Fragmented industry: Industries in which a large number of small or small to medium sized firms operate and no one has a dominant market share.
- Industries of this type: Service industries like retailing, fabrics, commercial printing; Dry Cleaning (PurpleTie example in trying to—unsuccessfully—consolidate)
- Consolidation: consolidate the industry into a smaller number of firms (purchase firms).
- Example: Service Corporation International (SCI) funeral home industry; Dry Cleaning services
- Entrepreneurial firms exploiting opportunities: Blockbuster consolidated the video rental industry (consider them now, though);Air conditioning industries;Starbucks in coffee restaurants; Kinko’s in copying; Krispie Kreme in doughnuts
Emerging Industry: newly created or newly re-created industries formed by technological innovations, changes in demand, the emergence of new customer needs, etc.
- Industries of this type: microprocessor industry, PCs, medical imaging industry, etc.
- First-mover advantages(there are also potentially disadvantages—second-mover advantages)
- Technology leadership: include firms making early investments in certain technologies in an industry. Can generate advantages b/c may obtain a low-cost position due to economies of scale and may obtain patent protections.
- Strategically valuable assets: are resources to successfully compete in an industry. Those able to acquire will create barriers for other firms (e.g., diamond industry)
- Creation of customer switching costs: occurs when customers make investments in order to use a firm’s particularly products/ services and changing firms is simply too costly (e.g., Microsoft)
- Entrepreneurial firms exploiting opportunities: eBay and internet auctions; Cisco and routers
Mature Industry: characterized by
1) slowing growth in industry demand,
2) development of experienced repeat customers,
3) slowdown in increases in production capacity,
4) slowdown in introductions of new products/services,
5) increase of int’l competition,
6) overall reduction in profitability of firms in industry
- Industries of this type: home detergents, motor oil, kitchen appliances
- Product refinement: Innovation to current products that focuses on extending and improving current offerings (e.g., additives in motor oil to keep oil cleaner longer)
- Investment in service quality: To differentiate product offerings, firms often turn toward the quality of customer services (e.g., a convenience food industry reason for slower growth in fast food is due to “casual dining” like Chili’s and Applebee’s)
- Process Innovation: innovations that reduce manufacturing costs, increase product quality, and streamline management are important (e.g., US automobile industry to compete with Japanese firms)
- Entrepreneurial firms exploiting opportunities: Wal-Mart in retailing; JetBlue in airlines; Silk Soymilk in milk industry
Industry Structure / Opportunities
Declining Industry: An industry that has experienced an absolute decline in unit sales over a sustained period of time
- Industries of this type: Defense industry—even in accounting for Gulf and Iraq Wars; video rental industry
- Market Leadership: Wait out shakeout period and enjoy a more benign environment—should try to gain majority of market share (e.g., Defense industry)
- Niche: narrow scope of operations and focus on a narrow segment of the declining industry
- Harvest: Engage in a long, systematic withdrawal from the industry, extracting as much value as possible during withdrawal period.
- Divestment: Like a harvest strategy, but happens very quickly
- Entrepreneurial firms exploiting opportunities: Nucor in steel—exploiting the steel in the minimill industry—smaller and produce a narrower range of products…they are energy efficient and high-quality.
Global Industry: An industry that is experiencing significant international sales
- Industries of this type: Athletic shoes; Fast food
- Can pursue a multidomestic or global strategy
- Multidomestic strategy: compete for market share on a country-by-country basis and vary their product or service offerings to meet demands of the local market (e.g., Fast Food Industry)
- Global Strategy: Use the same basic approach in all foreign markets (e.g., Athletic Shoes industry)