南京大学商学院--企业战略管理18

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1.4 Some Pitfalls in Decline and Preparing for Decline
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1.1 Structural Determinants of Competition in Decline
⑴CONDITIONS OF DEMAND
– ①uncertainty (in firms’ perceptions of future demand) – ②rate and pattern of decline (slowly; precipitously) – ③structure of remaining demand pockets(bargaining power) – ④cause of decline: technological substitution; demographics; shifts in needs.
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⑶HARVEST
The objective is to seek to optimize cash flow from the business. It does this by:
– ①eliminating or severely curtailing new investment; – ②cutting maintenance of facilities; – ③taking advantage of whatever residual strengths the business has in order to raise prices or reap benefits of past goodwill in continued sales;
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⑵EXIT BARRIERS
– – – – – – –
①durable and specialized assets; ②fixed costs of exit; ③strategic exit barriers; ④information barriers; ⑤managerial or emotional barriers; ⑥government and social barriers; ⑦mechanism for asset disposition;
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– ④other ways, such as by willingly manufacturing spare parts for their products, taking over longterm contracts, producing private label goods; – ⑤demonstrating a strong commitment to staying in the business through public statements and behavior; – ⑥demonstrating clearly superior strengths through competitive moves; – ⑦developing and disclosing credible information that reduces uncertainty about future decline; – ⑧raise the stake for other competitors to stay in the business by precipitating the need for reinvestment in new products or process improvements.
• Ultimately the business is sold or liquidated.
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⑷QUICKE DIVESTMENT
• This strategy rests on the premise that the firm can maximize its net investment recovery from the business by selling it early in decline, rather than by harvesting and selling it later or by following one of the other strategies. In some situations it may be desirable to divest the business before decline, or in the maturity phase. 2012-4-21 Jia Liangding 11
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⑵NICHE
• The objective is to identify a segment of the declining industry that will not only maintain stable demand or decay slowly but also has structural characteristics allowing high returns. Ultimately the firm may either switch to a harvest or divest strategy.
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⑶VOLATILITY OF RIVALRY
– The volatility of rivalry can be accentuated by suppliers and distribution channels. The situation maybe worse, if there are one or two firms are relatively weak in terms of their strategic position in the industry, but they possess significant overall corporate resources and a strong strategic commitment to stay in the business.
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Tactical steps foraggressive competitive actions in pricing, marketing, or other areas designed to build market share and insure rapid retirement of capacity from the industry by other firms; – ②purchasing market share by acquiring competitors or competitors’ product lines at prices above their opportunities for sale elsewhere; this has the effect of reducing competitors’ exit barriers; – ③purchasing and retiring competitors’ capacity, which again lowers exit barriers and insures that their capacity is not sold within the industry;
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– ④curtailing advertising and research costs; – ⑤reducing the number of models; – ⑥shrinking the number of channels employed; – ⑦eliminating small customers; – ⑧eroding service in terms of delivery time, speed of repair, or sales assistance.
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1.2 Strategic Alternatives in Declining Industries
⑴LEADERSHIP
– The strategy is directed at taking advantage of a declining industry whose structure is such that the remaining firm or firms have the potential to reap above-average profitability and leadership is feasible vis-à-vis competitors. Once this position is attained the firm switches to a holding position or controlled harvest strategy, depending on the subsequent pattern of industry sales.
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– Of the firms that stay, what are their relative strengths for competing in the pockets of demand that will remain in the industry? How seriously must their position be eroded before exit is likely, given their exit barriers? – What are the exit barriers facing the firm? – What are the firm’s relative strengths vis-àvis the pockets of demand that remain?