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This best strategy for a given firm is ultimately a unique construction reflecting it's particular. - MICHAEL E. PORTER
This topic discusses on the various strategies available for/adapted by firms in various business scenarios or market conditions.
Listed below are the different market environments and the strategies that managers have the option of adapting in order to make strategic decisions and face challenges in order to survive in the market.
STRATEGIES FOR COMPETING IN EMERGING INDUSTRIES OF THE FUTURE
Emerging industries are the early formative stage of a company. The features of companies in this industry are latest technology, adding human resource, acquiring constructing facilities, broadening distribution and marketing channels, gearing up operating facilities and gaining buyer acceptance. Emerging industries face issues such as product design problem and technological problems that remain to be sorted out.
Market is new and has an unproven track record and so there is an uncertainty of how the market will behave, how fast it will grow and how big it will get.
Strategists should be aware of the new technological development in product design and in the production of products and services.
Strategic managers study the factors like competitors, demand, market, technology and socio-cultural, political and legal environment.
Companies strong in resources tend to emerge as winners in the segment.
Strategy manager should adopt generic strategies to keep costs and price of expenditure low.
Marketers' task is to induce initial purchase and to overcome customers concerns over the product features and performance reliability.
Utilize potential buyers' feedback as they always try to improve the quality of the product and services of the company.
Strategic managers are required to have ample suppliers to offset uncertainty in supply by certain suppliers.
In case of under capitalization, managers must look to tie up with capital rich firms or look to being acquired by financially strong firms.
How to succeed in an emerging industry
Perfect in technology to improve product quality and to develop attractive performance features in the product and service.
Acquire or form alliance with companies strong in technology to out compete rivals.
Adapt to the change in technology market.
Win the early race for industrial leadership by taking bold moves in creating strategies and with risk taking entrepreneurship.
Make it easy and cheap for first time buyers to try the industry as first gen product.
STRATEGIES FOR COMPETING IN TURBULENT HIGH-VELOCITY MARKET
The central strategy making challenge in this kind of an environment is managing change.
Reacting to change
Adjust to the monetary and legal policies of the government.
Launch better products in the market in response to competitors' offerings.
Respond quick to unexpected changes in buyers' needs and preferences.
Strategists react and respond quickly to problems that arise.
Perform market research to study buyers' behaviour, needs and expectations to get an insight on how the market will evolve and then reacting to change.
Opens up the doors for new opportunities and hence is a better way to manage change than simply react to the change.
Analyze opportunities for going global.
Monitors technological developments to design product's future path.
Adapt strategies such as strong distribution channel, add/adopt resources and competitive capabilities, improving the existing product line.
Leading the change
Set standards in the industry.
Pioneer new and updated technology.
Introduce new and innovative products that open up a new market or even spur the creation of a whole new industry.
Invest aggressively in R&D to improve product capability and drive the change with technology.
Develop and maintain organizational capabilities quickly ahead of the rivals.
Rely on strategic partnership with outside suppliers and with companies making tie in products for which first the company needs to strengthen its internal resources base.
Companies in depth expertise, speed, adaptation to change, innovativeness, opportunism and resources flexibility is critical for organizational capabilities in order to keep the products and services fresh and exciting enough to change taking place.
Force the rivals to follow.
Set changes in the industry place.
Influence the rules of the game in market.
STRATEGIES FOR COMPETING IN MATURE MARKET
This type of industry moves from rapid growth to significantly slower growth. The industry is said to have become mature when all the potential buyers' are already users of the industry's products and services. An industry is said to be matured when there is a need for technologically advanced factors, product innovation factors and marketing driven factors such as demand for products and services, combination of the 4Ps.
Indulge in price-cutting policy for products and services, increased advertising and other aggressive methods to gain market share.
Sophisticated buyers' indulge in evaluating different brands and use their knowledge to negotiate a better deal with sellers. This will help them in repeated purchases.
Buyers prefer to purchase quality products with the best combination of price and service.
The company's cash flow is affected by too much advertising but rapidly declining sales.
Difficult to find future users for the existing products.
Penetrate in to foreign market for the domestic market is matured.
Indulge in mergers and acquisition or else be prepared to get the axe.
Adapt cost leadership, market leadership, generic strategies and new technologies there by mergers and acquisition to develop competitive market.
Characteristics of maturing industry
Pruning marginal products and models
The industry introduces many product versions which work against achieving growth and increased manufacturing costs. Pruning marginal products opens the doors for cost savings and permits more concentration on items whose margins are high and where the firm attains a competitive advantage.
Emphasize value chain innovation
Industries that adopt innovation provide better products and service at lower costs even quality and introduce new versions to market. Manufacturers' can mechanize innovation in terms of high cost activities, redesign of production lines in order to improve labour efficiency and build a flexible manufacturing process. Hence, customized products can be produced with increased use of advance technology.
Strong focus on cost reduction
Companies can select suppliers to supply materials at competitive prices, implement a tighter supply chain system to keep costs low by trimming out cost consuming processes, develop economical product designs, re-engineering, use of e-commerce in internal and external processes and create an economical distribution channel.
Increasing sales to present customers
Companies can take responsibility in expanding its sales to its existing customer base. Mature companies provide complementary items and ancillary service such as sales after sales and studying more ways for customers to use their company's products.
Purchasing rival firms at bargain price
Purchasing of rival firms at bargain prices can help to create low cost positioning if opportunities are present for greater operating efficiency. It also helps the acquiring company to gain access to the customer base of the acquired company enhancing and enlarging the market share against rival concerns.
Since the domestic market is matured, companies may look to penetrate in to other countries using the domestic firm's skill reputation. Mature industries in time become strong in resources like market, finance, HR, distribution channels, alliance, mergers and technology.
Building capabilities that are flexible
It is adding new competencies or capabilities that depending existing competence makes them harder to initiate or strive to make core competencies more adaptable to changing customer requirements and expectations.
STRATEGIES FOR FIRMS IN DECLINING MARKETS
Focusing on the growth market segment within the industry
The first competitive approach of strategies for firms in declining industries is to focus on growth market segments. Declining markets are composed of a number of segments or niches, say, one or more of these segments are growing rapidly despite the stagnation of the industry. An astute competitor who focuses on fast growing segments in industries and does a clean job of meeting the needs of the buyers which comprises these segments can often escape stagnation sales and profits and even gain decided competitive advantage in the industry.
Differentiating on the basis of quality and frequency of product innovation
This strategy either enhances quality or innovation thereby rejuvenating demand by creating important new growth segments or inducing buyers to trade up in the industry. Successful product innovation opens up avenues for competing besides meeting or beating rivals' price of product in the market. Being successful in differentiating with upgraded innovation has an added advantage. It becomes difficult for firms to imitate as it is expensive.
Become a low cost producer
Companies in declining industries can improve profit margins and RoI by pursuing innovative cost reduction techniques. The potential ways to save costs are -
Cut down on marginally beneficial activities in the value chain
Outsource those activities that can be performed cheaply by sub contractors or other firms in the business
Using e-commerce technology to redesign internal business processes to save costs
Consolidate underutilized production facilities
Widen distribution channels to ensure the unit volume needed for low cost production in factory
Close down low volume, high cost retail outlets
Pruning marginal products from the firm is offering
Managers who believe in strategic decision making to be the success path for their firm, then, mentioned above are some of the strategies or weapons that they can use in different market scenarios that the industry is facing and steer their firms to success.