Chapter Eleven Strategies for Mature and Declining Markets

Chapter Eleven Strategies for Mature and Declining Markets Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Exhibit 11. 1 Common Strategic Traps During Market Shakeouts Failure to anticipate transition from growth to maturity n No clear competitive advantage n Assumption that an early advantage will insulate the firm from price or service competition n Sacrificing market share in favor of short-run profit n Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Some Advice for Marketers in Mature Markets • Don’t give up -- think strategically. Most of the world’s leading companies and brands serve mature markets. • A key imperative: maintain the satisfaction and loyalty of existing customers • Find avenues for market growth: someone will, so it might as well be you! Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Some Advice for Marketers in Declining Markets • Again, don’t give up -- think strategically. Money can be made in declining markets, depending on market conditions. • Others’ desire to exit can be your chance to grow, if you believe the market will survive. Look for opportunities to acquire your competitors for little or no cash. This can improve industry attractiveness. Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Exhibit 11. 12 Factors Affecting the Attractiveness of Declining Market Environments (1 of 3) Environmental Attractiveness Conditions of demand Hospitable Speed of decline Certainty of decline Pockets of enduring demand Product differentiation Price stability Inhospitable Very slow Rapid or erratic 100% certain, predictable Great uncertainty, erratic patterns Several or major ones No niches Brand loyalty Stable price premiums attainable Commoditylike products Very unstable, pricing below costs Source: Kathryn Rudie Harrigan and Michael E. Porter, “End-Game Strategies for Declining Industries, ” Harvard Business Review, July-August 1983, p. 117. Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Exhibit 11. 12 Factors Affecting the Attractiveness of Declining Market Environments (2 of 3) Environmental Attractiveness Exit barriers Reinvestment requirements Excess capacity Asset age Hospitable None Little Mostly old assets Resale markets for assets Easy to convert or sell Shared facilities Few, free-standing plants Little None Vertical integration Single-product competitors Inhospitable High, often mandatory and inv. cap. assets Substantial Sizable new assets and old ones not retired No markets available, substantial costs to retire Substantial and interconnected with imp. bus. Substantial Serveral large companies Source: Kathryn Rudie Harrigan and Michael E. Porter, “End-Game Strategies for Declining Industries, ” Harvard Business Review, July-August 1983, p. 117. Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Exhibit 11. 12 Factors Affecting the Attractiveness of Declining Market Environments (3 of 3) Environmental Attractiveness Rivalry determinants Customer industries Customer switching costs Diseconomies of scale Dissimilar strategic groups Hospitable Fragmented, weak High Inhospitable Strong bargaining power Minimal None Few Substantial penalty Several in same target markets Source: Kathryn Rudie Harrigan and Michael E. Porter, “End-Game Strategies for Declining Industries, ” Harvard Business Review, July-August 1983, p. 117. Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Chapter Twelve Marketing Strategies for the New Economy Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Seven Key Elements Characterize New. Economy Technologies: Are They Advantages or Disadvantages? • • Syndication of information Increasing returns to scale of networks Personalization and customization Disintermediation Global reach 24 x 7 access Instantaneous delivery Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Deciding What New-Economy Tools to Apply Can we digitize? Can we do so first, and/or be proprietary? How valuable and time-critical is what kind of information? Can we reach and build relationships with our target market? Measurably effective? Measurably efficient? Customer Insight Product promotion and brand building Transaction Product delivery Customer support and service Product return or disposal Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.