Competitive strategy in fragmented industries: Potential Strategic Traps

The unique structural environment of the fragmented industry offers a number of characteristic strategic traps. Some common traps, which should serve as red flags in the analysis of strategic al–ternatives in any particular fragmented industry, are as follows: Seeking Dominance. The underlying structure of a frag-mented industry makes seeking dominance futile unless that struc-ture

Fragmented industries: Formulating Strategy

Collecting the ideas that have been discussed earlier, we are in a position to outline a broad analytical framework for formulating competitive strategy in fragmented industries (see Figure 9-1). Step one is to conduct a full industry and competitor analysis to identify the sources of the competitive forces in the industry, the structure within

Emerging industries: The Structural Environment

Although emerging industries can differ a great deal in their structures, there are some common structural factors that seem to characterize many industries in this stage of their development. Most of them relate either to the absence of established bases for competi-tion or other rules of the game or to the initial small size

Emerging industries: Problems Constraining Industry Development

Emerging industries usually face limits or problems, of varying severity, in getting the industry off the ground. These stem from the newness of the industry, its dependence for growth on other outside economic entities, and externalities in its development that result from its need to induce substitution by buyers to its product. Inability to

Emerging industries: Early and Late Markets

One of the crucial questions for strategic purposes in an emerg-ing industry is often the assessment of which markets for the new in-dustry’s product will open up early and which will come later. This assessment not only helps focus product development and marketing efforts but also is essential to forecasting structural evolution, since the

Emerging industries: Strategic Choices

Formulation of strategy in emerging industries must cope with the uncertainty and risk of this period of an industry’s development. The rules of the competitive game are largely undefined, the struc-ture of the industry unsettled and probably changing, and competi–tors hard to diagnose. Yet all these factors have another side—the emerging phase of an

Emerging industries: Techniques for Forecasting

The overriding aspect of emerging industries is great uncertain-ty, coupled with the certainty that change will occur. Strategy cannot be formulated without an explicit or implicit forecast of how the structure of the industry will evolve. Unfortunately, however, the number of variables that enter into such a forecast is usually stagger-ing. As a result,

Which Emerging Industries to Enter

The choice of which emerging industry to enter is dependent on the outcome of a predictive exercise such as the one described above. An emerging industry is attractive if its ultimate structure (not its ini-tial structure) is one that is consistent with above-average returns and if the firm can create a défendable position in

Industry Change during Transition

Transition to maturity can often signal a number of important changes in an industry’s competitive environment. Some of the probable tendencies for change are as follows: Slowing growth means more competition for market share. With companies unable to maintain historical growth rates merely by holding market share, competitive attention turns inward toward attacking the

Some Strategic Implications of Transition

The changes that often accompany transition to maturity repre-sent possible changes in the basic structure of the industry. Each ma-jor element of industry structure often is changing: overall mobility barriers, the relative significance of various barriers, the intensity of rivalry (it usually increases), and so on. Structural change nearly al-ways means that firms must

Strategic Pitfalls in Transition

In addition to failure to recognize the strategic implications of transition described above, there is the tendency for firms to fall prey to some characteristic strategic pitfalls: A company’s self-perceptions and its perception of the in- Companies develop perceptions or images of themselves and their relative capabilities (“we are the quality leader”; “we provide

Organizational Implications of Industry Maturity

We tend to think of requirements for organizational change as resulting from major shifts in strategy and from evolution in the size and diversification of a company. The necessary fit between organi-zational structure and a firm‘s strategy holds equally true in industry maturity, and the transition to maturity can be one of the critical

Industry Transition and the General Manager

Industry transition to maturity, especially when it requires many of the strategic adjustments described above, often signals a new “way of life” in a company. The excitement of rapid growth and pioneering are replaced by the need to control costs, compete on price, market aggressively, and so on. This change in the way of

Structural Determinants of Competition in Declining Industries

In the context of the analysis in Chapter 1, a number of struc-tural factors take on a particular importance in determining the na-ture of competition in the decline phase of an industry. Shrinking in-dustry sales make this phase potentially volatile. However, the ex-tent to which the incipient competitive pressure erodes profitability depends on some

Strategic Alternatives in Declining Industries

Discussions of strategy during decline usually revolve around disinvestment or harvest, but there is a range of strategic alterna-tives—although not all are necessarily feasible in any particular in-dustry. The range of strategies can be conveniently expressed in terms of four basic approaches (shown in Figure 12-1) to competing in decline, which the firm can

Choosing a Strategy for Declining Industries

The previous discussion provides a series of analytical steps to determine the position of the firm in a declining industry: Is the structure of the industry conducive to a hospitable (po–tentially profitable) decline phase based on the conditions in Section I? What are the exit barriers facing each and every significant competitor? Who will

Pitfalls in Declining Industries

Finding the firm‘s position on Figure 12-2 requires a great deal of subtle analysis, and many firms violate the basic consistency be-tween industry structure and strategic choice embodied in the figure. Study of declining industries also reveals a number of other potential pitfalls. Failure to Recognize Decline. With the benefit of hindsight, it is

Preparing for Declining Industries

If the firm can forecast industry conditions in the decline phase, it may be able to improve its position by taking steps during the ma–turity phase that greatly improve its position for decline; sometimes these moves cost little in terms of strategic position in maturity. Minimize investments or other actions that will raise exit

Sources and Impediments to Global Competition

Firms can participate in international activities through three basic mechanisms: licensing, export, and foreign direct investment. Usually a firm‘s first foray overseas involves export or licensing, and only after it has gained some international experience will it consider foreign direct investment. Export or foreign direct investment will be present in industries where competition is

Evolution to Global Industries

Few industries begin as global industries, but they tend to evolve into them over time. A number of triggers most common in creating global industries will be discussed. They involve either establishing or enhancing the sources of global competitive advantage or reduc-ing or eliminating impediments to global competition. The latter will not lead to