Competitive Advantage in Retailing: Retailers with the Highest and Lowest Valuation Ratios?. Competitive Advantage in Retailing: Retailers with the Highest and Lowest Valuation Ratios.[r]
(1)Competitive Advantage in Mature Industries
Competitive Advantage in Mature Industries
• Key success factors in mature industries
• Strategic Implementation: Structure, Systems, Style
(2)Competitive Advantage in Retailing: Retailers with the Highest and Lowest Valuation Ratios
Competitive Advantage in Retailing: Retailers with the Highest and Lowest Valuation Ratios
TOP 15 Valuation Sales Ratio ($,bil.)
Amazon.com (US) n.a 3.9 Caremark Rx (US) 18.0 6.8 Expedia 16.6 0.6 Autozone (US) 13.1 5.3 Hennes & Mauritz (Swe.) 10.5 5.9 Next (UK) 10.1 3.6 Bed, Bath & Beyond (US) 8.5 3.7 Woolworth (Australia) 8.0 16.0 Gap (US) 4.1 14.5 TJX (US) 6.9 12.0 Inditex (Spain) 6.8 4.7 Wal-Mart (US) 5.7 244.5 Radio Shack 5.6 4.6 Family Dollar Stores 5.1 4.2 Best Buy (US) 5.0 20.9
Toys-R-Us 0.6 11.3 J.C Penny (US) 0.7 32.3 Federated Dept Stores (US) 1.1 15.4 J Sainsbury (UK) 1.1 29.8 Ito-Yokado (Japan) 1.1 28.0 Ahold 1.2 78.3 Safeway plc (UK) 1.3 29.8 Pinault-Printemps
-Redoute (France) 1.4 32.2 Sears Roebuck (US) 1.4 41.4 Dixons Group (UK) 1.4 8.0 Albertson’s (US) 1.5 35.6 May Department Stores (US) 1.7 11.9 Office Depot (US) 1.7 11.4 CVS 1.9 24.2 Kingfisher (UK) 2.0 17.6
(3)Key Success Factors in Mature Industries
Key Success Factors in Mature Industries • Opportunities for sustainable limited potential for differentiation
competitive advantage are technology stable and well diffused limited ease of entry due to well developed
industry infrastructure and powerful distributors
international competition : domestic cost advantage vulnerable
• Sources of Economies of scale cost advantage Low-cost inputs
Low overheads
• Segment and customer As general industry environment selection deteriorates, important to locate
attractive segments and woo good customers
• Sources of differentiation Emphasis on image differentiation and advantage differentiation through complementary
services.
(4)Sources of Strategic Innovation in Mature Industries Sources of Strategic Innovation in Mature Industries
• Reconfiguring the value chain: - Benetton and Zara in clothing - Southwest & Ryanair in airlines - Dell in PCs
• Redefining markets and products - Swatch in watches
- Starbucks in coffee shops
- Barnes & Noble in book retailing
• Innovative approaches to - Virgin Atlantic in air travel
differentiation - Sephora in cosmetics retailing
Who are the strategic innovators?
• New entrants - CNN in news broadcasting - Nucor in the U.S steel industry
• Existing firms on the periphery -Sun Records in rock ‘n roll music
• Firms from adjacent industries - Prudential Insurance in banking (Egg)
Why not leading incumbents?
• They are constrained by “industry recipes,” relationships with existing customers, investments in resources & capabilities linked to past
(5)TIME
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Process innovation
Strategic innovation
Product innovation
Product, Process, and Strategic Innovation over the Life Cycle
(6)Strategy Implementation in Mature Industries:The Traditional Model
Strategy Implementation in Mature Industries:The Traditional Model
STRATEGY - Pursuit of cost efficiency through mass production
STRUCTURE - Functional departments - Line and staff distinction - Job specialization
CONTROLS - Quantitative, short-term performance targets - Hierarchical monitoring and control
- Standard, formalized operating procedures, reporting, and management by exception. INCENTIVES - Emphasis on financial incentives linked to
individual performance
TOP - Primary functions are control and MANAGEMENT strategic decision making
(7)The Competitive Environment of Declining Industries
The Competitive Environment of Declining Industries
Features - Excess capacity
of declining - Lack of technological change
industries - Consolidation (but some new entry as new firms exit)
- Old machines and employees
Smooth adjustment - Predictability of decline
of capacity Durable assets
depends upon Costs of closure
- Barriers to exit Management commitment
- Strategies of surviving firms