Strategy is the overall plan for deploying resources to establish a favorable position. In today’s thriving enterprise strategic management is the identification of organizational strengths and competitive advantages that can be used in developing strategies to perform better than the competitors in the market environment.
These strategies deter entry of potential rivals. This can be done by product proliferation , price cutting or maintaining excess capacity. In product proliferation strategy the company tries to capture market by introducing variety of products for different segments thereby deterring potential rival entry. Companies try to skim the market and charge high prices during the growth stage and then move to increase the market share by charging lower price later.Maintaining excess capacity can deter the other firms to enter on fear of increasd output by the firm and subsequent price reduction.
Strategies to Maintain Rivalry in Mature Industries
Mature industries urestricted competition results in reduction in price and quality of output of the company. And thus the profitability of mature company decreases.The strategies that are used are price signaling, price leadership, non price competition and capacity contrl.
In price signaling companies convey their intention to other companies about pricing strategy on how they will compete in future or how they will react to competitive moves.This helps the companies defend their generic competitive strategies.It may adopted to signal that they would respond vigorously to hostile competitive moves. It also indirectly allows companies to coordinate their actions and avoid competitive move or further to improve industry profitability.
Price leadership strategy refers to price setting of the product. Another way of price signaling strategy ,price leadership is generally adopted by the company that is strongest in the industry.Formal price leadership strategy helps to differentitors to charge a premium price of output and helps low cost companies by inceasing their profit margin.It can stabilize industry relation by preventing head to head competition and raises industry profitability.
Non price competition strategy refers to use of non price competiton to manage rival industry. Various techniques without costly price cutting can give significant advantage. Product differentitation is on such. Non price competitive strategies are important to mature industry for marketing goods and serviceds into different segmentation- market penetratin, produc development, market development,product proliferation.
Market penetration strategy focuses on advertisement to promote and build product differentiation. The thrust is to influence consumer brand choice and create brand name reputation for company and its products to increase its market share.
Product development strategy aims in creation of product or replacement of existing ones to maintain its product differentiation.
Maket development strategy helps companies in finding new markrt segemts for its products. The company using this strategy aims to capitalize on its brand name.
Product proliferation strategy is used to manage industry rivalry and deter entry of new competitor. It helps mature companies to have aproduct market in each segment.
It helps avoid cut throat competition. It can influence the level of industry output. Some times price competition does periodically breakout when there is industry overcapacity and therefore they reduce price in order to dispose it off
Factors Affecting Excess Capacity
It is caused by falling short in meeting the demand. It may balso result from increasing demand which may compel in deciding to increase the capacity. Simultaneous use of new and old technology etc.
Choosing a Capacity Control Strategy in Mature Industry
Companies try to prevent its competitors by adequately deciding upon the capacity control. The capacity can maintained and utilized by projecting the demad through market research or survey.
Supply and Distribution strategy in Mature Industries
It refers to contolling supplier and distributor relationship to ensure its ability to dispose oof output in a timely and reliable manner.
Strategy in Declining Industry
The strategy followed are
Leadership Strategy refers to growing in a decling industry by picking the shares of companies that are exiting.
Niche Strategy where the company focuses on the output demand to keep the demand stable
Harvest Strategy refers to cutting all new investments in capital equipments, advertisement, R&D in a competive environment where you lack strength
Divestment strategy followed when it sees a steep decline and it sells it assets early to maximize its net investment.
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