Strategy in Aging/Declining Industry

1. Strategy in Aging/Declining Industry Amin Wibowo FEB UGM

2. 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 New Competitive Landscape Visi Strategik: Misi, Visi, Nilai-nilai Keunggulan kompetitif berbasis proteksi pasar, monopoli, produk dan sebagainya Keunggulan kompetitif berbasis kompetensi dan knowledge Agenda Strategik dan Transformasi organisasional

3. Declining Phase

4. Declining Industries 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. • Reasons for and severity of the decline • Reasons: 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

5. 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)

6. The Life-Cycle Portfolio Matrix • Wide range of strategic options • Caution: selective development • Danger: withdraw to market niche, divest or liquidate Industry Maturity (External) Embryonic Growth Aging Mature Dominant Strong Favorable Competitive Position (Internal) Tenable Weak Nonviable

7. The Life-Cycle Portfolio Matrix

8. The Life-Cycle Portfolio Matrix

9. Criteria of Competitive Position Dominant: Dominant competitors are very rare. Dominance often results from a quasimonopoly or from a strongly protected technological leadership. Strong: Not all industries have dominant or strong competitors. Strong competitors can usually follow strategies of their choice, irrespective of their competitors’ moves. Favorable: When industries are fragmented, with no competitor clearly standing out, the leaders tend to be in a favorable position. Tenable: 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. Weak: Weak competitors can be intrinsically too small to survive independently and profitably in the long term. Nonviable: 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.

10. The Life-Cycle Portfolio Matrix • Market share thrust Mature Embryonic Growth Aging Dominant Strong Favorable Tenable Weak Nonviable

11. The Life-Cycle Portfolio Matrix • Investment Requirements Mature Embryonic Growth Aging Dominant Strong Favorable Tenable Weak Nonviable

12. The Life-Cycle Portfolio Matrix • Profitability and Cash Flow Mature Embryonic Growth Aging Dominant Strong Favorable Tenable Weak Nonviable