweden
Denmark
Japan
Switzerland
Finland
Netherlands
United Kingdom
France
New Zealand
United States
Germany
Norway
“Group of Seven” (G7)
PLUS, Russia = “Group of Eight” (G8)
Source: Morgan Stanley’s EM Index (May 2008)
BI 322 Global Business & Strategy – Class 1
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G8 Countries Dominates The World’s Economy
% of Total
100%
90%
32%
80%
53%
70%
71%
60%
50%
87%
96%
40%
69%
30%
47%
20%
29%
10%
0%
13%
4%
# Countries
Rest of the World
Population
BI 322 Global Business & Strategy – Class 1
Area
GDP (PPP)
# Co's in
Forbes
Global 1000
G8 Countries
12
27 Countries In the European Union (EU)
Making It the Second Largest Economy
15 Countries Adopted
Single Currency (€)
12 Other Countries Retained
their Own Currencies
Austria
Belgium
Bulgaria
Cyprus
Czech Republic
Finland
Denmark
France
Estonia
Germany
Hungary
Greece
Latvia
Ireland
Lithuania
Italy
Poland
Luxembourg
Romania
Malta
EU Statistics
Population:
~500 mil (#3)
Slovakia
Area:
~4 mil. Sq. Km (#6)
Netherlands
Sweden
GDP_PPP:
$10.3 trillion (#2)
Portugal
UK
Slovenia
Spain
BI 322 Global Business & Strategy – Class 1
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2. Rapidly Growing Markets
Emerging Markets
Emerging Market is a term used to describe countries that are between “developing” and
“developed” status and are going through rapid industrialization.
Argentina
Iran
Poland(2)
Brazil(2)
Israel(1)
Russia(2)
Chile
Jordan
South Africa(2)
China(2)
Malaysia
South Korea(1)
Colombia
Mexico(2)
Taiwan(1)
Czech Republic
Morocco
Thailand
Egypt(2)
Pakistan
Tunisia
Hungary
Peru
Turkey(2)
India(2)
Philippines
Vietnam
Indonesia(2)
BRIC
(1)
More than EM but maintained in index for continuity
(2)
Big Emerging Markets
Source: Morgan Stanley’s EM Index (June 2006)
BI 322 Global Business & Strategy – Class 1
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2. Rapidly Growing Markets
BRIC Countries Accounts for 22%% of the World’s GDP
% of Total
100%
90%
80%
58%
70%
71%
60%
50%
78%
95%
98%
40%
30%
42%
20%
29%
10%
0%
22%
5%
2%
# Countries
Population
BI 322 Global Business & Strategy – Class 1
Area
GDP (PPP)
# Co's in
Forbes
Global 1000
Rest of the World
BRIC Countries
15
The Other Emerging Markets Group Sounds More Like Charity
Emerging Market is a term used to describe countries that are between “developing” and
“developed” status and are going through rapid industrialization.
Argentina
Iran
Poland(2)
Brazil(2)
Israel(1)
Russia(2)
Chile
Jordan
South Africa(2)
China(2)
Malaysia
South Korea(1)
Colombia
Mexico(2)
Taiwan(1)
Czech Republic
Morocco
Thailand
Egypt(2)
Pakistan
Tunisia
Hungary
Peru
Turkey(2)
India(2)
Philippines
Vietnam
Indonesia(2)
“Outreach Five” (O5)
(1)
More than EM but maintained in index for continuity
(2)
Big Emerging Markets
Source: Morgan Stanley’s EM Index (June 2006)
BI 322 Global Business & Strategy – Class 1
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Most of Large Corporations are Global Firms (1)
The ranking is based on a mix of four metrics: Sales, Profit, Assets and Market value.
