MGMT 498 Chapter 5

3 turnaround strategies

asset & cost surgery, selective product & market pruning, piecemeal productivity improvements

3 types of generic strategies

focus, cost leadership, differentiation

digital technologies

information that is in numerical form, which facilitates its storage, transmission, analysis and manipulation.

strategies in the decline stage

maintaining, harvesting, exiting, consolidation

strategies in the maturity stage

reverse positioning, breakaway positioning

Potential pitfalls of focus strategies

1) erosion of cost advantages within the narrow segment 2) focusers can become too focused to satisfy buyer needs

reverse positioning

a break in industry tendency to continuously augment products, characteristic of the product life cycle, by offering products with fewer product attributes and lower prices.

mass customization

a firm's ability to manufacture unique products in small quantities at low cost

competitive parity

a firm's achievement of similarity, or being "on par," with competitors with respect to low cost, differentiation, or other strategic product characteristic.

harvesting strategy

a strategy of wringing as much profit as possible out of a business in the short to medium term by reducing costs.

turnaround strategy

a strategy that reverses a firm's decline in performance and returns it to growth and profitability.

experience curve

the decline in unit costs of production as cumulative output increases.

introduction stage

the first stage of the industry life cycle, characterized by (1) new products that are not known to customers, (2) poorly defined market segments, (3) unspecified product features, (4) low sales growth, (5) rapid technological change, (6) operating losses, and (7) a need for financial support.

decline stage

the fourth stage of the product life cycle, characterized by (1) falling sales and profits, (2) increasing price competition, and (3) industry consolidation.

maturity stage

the third stage of the product life cycle, characterized by (1) slowing demand growth, (2) saturated markets, (3) direct competition, (4) price competition, and (5) strategic emphasis on efficient operations.

consolidation

a firm's acquiring or merging with other firms in an industry in order to enhance market power and gain valuable assets.

focus strategy

a firm's generic strategy based on appeal to a narrow market segment within an industry.

overall cost leadership

a firm's generic strategy based on appeal to the industrywide market using a competitive advantage based on low cost.

differentiation strategy

a firm's generic strategy based on creating differences in the firm's product or service offering by creating something that is perceived industrywide as unique and valued by customers.

Pitfalls of Integrated Overall Cost Leadership & Differentiation

1) Firms that fail to attain both strategies may end up with neither and become stuck in the middle 2) Underestimating the challenges and expenses associated with coordinating value creating activities in the extended value chain 3) miscalculating sources of revenue and profit pools in the firm's industry

Potential Pitfalls of cost leadership strategies

1) too much focus on one or few value chain activities 2) increase in the cost of inputs in which the advantage is based 3) strategy is imitated too easily 4) A lack of parity in differentiation 5) reduced flexibility 6) obsolescence of the basis of cost advantage

potential pitfalls of differentiation strategies

1) uniqueness that is not valuable 2)too much differentiation 3) too high a price premium 4) differentiation that is easily imitated 5) dilution of brand identification through product line extensions 6) perceptions of differentiation may vary between buyers and sellers

breakaway positioning

a break in industry tendency to incrementally improve products along specific dimensions, characteristic of the product life cycle, by offering products that are still in the industry but that are perceived by customers as being different.

generic strategies

basic types of business level strategies based on breadth of target market (industrywide versus narrow market segment) and type of competitive advantage (low cost versus uniqueness).

growth stage

the second stage of the product life cycle, characterized by (1) strong increases in sales; (2) growing competition; (3) developing brand recognition; and (4) a need for financing complementary value-chain activities such as marketing, sales, customer service, and research and development.

industry life cycle

the stages of introduction, growth, maturity, and decline that typically occur over the life of an industry.