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Chapter 8

Chapter 8

4 Pages
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Department
Administrative Studies
Course Code
ADMS 4900
Professor
Kelly Thomson

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Jan.23/14 Lecture 3 Chapter 8 – Industry Change and Competitive Dynamics Industry Life Cycle Stages: Strategic Implications - generic strategies, functional areas, value-creating activities and overall objectives vary depending on life cycle stage - managers need to strive to emphasize key functional areas during each stage and maintain a level of parity ~ should not become so focuses on one area that other areas are ignored - cannot predict when industry moves from one stage to another - limitation of cycle is that products go through many innovations and renewal stages - only fad products have single life cycle - biggest industry change are usually caused by technology and innovation - regulation and deregulation also can alter an industry - industry whose core activities or core assets face obsolescence will make one of the changes: a) intermediating change core assets not threatened but core activities are (ex: automobile dealerships, can find information about cars online) b) creative change core assets are threatened but core activities are not (ex: pharmaceutical companies, patents for drugs are expiring while new drugs are being improved, but marketing and commercialization are still relevant) c) progressive change core assets and core activities are both not threatened ~ change occurs but it’s within the existing framework of the industry ~ at any time there may be incremental changes but that accumulates to substantial change 1. Introduction Stage - unfamiliar consumers, market segments are not well defined, features are not clearly specified - low sales growth, rapid technology change, operating losses, need for strong sources of cash to finance operations - usually few players so there isn’t much growth and competition is limited - emphasis should be on research and development and marketing to enhance awareness of product/service - challenges involve ~ developing a product and trying to get consumers to try it ~ generating enough exposure that it is at the standard all other products are evaluated - benefits of both first mover (you did it first) and late mover (learn from others mistakes) 2. Growth Stage - strong increase in sales - key to success is to build consumer preferences for specific brands ~ strong brand recognition, differentiated products, financial resources to support various value chain activities - want to stimulate selective demand, generate demand for your firm over rivals - revenue increases because: ~ new consumers are trying your product ~ growing proportion of satisfied consumers are making repeat purchases 3. Maturity Stage - demand begins to slow since market is saturated - marginal competitors exit the market - rivalry amongst existing competition intensifies, price competition - want to keep costs low as consumers are more price sensitive - difficult for firm to differentiate their offerings one users have an understanding of their product - can reposition their product in unexpected ways to change the way consumers categorize them 4. Decline Stage - need to decide if they’re going to stay and reclaim their position or exit - sales and profits begin to fall - products in this stage consume a large amount of managements time and financial resources - cutting prices to raise cash and remain solvent in the short term - wholesale liquidation of assets - strategic options become dependent on rivals actions - options available: a) maintaining keeping product going without reducing marketing support, technological development or other investments in the hope that competitors will exit the market b) harvesting taking as much profits and making minimal investments, maximizing sales volume and reducing costs quickly c) exiting dropping the product from the firm’s portfolio d) co
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