Ch. 5: Business Strategies in Different Industries Cristian Marsico - Larry Griffin - Beau Gould Teresita Pinon

Opening Case: 1981 PC Industry value 3.0B with 150 companies. Apple had about 20% of the market. IBM reacted; started PC projects in Florida Open strategy for third-party complimentary products Fast complementary products growth led to many imitators Reduced barriers to entry for the industry Apple developed in-house only without third-party Over the following years, PC’s become more complex but gain more popularity IBMs MS/DOS operating system became the industry standard

Industry Life Cycle Product Life Cycle - born, grow, maturity, decline, die Industry Life Cycle - supply-side equivalent of the product life cycle Stages: Introduction, growth, maturity, decline

Two Factors Demand Growth - The life cycle stages are determined by sales, rate of market penetration, market saturation, and substitutes Production & Diffusion of Knowledge - Product innovation and knowledge diffusion are major influences on industry evolution

Dominant Designs and Technical Standards Dominant Design - Product architecture that defines the look, functionality, production method, and acceptance in the industry Technical Standards - Technology or specification that is important for compatibility Technical standards emerge where there are network effects (need for users to connect)

From Product to Process Innovation Once in the Growth phase, there is a shift from a radical to a more incremental product innovation. From design to manufacturing firms seek to reduce costs and increase product reliability For successful market penetration, process improvements, design modifications, and scale economies are applied

Life cycles Duration of life cycles are becoming more compressed. (Especially in E-commerce) Patterns in evolution differ across industries Industries are in different life cycle stages in different countries

Introduction Phase “De novo” - new entrants (Apple) “De alio” - firms looking to diversify (Commodore) Born global companies (Eyeview)

Growth Phase Demand Dominant design Financial resources

Maturity Phase Competitive advantage Cost efficiency ‘Shakeouts’

Decline Phase Causes: technology, preferences, demographic shifts, foreign competition Key features: excess capacity, lack of technical change (no new products), high average age or physical and human resources, aggressive price competition

Key Success Factors 1. INTRO: Capabilities in product development, manufacturing, marketing & distribution 2. GROWTH: Scaling up 3. MATURITY: Cost efficiency - scale economies, low wages and low overhead costs 4. DECLINE: Planning for the future

Strategy for the Public Sector Ownership is vested in the government Funded at least partially by the government Act in national or public interest ▫Public goods

Differences Between Public/Private 1.Multiple, potentially conflicting goals 2.Distinctive constraints/levers 3.Absence of market forces 4.Monopoly power 5.Less autonomy and flexibility 6.Increased accountability 7.Less predictability

Strategy for Not-for-profits Organisations that do not distribute surplus funds Pursuing a philanthropic goal Do not always act in the shareholders best interest Social enterprise - for profit organization with a philanthropic pursuit

Characteristics of Not-for-profits Not-for-profits share many of the same characteristics with public orgs, but also face: 1.The need for employment of volunteers 2.Fundraising However, they differ in that they do not: 1.Have monopoly power 2.Direct political influence

Realogy and Public/Not-for-profit Public Sector Texas Real Estate Commission Federal Housing Administration Not-for-profits Texas Association of Realtors National Association of Realtors International Valuation Standards Council

Stakeholder Analysis Helps to identify importance of different groups of stakeholders Aids in strategy development for company

Creating A Stakeholder Analysis 1.Brainstorm 2.Categorize 3.Analyze

Board of Directors (Manage Closely) Employees (Keep Informed) Customers (Keep Satisfied) General Public (Minimal Effort)

Scenario Planning 1.Define purpose/time horizon 2.Identify trends 3.Identify uncertainties 4.Construct scenarios 5.Identify scenario indicators 6.Assess strategic implications

Conclusion Industry Life Cycles Key Success Factors Strategies for Differing Industries/Sectors Stakeholder Analysis