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
19
21
22
23
24
25
25
Company
Citigroup
Bank of America
HSBC Holdings
General Electric
JPMorgan Chase
American Intl Group
ExxonMobil
Royal Dutch Shell
UBS
ING Group
BP
Toyota Motor
Royal Bank of Scotland
BNP Paribas
Allianz
Berkshire Hathaway
Wal-Mart Stores
Barclays
Chevron
Total
HBOS
ConocoPhillips
AXA Group
Société Générale Group
Goldman Sachs Group
Morgan Stanley
354 PTT Public Company
863 Siam Cement
Country
United States
United States
United Kingdom
United States
United States
United States
United States
Netherlands
Switzerland
Netherlands
United Kingdom
Japan
United Kingdom
France
Germany
United States
United States
United Kingdom
United States
France
United Kingdom
United States
France
France
United States
United States
Industry
Banking
Banking
Banking
Conglomerates
Banking
Insurance
Oil & Gas Operations
Oil & Gas Operations
Diversified Financials
Insurance
Oil & Gas Operations
Consumer Durables
Banking
Banking
Insurance
Diversified Financials
Retailing
Banking
Oil & Gas Operations
Oil & Gas Operations
Banking
Oil & Gas Operations
Insurance
Banking
Diversified Financials
Diversified Financials
Sales
($Bil)
146.56
116.57
121.51
163.39
99.30
113.19
335.09
318.85
105.59
153.44
265.91
179.02
77.41
89.16
125.33
98.54
348.65
67.71
195.34
175.05
84.28
167.58
98.85
84.47
69.35
76.55
Profits
($Bil)
21.54
21.13
16.63
20.83
14.44
14.01
39.50
25.44
9.78
9.65
22.29
11.68
12.51
9.64
8.81
11.02
11.29
8.95
17.14
15.53
7.59
15.55
6.38
6.55
9.54
7.47
Assets
($Bil)
1,884.32
1,459.74
1,860.76
697.24
1,351.52
979.41
223.95
232.31
1,776.89
1,615.05
217.60
243.60
1,705.35
1,898.19
1,380.88
248.44
151.19
1,949.17
132.63
138.82
1,156.61
164.78
666.47
1,259.32
838.20
1,120.65
Market Vaue
($Bil)
247.42
226.61
202.29
358.98
170.97
174.47
410.65
208.25
116.84
93.99
198.14
217.69
124.13
97.03
87.22
163.79
201.36
94.79
149.37
152.62
79.83
107.39
87.64
77.62
83.31
79.76
Thailand
Thailand
Oil & Gas Operations
Construction
22.63
7.26
2.08
0.83
15.77
6.10
17.18
8.20
Note: As of 2007 Source: Forbes
BI 322 Global Business & Strategy – Class 1
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Most of Large Corporations are Global Firms (2)
• ~356,000 staffs
• Over 200 million customer accounts in over
100 countries
• Diversified financial services firm
- Consumer Group (Citicards, Citifinancial,
CitiBank)
- Wealth management Group
- Institutional Client Gtroup
• Over 50% of revenue from international
businesses
• 82,000 staffs worldwide
• Operate in over 40 countries in 6 continents
• Multiple businesses and brands
- Upstream (oil exploration, extraction,
shipping, and wholesale operations)
- Downstream (marketing, refining, and
retail operations)
- Brands; Esso, Exxon, Mobil
• 138,000 staffs in 80 countries
• ~100 Brands in over 20 product catagories
- Pantene, Head & Shoulders, Vicks,
CoverGirl, Olay, Oral-B, Duracell, Pringles
etc..
Note: As of 2007
Source: World Bank, Company Websites
BI 322 Global Business & Strategy – Class 1
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What is Strategy??
A company’s STRATEGY is its action plan for running the business and conducing
operations
These action plans are in place in order to…
• Grow the business
• Attract and please customers
• Compete successfully
• Conduct operations
• Improve company’s financial/market performances
BI 322 Global Business & Strategy – Class 1
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5 Generic Competitive Strategies
Market Target
4
Broad
Cross-Section
of Buyers
Overall
Low-Cost Provider
Strategy
Broad
Differentiated
Strategy
Best-Cost
5 Provider
Strategy
3
Narrow
Buyer
Segment
(Niche)
Focused
Low-Cost Provider
Strategy
1
Lower Cost
Focused
Differentiated
Strategy
2
Differentiation
Type of Competitive Advantage Being Pursued
BI 322 Global Business & Strategy – Class 1
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1. Low-Cost
How to Achieve Low – Cost Advantage?
