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Strategic Management
2.
Get into critical countries/markets quickly to accelerate process of building a global presence Gain inside knowledge about unfamiliar markets and cultures Access valuable skills and competencies concentrated in particular geographic locations Establish a beachhead to participate in target industry Master new technologies and build new expertise faster than would be possible internally Open up expanded opportunities in target industry by combining firms capabilities with resources of partners
Activities, Costs, & Margins of Forward Channel Allies & Strategic Partners
On occasions integrating into more stages along industry value chain can add to companys differentiation capabilities by: - allowing the company to build or strengthen its core competencies - better muster key skills or strategy-critical technologies - add features that deliver greater customer value Other potential advantages of backward integration are: - sparing a company of uncertainty of being dependent on suppliers for crucial components or support services - lessening a companys vulnerability to powerful suppliers inclined to raise prices at every opportunity
To gain better access to end users and better market visibility Independent sales agents, wholesalers, retailers handle competing brands of the same product, have no allegiance to any one companys brand and tend to push what sells and earns the biggest profit. This results in: a. Frustrating a companys effort to boost sales and market share b. Giving rise to costly inventory pileups and frequent under utilization of capacity If companys product line is not broad enough to justify stand alone distributor-ship or retail stores, it leaves the option for selling directly to end users perhaps by internet, which may: Lower distribution costs Produce a relative cost advantage over rivals Enable lower selling prices to end users
Outsourcing Strategies
Concept Outsourcing involves withdrawing from certain value chain activities and relying on outsiders to supply needed products, support services, or functional activities
Suppliers Internally Performed Activities Functional Activities
Support Services
Distributors or Retailers
Employ the element of surprise as opposed to doing what rivals expect Apply resources where rivals are least able to defend themselves Be impatient with the status quo and display a strong bias for swift, decisive actions to boost a firms competitive position vis--vis rivals
Defensive Strategy
Objectives
Lessen risk of being attacked Blunt impact of any attack that occurs Influence challengers to aim attacks at other rivals
Approaches
Block avenues open to challengers Signal to challengers that vigorous retaliation is likely
Publicly announce managements strong commitment to maintain present market share Publicly commit firm to policy of matching rivals terms or prices Maintain war chest of cash reserves Make occasional counter-response to moves of weaker rivals
An attractive market positioning option for manufacturers and wholesalers that have invested heavily in building and cultivating retail dealer network Face channel conflict issues if they try to sell on line in direct competition with dealers A manufacturer that aggressively pursues online sales to end user is signaling: - a weak strategic commitment to its dealers - a willingness to cannibalize dealers sales and growth potential Such strategy is certain to anger its wholesale distributors and retail dealers who may respond by putting more effort into marketing bands of rival manufacturers that dont sell on line In sum, manufacturer may stand to lose more sales by offending its dealers than it gains from its own online sale
First-Mover Advantages
When to make a strategic move is often as crucial as what move to make First-mover advantages arise when
Pioneering helps build firms image and reputation Early commitments to new technologies, new-style components, and distribution channels can produce cost advantage Loyalty of first time buyers is high Moving first can be a pre-emptive strike
First-Mover Characteristics
Sustaining advantages of being first-mover: 1. Needs to be fast learner 2. Continue to move aggressively to capitalize on any initial pioneering advantage 3. Helps immensely if first mover has financial pockets 4. Has competencies and competitive capabilities and astute managers
First-Mover Disadvantages
Moving early can be a disadvantage (or fail to produce an advantage) when: Cost of pioneering is more than being an imitative follower and only negligible learning/experience curve benefits accrue to the leader Innovators products are primitive, not living up to buyer-expectations Demand side of the market is skeptical about the benefits of new technology/product of a first-mover Rapid technological change allows followers to leapfrog pioneers
It matters whether the race to market leadership in a particular industry is a sprint or marathon In marathons a slow mover is not unduly penalized - first mover advantages could be fleeting - there is ample time for fast-mover followers, some times even late-movers to play catch up The speed at which the pioneering innovation is likely to catch on matters as companies struggle with whether to pursue a particular emerging opportunity aggressively or cautiously There is a market penetration curve for every emerging opportunity The curve has an inflection point at which all pieces of the business model fall into place, buyer demand explodes, and the market takes off