Strategy - Competitive Strategy P2 Flashcards
How do we know when and how to change strategy? (17 cards)
What are the three types of change?
- Evolution along the industry life cycle
- Discontinuous technological change
- Change stemming from competitors’ actions
Describe the stages of evolution along an industry’s life cycle
- Introduction
Niche consumer base and products. High costs. Few competitors.
Market Objective: gain awareness - Growth
Expands beyond niche. Informed mainstream customer-base. More differentiated competition. More profitable.
Market Objective: stress differentiation - Maturity
Product proliferation. Fewer buyers. Consolidated competition. Cost-based competition.
Market Objective: maintain brand loyalty - Decline
Market Objective: harvesting, deletion
What constitutes a “disruptive technology”?
It is a…
- radical innovation
- disruptive for buyers and producers - it destroys the R&Cs of incumbent firms
What is the effect of disruptive technology?
It shifts the natural incremental stages of evolution of the industry in question.
The introduction, growth, and maturity have greater performance.
Due to technological uncertainty, probably will only appeal to small market at the beginning.
Who often introduces disruptive technologies? Why?
Almost always introduced by entrants because incumbents are busy satisfying the needs of their mainstream and most
profitable customers
What are the pros and cons of being an early adopter of a disruptive technology? How about that of being a late adopter?
Early adopters have more chance to shape tech (“standards race”)
Later adopters have better understanding of demand and technology
Why do cooperations who innovate rarely create mass market for their innovation?
This is because different skill sets are required.
Pioneers value experimentation, have strong technical knowledge.
Mass marketing requires strong knowledge of production and marketing.
How do disruptions impact the number of companies involved in an industry.
Disruptions are characterized by high entry and high exit. This is called “consolidation”.
Many companies will join, and many will leave.
Why are disruptions important?
They can change….
1. the sources of value a customer expects
2. the types of customers a firm is interested in
3. how the firm delivers value to customers
What does “change stemming from a competitor’s actions” refer to?
It’s when individual firms undergo actions that impact competition.
i.e. Merging, acquiring firms. Change in core-competencies. Change in value chain.
What are the 3 questions to consider when a firm considers changing its strategy?
- When should a firm change strategy?
- Should the change be offensive or defensive?
- What mechanisms can be used to increase or decrease the scope of the firm’s activities?
A. Strategic alliances
B. Mergers and acquisitions
C. Vertical integration or outsource
Can you give examples of offensive moves a firm can make (regarding changing strategy)?
Offensive move: aggressive move to gain competitive advantage from rivals
Examples:
- rescaling industry
microbrewery
- changing when/ where you compete
Google (mobile, social media, ads)
- reconfigure product/ service so that it’s in its own category
Cirque de Soliel vs. circus
- configure value chain
Skype (no phone), Ikea (no assembly), Dell (no retail)
Can you give examples of defensive moves a firm can make (regarding changing strategy)?
Defensive move: a move made to decrease risk of attacks and weaken the impact of attack.
Examples:
- Buy competitor
eBay buys PayPal
- Diversify strengths and competencies
IBM built up software and service businesses
- Add new product/ service to compete
Air CAN added Rouge to compete with West Jet
- Shape industry rules
legal challenges
- Lock out competition
Patents
What are the objectives of a merge/ acquisition (M&A)?
- Efficiency
- Increase geographic coverage
- Fill gaps in product line
- Gain access to new technology
- Bring together different R&Cs in converging industries
Why do 83% of M&As fail?
- Cannot consolidate different operations (i.e. cultural, operational system)
- Savings are less than anticipated (paid too much for acquisition)
- Competitive objectives did not occur (you betted on wrong company within the industry - i.e. New Corp acquired mySpace)
What’s the advantage of forward integration?
Greater differentiation stemming from interacting more closely with customers + greater market visibility
What’s the advantage of backward integration?
Greater profitability as you are not paying another company for a component.