Examples
•
•
•
•
•
•
•
•
•
•
•
Economies of Scale
– Operate to full capacity
– Bargaining power
Learning Curve
Boost sales to spread Fixed/Overhead costs
– R&D, advertising, SG&A expenses (selling, general, Admin)
Improving supply chain efficiency
Substitute with low cost components/materials
Online/IT software
Labour-saving methods
Outsourcing vs Vertical integration
Cutting out the “middle man” and going directly to customers
Streamlining operations
Redesign products
– Offering frills-free product
– Limiting product line
BI 322 Global Business & Strategy – Class 1
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1. Low-Cost
When Low-Cost Provider Strategy Works Best
• Vigorous price competition among rival sellers/competitors
• Products are essentially identical and supplies are readily available
• There are few ways to achieve product differentiation
• Most buyers use product in the same way
• Low switching costs for customers to change brands
• A “buyers’ market” and bargain down prices
• Industry newcomers use low introductory prices to gain customer base
BI 322 Global Business & Strategy – Class 1
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2. Differentiated
How to Differentiate?
Examples
Types of Differentiations
• Unique tastes
• Multiple features
• Wide selection in one place
• Superior service
• Spare parts availability
• Engineering design and performance
• Product reliability
• Prestige and distinctiveness
• Quality manufacture
• Technological leadership
• Full range of services
• Complete line of products
• Superior image/reputations
Examples
Dr. Pepper
Microsoft Windows
Tesco Lotus
FedEx
Toyota
Mercedes Benz
IBM
Rolex
Honda
3M
SCB
P&G
Starbucks
Key Success of Differentiation
• Differentiation must be difficult or expensive to copy
• Buyers must value the differentiation (either Actual vs Perceived Value)
BI 322 Global Business & Strategy – Class 1
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2. Differentiated
When Differentiation Strategy Works Best
• Buyers needs and uses of product are diverse
• There are many ways to differentiate the product (and buyers value these
differentiations)
• Few rival firms are not able or willing to follow the differentiated approach
• Industry is dynamic and evolves around evolving product
BI 322 Global Business & Strategy – Class 1
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3. “Niche”
Focused (“Niche”) Market Strategy
Focused Strategies concentrates on a narrow piece of the total market
Companies can choose to focus on a variety of niche markets…
• By geographic areas
• By customer segments
– E.g. Gender, Age, Occupation
• By specific product category
– E.g. High-end goods
• By product usage/attributes
– E.g. Online, Direct sales
BI 322 Global Business & Strategy – Class 1
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3. “Niche”
When Focused (Niche) Strategy Works Best
•
Target market niche is large enough to be profitable (with growth potential)
•
Industry leaders do not have presence in the market
•
Customer needs in market is specialized
•
Few rivals are attempting to specialized in same segment
•
Company has a loyal customer base
BI 322 Global Business & Strategy – Class 1
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4. Broad
Broad Strategy Appeals to Large Spectrum of Buyers
The strategy does not focus on a particular market/customer, but appeals to broad
spectrum of buyers
But still needs to have a competitive advantage
• Through Lower Cost, Differentiation…
• …or stronger Brand
Examples,
• McDonalds
• Coca-Cola
BI 322 Global Business & Strategy – Class 1
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5. Best-Cost
What is Best-Cost Strategy?
