Strategies in Fragmented Industries

MARKET DEVELOPMENT STRATEGY

• Find new markets for current products)

• ENTER NEW GEOGRAPHICAL MARKETS

• FIND NEW USES FOR EXISTING product

• Find new TARGET MARKETS

PRODUCT DEVELOPMENT STRATEGY

• (Develop new products for existing markets)

• IMPROVE FEATURES

• IMPROVE

• QUALITY/RELIABILITY/DURABILITY ENHANCE AESTHETICS/STYLING ADD MODELS DIVERSIFICATION STRATEGY

• (Develop new products for new markets)

THE 4 «P’S» OF MARKETING

• MARKETING MIX ISSUES

- Product Strategy

Specifying the exact product or service to be offered

• New or existing product? ...for new or existing customers?

- Promotion Strategy

How the product or service is to be communicated n customers

• «Push» - spend $$$ on promotions and discounts to push products

• «Pull» - spend $ to build brand awareness so consumer* will ask for it by name

- Channel or «Place» Strategy

Selecting the method for distributing the product or service

• Distribute through dealer networks or through mas merchandisers?

• Sell directly to consumers through own stores or througt internet?

- Price Strategy

Establishing a price for the product or service

• «Skim pricing» (high) when you are a pioneer

• «Penetration pricing» (low) builds market shares

• «Dynamic pricing» (prices vary frequently) based on demand/availability

FINANCIAL MANAGEMENT STRATEGIES

CAPITAL ACQUISITIONS

- Debt Leverage, Stock Sales, & Gains from Operations

• Equity financing is preferred for related diversification

• Debt financing is preferred for unrelated diversification

• Leveraged buyouts (LBOs) make the acquired firm pa off the debt

CAN WE GROW BY RELYING ON ONLY INTERNA CASHFLOWS?

DO STOCK SALES DILUTE OWNERSHIP CONTROL?

DOES A LARGE DEBT RATIO CRIPPLE FUTURE

DOES STRONG LEVERAGE BOOST EARNINGS PER dare?

DOES HIGH DEBT DETER TAKEOVER ATTEMPTS? DO MOST LBOs UNDERPERFORM 3-4 YEARS ~TER THE BUYOUT?

RESOURCE ALLOCATIONS

Dividends, Stock Price, & Reinvestment

• Reinvest earnings in fast-growing companies

• Keeping the stockholders contented with consistentdividends

• Use of stock splits (or reverses) to maintain high stock prices

• Tracking stock keeps interest in company, but doesn’t allow takeover

RESEARCH & DEVELOPMENT STRATEGIES

LEVEL OF INNOVATION

- Pioneer (Leader) v. Copy Cat (Follower)

Technological leadership fits well with differentiation A «follower» strategy makes sense with cost-leader strategies Are we better at finding applications and customer adaptations than actually inventing something really new?

- Different types of R & D (basic, product, process)

Where is the firm’s historic expertise / advantage?

How competent are the R & D Personnel?

ACQUISITION OF TECHNOLOGY

- Internally developed v. acquired from outside

- T echnology «Scouts»

- Strategic Technology Alliances

- Acquire minority stake in promising high-tech ventures

OPERATIONS STRATEGIES

MANUFACTURING LOCATION

- Internal Production v. Outsourcing

- Domestic Plants v. International Locations

- SYSTEM LAYOUT

- Product v. Process Layouts Job Shops v. Mass Production

Job shop/small batch production fits well with a differentiation strategy

Continuous production / dedicated transfer lines helps achieve cost leadership

Use of robots and CAD/CAM v. Labor intense manufacturing Modular Manufacturing and just-in-time delivery of sub- assemblies

Continuous improvement systems lower costs and increase quality

PURCHASING STRATEGIES

• SOURCING COMPONENTS AND SUPPLIES WHERE

CAN THE HIGHEST QUALITY COMPONENTS BE FOUND?

- Outsourcing (our firm buys everything)

• Buying on the Open Market (Spot) (prices fluctuate)

• Long-Term Contracts with Multiple Suppliers (low bid)

• Sole Sourcing (only one supplier) improves quality

• Parallel Sourcing (two suppliers) provides protection

- Backward Integration (our firm has an ownership stake in the suppliers we use)

• Quasi-integration (minority ownership position in a supplier)

• Tapered (produce some of what we need, but not all)

• Full (produce all of our own needs)

- Use of Component Inventories v. Just-in-time supph delivery

LOGISTICS STRATEGIES

DO WE НАШ GOODS THAT MUST BE TRANSPORTEL OR DELIVERED?

• TYPE OF MATERIALS TRANSPORTED (Bulky or Compact?)

- Raw Materials, Supplies, & Components

- Finished Goods

• BEST MODE OF TRANSPORTATION

- AIR

- RAIL

- TRUCK

- BARGE

DO WE WANT DEPENDABILITY, LOW COST, OI HIGH QUALITYSER VICE?

• OUTSOURCE TRANSPORTATION OR DO IIYOURSELF?

- CONTRACT WITH OTHERS

• Use Multiple Shippers v. Just One (UPS)? •

• Consider batch deliveries v. Just-in-time arrangements?

- OWNERSHIP IN DISTRIBUTION CHAIN

• Quasi

• Tapered

• Full

HUMAN RESOURCES STRATEGIES

• TALENT ACQUISITION

- Recruit from Outside v. Internal Development

- Require experienced, highly-skilled workers v. «we wi train you»

Offer «top dollar» wages & benefits v. mentoring and career

wORK ARRANGEMENTS Individual Jobs v. Team Positions

Narrowly-defined jobs v. Positions with discretion and

autonomy

- On-premises Work v. Telecommuting Options MOTIVATION & APPRAISAL

- Extrinsic v. Intrinsic Reward Systems Assessment for development v. assessment for rewards Incentives for ideas & originality v. incentives for conformity?

INFORMATION SYSTEMS STRATEGIES

WORKER PRODUCTIVITY & CONNECTIVITY Employees can be networked together across the globe Instant translation software for global firms Follow the Sun Management»...pass projects on to the next team

SALES & INVENTORY MANAGEMENT Internet sales and development of customer databases Instant sales reports allow immediate inventory reorders

SHIPPING & TRACKING GOODS

FEDEX PowerShip software...stores addresses, prints labels, etc.

Tracking the progress of package shipment...FEDEX &

UPS

2.2. Strategies for enterprises of different industries

Strategies in Fragmented Industries

Fragmented industry characteristics:

- Localized markets with low entry barriers.

Few economies of scale opportunities exist.

High transportation costs for products.

• Focus strategies predominate (customer group, region).