Strategy in Strategy in Aging/Declining Aging/Declining IndustryIndustry

Amin WibowoAmin Wibowo

FEB UGMFEB UGM

Tantangan Strategik dalam New Competitive Landscape

Para manajer dan pemimpin semakin dituntut untuk mempunyai kapasitas menavigasi perusahaan dalam menghadapi new competitive landscape, dengan mengembangkan fleksibilitas strategik dan keunggulan kompetitif berkelanjutan

Old Competitive Landscape

Old Competitive Landscape

New Competitive Landscape

New Competitive Landscape

Keunggulan kompetitif berbasis proteksi pasar, monopoli, produk dan sebagainya

Keunggulan kompetitif berbasis proteksi pasar, monopoli, produk dan sebagainya

Keunggulan kompetitif berbasis kompetensi dan knowledge

Keunggulan kompetitif berbasis kompetensi dan knowledge

Visi Strategik:Misi, Visi, Nilai-nilai

Agenda Strategik dan Transformasi

organisasional

Declining Phase

Declining Industries

Reasons for and severity of the declineReasons: technological change, social trends,

demographic shifts Intensity of competition is greater when:

The decline is rapid versus slow and gradual. The industry has high fixed costs. The exit barriers are high. The product is perceived as a commodity.

• Not all industry segments typically decline at the same rate

A declining industry is one in which market demand has leveled off or is falling and the size of total market starts to shrink.

Competition tends to intensify and industry profits tend to fall.

What does aging/declining industry mean?

The size of total market starts to shrink:

- Technological advances (railroads, steel vs.

plastic, vacuum tube vs. transistor)

- Lower cost or high quality (synthetics for leather)

- Customer groups shrinks (baby foods)

- Change in life-style, buyers’ need, or tastes (cigars and hatmaking)

The Life-Cycle Portfolio Matrix

Industry Maturity (External)Embryonic Growth Mature Aging

Com

peti

tive

Pos

itio

n (I

nter

nal)

Dominant

Strong

Favorable

Tenable

Weak

Nonviable

•Wide range of strategic options•Caution: selective development•Danger: withdraw to market niche, divest or liquidate

The Life-Cycle Portfolio Matrix

Descriptors

Development Stage

Embryonic Growth Mature Aging

Market Growth Rate

Accelerating Faster than GNP Equal to or slower than GNP

Declines over long term

Industry Potential

Difficult to determine

Exceeds the industry volume

Well-known; approach saturation

No potential remains

Breadth of product lines

Basic product line established

Rapid proliferation

Product turnover

Shrinking

Number of competitors

Increasingly rapid

Increasing to peak

Stable Declines

The Life-Cycle Portfolio Matrix

Descriptors

Development Stage

Embryonic Growth Mature Aging

Market share stability

Volatile A few firms have major shares

Firms with major shares are entrenched

Concentration increases as marginal firms drop out

Purchasing Patterns

Little or none Some: buyers are aggressive

Buying patterns are established

Number of alternatives decreases

Ease of entry Opportunity may not be apparent

The presence of competitors is offset by vigorous growth

Competitors are entrenched, and growth is slowing

Little incentive

Technology Concept dev and product engineering

Product line refinement and extension

New product line development to renew growth

Role is minimal

Criteria of Competitive PositionDominantDominant: Dominant competitors are very rare. Dominance often

results from a quasimonopoly or from a strongly protected technological leadership.

StrongStrong: Not all industries have dominant or strong competitors. Strong competitors can usually follow strategies of their choice, irrespective of their competitors’ moves.

FavorableFavorable: When industries are fragmented, with no competitor clearly standing out, the leaders tend to be in a favorable position.

TenableTenable: A tenable position can usually be maintained profitably through specialization in a narrow or protected market niche. This can be a geographic specialization or a product specialization.

WeakWeak: Weak competitors can be intrinsically too small to survive independently and profitably in the long term.

NonviableNonviable: Represents the final recognition that the firm relly has no strength whatsoever, now or in the future, in that particular business. Therefore, exiting is the only strategic responses.

The Life-Cycle Portfolio Matrix

All-out push for share; Hold position

Hold position; Hold share

Hold position; Grow with industry

Hold position

Attempt to improve position; All-out push for share

Attempt to improve position; Push for share

Hold position; Grow with industry

Hold position or Harvest

Selective or all-out push for share; Selectively attempt to improve position

Attempt to improve position; Selectively push for share

Custodial or maintenance; Find niche and attempt to protect

Harvest or Phased withdrawal

Selectively push for position

Find niche and protect it

Find niche an hang on or Phased withdrawal

Phased withdrawal or Abandon

Up or Out Turnaround or Abandon

Turnaround or Phased withdrawal

Abandon

Exiting Exiting Exiting Exiting

Embryonic Growth Mature Aging

Dominant

Strong

Favorable

Tenable

Weak

Nonviable

•Market share thrust

The Life-Cycle Portfolio Matrix

Invest slightly faster than market dictates

Invest to sustain growth

Reinvest as necessary

Reinvest as necessary

Invest as fast as market dictates

Invest to increase growth rate (and improve position)

Reinvest as necessary

Minimum reinvestment or maintenance

Invest selectively Selective investment to improve position

Minimum and/or selective reinvestment

Minimum maintenance investment or disinvest

Invest (very) selectively

Selective investment

Minimum reinvestment or disinvest

Disinvest

Invest or divest Invest or divest Invest selectively or disinvest

divest

Embryonic Growth Mature Aging

Dominant

Strong

Favorable

Tenable

Weak

Nonviable

•Investment Requirements

The Life-Cycle Portfolio Matrix

Probably profitable but not necessary; Net cash borrower

Profitable; Probably net cash producer (but not necessary)

Profitable; Net cash producer

Profitable; Net cash producer

May be unprofitable; Net cash borrower

Probably profitable; Probably net cash borrower

Profitable; Net cash producer

Profitable; Net cash producer

Probably profitable; Nat cash borrower

Marginally profitable; Net cash profitable

Profitable; Net cash producer

Moderately profitable; Cash flow balance

Unprofitable; Net cash borrower

Unprofitable; Net cash borrower or cash flow balance

Minimally profitable; cash flow balance

Minimally profitable; Cash flow balance

Unprofitable; Net cash borrower

Unprofitable; Net cash borrower or cash flow balance

Unprofitable; Possibly net cash borrower or net cash producer

Unprofitable (write-off)

Embryonic Growth Mature Aging

Dominant

Strong

Favorable

Tenable

Weak

Nonviable

•Profitability and Cash Flow