Also known as “hybrid” strategy
• Include up-scale attributes…
• …At lower cost than rivals
Target market: Value-conscious buyers (Appealing extras at appealing low price)
Value  Quality/Price
Best-Cost Strategy works best when…
• Buyers and products are diverse
• Buyers are sensitive to price and value
• Company has resources, know-how and capabilities to execute strategy
BI 322 Global Business & Strategy – Class 1
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5. Best-Cost
Best-Cost Example: Toyota’s Lexus
Illustrative
Toyota has achieved low-cost leadership
• Efficient supply chain
management
• Low-cost assembly
High (-)
C-240
Used Best-Cost Strategy for Lexus
• Designing high-performance
characteristics to compete in
luxury market
• Leverage Toyota’s low-cost
capabilities to incorporate upscale
quality
• Underprice comparable models of
Mercedes Benz and BMW
• Established separate (more
personalized and attentive)
dealers for Lexus
BI 322 Global Business & Strategy – Class 1
IS250
Quality
Camry
Low (-)
High (-)
Low (+)
Price
29
Pitfalls of Each Strategy
Low-Cost Strategy
Differentiation Strategy
Best-Cost Strategy
Niche-Market Strategy
• Get carried away with
cost and price cutting.
(“Price War”) Ending
up with lower overall
profits
• Competitors are able
to copy quickly
• Getting squeezed
between Low-Cost
and Differentiated
competitors
• Targeted market not
big enough to be
profitable
• Cost advantage is not
sustainable and rivals
are able to catch-up
quickly
• Low product quality
due to over-aggressive
cost cutting
• Buyers see little
value in the unique
attribute of the
product
- Buyers not willing
to pay the
premium of
differentiation
• Overspending on
differentiation.
Broad Market Strategy
• Unfocused and
unable to compete
(with niche players)
and meet needs of
customers
• Battle head-to-head
with industry-leaders
or too many other
competitors
• Changes in needs of
niche customers
towards
“mainstream”
• High cost to serve
BI 322 Global Business & Strategy – Class 1
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Homework/Reading
1
“Sidestepping Economies of Scale”, 5 Future Strategies You Need to Know Right Now
by George Stalk (Senior partner of The Boston Consulting Group)
2
“Losing its shine” (Japan’s luxury goods market), The Economist (September 20th,
2008)
3
“Minding the Cost Gap”, Globality: Competing with Everyone From Everywhere For
Everything, HL Sirkin, JW Hemerling, AK Bhattacharya
BI 322 Global Business & Strategy – Class 1
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Strategies for Specific Situations
3 commonly encountered situations….
1. Companies competing in emerging industries
2. Companies competing in rapidly growing markets
3. Companies competing in maturing, stagnant or declining industries
BI 322 Global Business & Strategy – Class 1
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1. Emerging Industries
A Typical Product Life Cycle’s Divided Into 4 Stages
Examples
Hybrid Vehicles
iPods
DVD, Neon lights
CRT Television
BI 322 Global Business & Strategy – Class 1
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1. Emerging Industries
BCG Matrix
Also known as “Growth-Share Matrix”
Developed by Bruce Henderson of The Boston Consulting Group (BCG) in 1970 to analyze business
units or product line so that companies can better allocate their resources.
High (+)
Star
Select
A Few
Growth Rate
Question Mark
Divest
Remaining
Invest
Cash Cow
Dog
Liquidate
Low (-)
High (+)
BI 322 Global Business & Strategy – Class 1
Relative Market Share
Low (-)
34
1. Emerging Industries
A (Hypothetical) Example of BCG Matrix
Sony
Sony’s Portfolio (By Product Line)
20%
Revenue
18%
16%
Wii
14%
DVD
Player
12%
Business
Growth Rate (%)
10%
Plasma
TV
8%
6%
Play
Stn.
Digital
Cam.
4%
VCR
Hi-Fi
Video
Cam
Video
Digital
2%
0%
10
5x
4x
1
0.5x
0.2x
0.1
Relative Market Share(1)
(1)
Relative Market Share = Company’s Mkt Share/Largest Competitor’s Mkt Share
E.g. If co’s share is 20% and competitor’s share is 5%, Relative Share is 4x.
