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Lecture Contemporary strategy analysis: Concepts, techniques, applications (5th edition): Chapter 10 - Robert M. Grant

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Products become more standardized Distribution channels consolidate Production shifts to low-wage countries Price competition intensifies Bargaining power of distributors increase[r]

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Industry Evolution

Industry Evolution

• The industry life cycle

• Industry structure, competition, and

success factors over the life cycle.

• Anticipating and shaping the future.

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The Industry Life Cycle The Industry Life Cycle

Drivers of industry evolution :

• demand growth

• creation and diffusion of knowledge

Introduction Growth Maturity Decline

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Product and Process Innovation Over Time

Product and Process Innovation Over Time

Time

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Product Innovation

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Standardization of Product Features in Cars

Standardization of Product Features in Cars

FEATURE INTRODUCTION GENERAL ADOPTION

Speedometer 1901 by Oldsmobile Circa 1915

Automatic transmission 1st installed 1904 Introduced by Packard as an option, 1938 Standard on Cadillacs early 1950s

Electric headlamps GM introduces, 1908 Standard equipment by 1916 All-steel body GM adoptes 1912 Standard by early 1920s

All-steel enclosed body Dodge, 1923 Becomes standard late 1920s Radio Optional extra 1923 Standard equipment, 1946

Four-wheel drive Appeared 1924 Only limited availability by 1994 Hydraulic brakes Introduced 1924 Became standard 1939

Shatterproof glass 1st used 1927 Standard features in Fords 1938 Power steering Introduced 1952 Standard equipment by 1969 Antilock brakes Introduced 1972 Standard on GM cars in 1991 Air bags GM introduces, 1974 By 1994 most new cars equipped

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How Typical is the Life Cycle Pattern?

How Typical is the Life Cycle Pattern?

• Technology-intensive industries (e.g pharmaceuticals,

semiconductors, computers) may retain features of emerging industries.

• Other industries (especially those providing basic

necessities, e.g food processing, construction, apparel) reach maturity, but not decline.

• Industries may experience life cycle regeneration.

Sales Sales

1900 ‘50 ‘60 ‘90 1930 50 60 90

MOTORCYCLES TV’s

• Life cycle model can help us to anticipate industry

evolution—but dangerous to assume any common, pre-determined pattern of industry development.

Color

B&W Portable

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Evolution of Industry Structure over the Life Cycle

Evolution of Industry Structure over the Life Cycle

INTRODUCTION GROWTH MATURITY DECLINE DEMAND Affluent buyers Increasing Mass market Knowledgeable,

penetration replacement customers, resi- demand dual segments

TECHNOLOGY Rapid product Product and Incremental Well-diffused innovation process innovation innovation technology

PRODUCTS Wide variety, Standardization Commoditiz- Continued

rapid design change ation commoditization

MANUFACT- Short-runs, skill Capacity shortage, Deskilling Overcapacity URING intensive mass-production

TRADE -Production shifts from advanced to developing

countries -COMPETITION Technology- Entry & exit Shakeout & Price wars, consolidation exit

KSFs Product innovation Process techno- Cost efficiency Overhead logy Design for uction, ration-

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The Driving Forces of Industry Evolution The Driving Forces of Industry Evolution

Customers become more knowledgeable & experienced Diffusion of technology Demand growth slows as market saturation approaches

Customers become more price conscious

Products become more standardized Distribution channels consolidate Production shifts to low-wage countries Price competition intensifies Bargaining power of distributors increases

BASIC CONDITIONS INDUSTRY STRUCTURE COMPETITION

Excess capacity increases Production becomes less R&D & skill-intensive

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