BI 322 Global Business & Strategy – Class 1
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1. Emerging Industries
A (Hypothetical) Example of BCG Matrix
Sony
Sony’s Portfolio (By Country)
20%
Revenue
18%
16%
USA
14%
DVD
Player
12%
Business
Growth Rate (%)
10%
Japan
8%
China
Singapore
France
6%
UK
4%
India
2%
Thailand
0%
10
5x
4x
1
0.5x
0.2x
0.1
Relative Market Share(1)
(1)
Relative Market Share = Company’s Mkt Share/Largest Competitor’s Mkt Share
E.g. If co’s share is 20% and competitor’s share is 5%, Relative Share is 4x.
BI 322 Global Business & Strategy – Class 1
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1. Emerging Industries
Relative Freedom Despite Some Challenges
Challenges in Emerging Industries
Strategy Options
• Uncertainties about how large market’s going
to get (and when)
• Push to perfect technology, improve product
quality/attributes
• Race to perfect the technology (which will be
the “industry standard”)
• Consider merging or acquiring another firm
to gain added expertise
• Need to overcome customer’s concerns
about product attributes
- Or alliance with companies
related/complementary technologies
• Barrier to entry are relatively low in some
cases (if not protected by patent)
- Alliance with key suppliers to secure
distribution channels
• Might be some problems securing raw
materials (suppliers unprepared)
• Try to gain first mover advantage by adopting
dominant technology
• Liquidity problems for small companies (to
support R&D)
• Make it easy and cheap for first-time buyers
- Followed by further prices cuts to get next
layer of customers
• Create product awareness through
advertising/marketing
BI 322 Global Business & Strategy – Class 1
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1. Emerging Industries
Red vs Blue Ocean
Red Ocean:
• Industry boundaries are defined and accepted
• Competitive rules are known
• Companies try to outperform their rivals on
contracting markets
• Commoditization of products and services
Blue Ocean:
• Untapped market space
• Created by expanding existing industry
boundaries
• Competition is irrelevant
• Rules of the game are waiting to be set
BI 322 Global Business & Strategy – Class 1
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2. Rapidly Growing Markets
Who’s in the “Emerging Markets”?
Emerging Market is a term used to describe countries that are between “developing” and
“developed” status and are going through rapid industrialization.
Argentina
Iran
Poland(2)
Brazil(2)
Israel(1)
Russia(2)
Chile
Jordan
South Africa(2)
China(2)
Malaysia
South Korea(1)
Colombia
Mexico(2)
Taiwan(1)
Czech Republic
Morocco
Thailand
Egypt(2)
Pakistan
Tunisia
Hungary
Peru
Turkey(2)
India(2)
Philippines
Vietnam
Indonesia(2)
(1)
More than EM but maintained in index for continuity
(2)
Big Emerging Markets
Source: Morgan Stanley’s EM Index (June 2006)
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2. Rapidly Growing Markets
Speed is Key for Growing Markets
Capture largest share as soon as possible
• Driving down costs per unit to attract customers
• Increase production capacities to meet growing demands
• Capture key distribution channels and sales outlets
• Expand geographic coverage
• Expand product range/line to appeal to wider customer range
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3. Maturing, Stagnant, Declining Industries
Making Cows, Not Dogs
Maturing Industries = When nearly all the potential buyers are already users
High (+)
Star
Select
A Few
Growth Rate
Question Mark
Divest
Remaining
Invest
Cash Cow
Dog
Liquidate
Low (-)
High (+)
BI 322 Global Business & Strategy – Class 1
Relative Market Share
Low (-)
41
3. Maturing, Stagnant, Declining Industries
Industry Growth Rates In Thailand (1)
Change in Industrial Production Index
GDP Growth
4.5%
%
50%
Industry Average
0.48%
Growing
44.0%
Matured
Declining
40%
30%
20%
12.4% 12.2% 11.1%
10%
4.7%
4.3%
2.8%
2.5%
2.3% 1.7%
0.6% 0.5%
ra
tio
n
Fo
&
Ru
ot
P
w
bb
ap
ea
er
er
r
&
Pr
Ru
od
uc
bb
ts
er
Pr
od
uc
ts
Be
ve
ra
ge
s
Pe
To
tro
ba
le
cc
um
o
Pr
El
ec
od
tro
uc
Iro
ni
ts
n
c
an
Pr
d
od
St
uc
e
Co
ts
el
ns
Pr
od
tr
uc
uc
tio
ts
n
M
at
er
ia
ls
-30%
-1.4%
-6.4%
-8.2%
-11.3%
-14.1%
Pa
pe
r
uc
ts
Pr
ep
a
g
Pr
od
Cl
ea
ni
n
-20%
Ch
em
ic
al
-10%
Fo
od
s
0%
-30.5%
-40%
Note: As of 2006 – 2007 (Jan)
Source: BOI
BI 322 Global Business & Strategy – Class 1
-32.6%
Industry
42
3. Maturing, Stagnant, Declining Industries
Industry Growth Rates In Thailand (2)
Change in Industrial Production Index
%
30%
Growing
Matured
Declining
GDP Growth
Industry Average
4.5%
3.9%
20.0%
20%
15.9%
13.6%
12.5%
10.6%
10%
9.7%
8.3% 7.9%
7.6%
6.8%
4.9% 4.4%
3.4%
3.1%
1.5%
0.8%
-10%
-1.0%
Le
tru
is
ct
ur
io
e
n
M
at
En
er
ia
te
l
rt
ai
nm
en
t
Ho
us
eh
ol
d
Fa
sh
io
n
er
gy
En
Ba
nk
in
g
Au
to
-0.3%
-5.5%
Co
ns
Tr
Fo
an
od
sp
or
ta
tio
Co
n
m
In
m
du
er
st
ce
ry
M
at
er
ia
El
l
ec
Co
tro
m
ni
m
cs
un
ic
at
io
ns
e
Pr
op
er
ty
tu
r
ic
ul
an
ce
Ag
r
Fi
n
He
al
th
Pe
tro
c
he
m
Pa
ck
ag
in
g
0%
-8.8%
Industry
Source: Bloomberg (2006-2007)
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3. Maturing, Stagnant, Declining Industries
“Grow It” vs “Milk It”
“Grow It”
Strategies to Extend the Life of
Maturing/Stagnant Market
• Going head-to-head with competitors –
Stealing market share
• Make the product more “sticky”
- Switching (to competitor) is more difficult
- Create barrier to entry for newcomers
• Emphasize on Value
“Milk It”
Strategies to Fit the Maturing Market
• Streamlining operations to trim costs and
improve margins
• Build new or more flexible capabilities
• Maintain high standards of product quality
and services
• Pruning marginal products and models
• Re-vamp brand and product to invigorate
demand
• Acquiring rival firms
• Grow internationally
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3. Maturing, Stagnant, Declining Industries
“Get Rid Of It”
Strategic Options for Declining Industries
End-Game Strategies
Focus on the growing segments of the industry
Examples:
Ben & Jerry’s and Haagen-Daz
Slow exit
• Generate as much cash from business for as
long as possible
• Cut-expenses to rock-bottom
• Sell
Stress differentiation
Example:
P&G’s electric toothbrush and related
products
Fast exit
• Find perspective buyer in early stage of
decline
Innovative cost reductions to improve margins
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Diversification
Diversification is a strategy that companies use grow their business by entering new
market with a new product
Ansoff Product-Market Growth Matrix….
Product
Present
Present
New
Market Development
Product Development
Market Penetration
Diversification
Market
New
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Examples with in the Ansoff Matrix
Product
Present
New
Market Development
Product Development
Market Penetration
Diversification
Present
Market
New
~ 40 brands in 16 Businesses
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There are Two Types of Diversification
Concentric Diversification
Conglomerate Diversification
Diversification to a new product/market that
Diversification to a totally new and unrelated
leverages the company’s existing product,
business.
customer base, technology or competency.
Example:
Example:
Boonrawd Brewery
What are the advantages & disadvantages of each type of Diversification?
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Diversification Photohunt
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Why Do They Choose To Be So Diversified?
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