MATCHING STRATEGY TO

INDUSTRY AND COMPANY

SITUATIONS 7

Before making a strategic choice managers of a company should tailor

strategies to the unique situations prevailing in the industry and the
company itself. Such tailoring or matching would help managers
customize the company’s strategy. Matching strategy to industry-specific
situations and company-specific situations also provides insights about
strategic choice – which strategy options are well suited (or better
suited) to certain industry conditions and which are better suited to
company situations. Managers finally custom-tailor the chosen strategic
approach to fit the industry situations and company’s capabilities. In this
unit we examine the issue of strategy-matching to industry situations first
and then we explore how strategy can be matched to company situations.
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Lesson-1: Matching Strategy to Industry Situations-I:

Emerging and Maturing Industries
Learning Objectives:
After studying this lesson, you should be able to:

Understand the types of industry environment.

Define emerging industry and develop appropriate strategies for
competing in an emerging industry.

Explain the concept of maturing industry and determine what types
of strategies would be suitable for operating business successfully in
the maturing industry.
Industry Situations: An Introduction
The best strategy always wins. A firm does the same thing in the
marketplace as what the army do in the battle-field. The marketplace is
similar to the war-field for a business organization. Doing business in a
competitive market is just like a war in the battlefield. If the army
commander fails to formulate and implement war-strategy most suitable
to the particular situations in the battlefield, the army is doomed to
defeat. Similarly, if the managers of a company are unable to develop
strategy appropriate to market situations, they will survive simply to
lament for their failures. That is why, after identification of generic
strategies, managers need to develop suitable strategies reflecting the
company’s particular circumstances. In the previous two units we have
examined strategies commonly undertaken by various firms. This unit
examines the issue of matching strategies in different industry
situations/industry environment. Simply speaking, this unit will provide
the readers with insights about customization of a company’s strategy on
the basis of prevailing conditions in the industry. The discussion in this
unit will equip the readers to answer the following two questions:
• What basic type of industry environment does the company operate in?
• What strategic options are usually best suited to this generic type of
environment?
Types of Industry Situations
Every company operates its business in an industry. An industry consists
of all units producing similar products and competing for the same
buyers. Industry has been defined by Thompson and Strickland as “a
group of firms whose products have so many of the same attributes that
they compete for the same buyers.”
An industry may be viewed, based on its nature, as:

1. Emerging Industry
2. Maturing Industry
3. Declining/Stagnant Industry
4. Fragmented Industry

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These are the industry situations. From the very name it appears that
industry situations widely differ. Every situation has its own unique
character. We now examine each of them to appreciate each of their
implications for strategy-making.
Emerging Industry and Strategies: Introduction
It is very challenging to operate business firms in an emerging industry.
Before we proceed toward identifying the strategic challenges in an
emerging industry, let us define it. And, then we would explore the
strategy-making challenges in the emerging industry, to be followed by
identification of possible strategies to pursue in emerging industry for
success.
Emerging Industry Defined
An emerging industry is an industry which is at its early stage of
An emerging industry
is an industry which is
development. In fact, it is an ‘infant industry.’ An emerging industry is
at its early stage of characterized by a few number of competitors, high growth potential,
development. uncertainty of demand, dominance of proprietary technology, wide
differences in product quality, low entry barriers, difficulty in having
ample supply of raw materials, and so on. In Bangladesh, examples of
emerging industry include software, broadband Internet, electronic
banking, distance education, CD-based book publications, flower
farming, fruits processing, and ‘spirulina’ (a herbal medicinal food
product invented by BCSIR).
Strategy-Making Challenges in Emerging Industry
Michael Porter has pointed out several strategy-making challenges that
manager’s face while competing in emerging industries. These are as
follows:
1. Doubts exist about the functioning, growth and size of the market.
Managers cannot make useful projections of sales and profits due
lack of historical data. Thus, they mostly depend on guesswork.
2. Proprietary technology dominates the industry. The owners of the
technology usually do not allow others to use it. Success mostly
depends on patents and unique technical expertise.
3. Uncertainty prevails regarding the product attributes that may win
customer acceptance. Uniformity is difficult to find in product
quality and product performance. Therefore, competition in the
industry centers around each company’s strategic approach to
technology, product design and marketing.
4. Entry into the emerging industry is relatively easy. As a result,
resourceful and opportunity-seeking companies may enter into the
industry if there is a high growth prospect.
5. In an emerging industry all buyers are first-time users of products.
Therefore, the marketing managers must try to induce initial
purchase.

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6. In an emerging industry the products are first-generation products

(absolutely new). Thus, many potential customers defer their
purchase until the quality improves.
7. Because of its immature stage, the emerging industry most often fails
to attract the suppliers of raw materials to gear up their production.
This creates hurdles in getting regular and adequate supply of raw
materials.

Possible Strategies to Pursue in Emerging Industries

Several strategic options are available to the entrepreneurs in the
emerging industry:
1. Low-cost strategy is viable to discourage potential competitors to
enter into the industry. Even company can use price-cuts to attract
the price-sensitive buyers.
2. Differentiation strategies may be adopted based on technological or
product superiority.
3. A company may adopt cooperative strategy (strategic alliance)
through forming partnership with key suppliers of materials and
components.
4. A company may form strategic alliance with other companies having
technological expertise to outcompete strong competitors.
5. Acquisition strategy may be followed to acquire special skills or
capabilities so that the company can weaken the competitors based
on technological superiority.
6. A company may enter into a joint venture agreement (if there are
financial constraints) to cover greater geographical areas or pursue
new customer groups.

Maturing Industry and Strategies: Introduction

Managers should be able to understand the meaning and nature of a
maturing industry. A knowledge about the maturing industry would help
them identify the fundamental changes that have occurred in the market
environment that would, in turn, facilitate them to adopt appropriate
strategic options in such an industry. Keeping this background in view,
following issues concerning a maturing industry would be covered in this
section:
• Meaning and nature of maturing industry
• Market maturity and fundamental changes in the maturing industry’s
competitive environment
• Strategic options in a maturing industry

Meaning and Nature of Maturing Industry

As an industry grows rapidly, it reaches a point where further growth
slackens significantly. The growth in the industry is halted due to
saturation in the market demand. When an industry is in such a situation,

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A maturing industry is it is called a maturing industry. According to Thompson and Strickland,

an industry that is a maturing industry is an industry that is moving from rapid growth to
moving from rapid significantly lower growth. According to their views, in a maturing
growth to significan- industry at least three issues become dominant:
tly lower growth.
(i) nearly all potential buyers are already users of the industry’s
products;
(ii) market demand consists mainly of replacement sales to existing
users; and
(iii) growth in the industry depends on the industry’s ability to attract
new buyers and motivate existing buyers to increase their use of
products.
Market Maturity and Fundamental Changes in the
Maturing Industry’s Competitive environment
A number of fundamental changes occur in a maturing industry’s
competitive environment due to market maturity. Michael Porter
identified these changes as follows:1
1. Growth in buyer demand slows down. This generates head-to-head
competition for market share
2. Buyers become more sophisticated. They start hard bargaining on
repeat purchases.
3. Competition produces greater emphasis on cost and service. All
competitors try to reduce costs and improve services to customers.
4. The industry experiences a slowdown in capacity expansion because
of slow growth.
5. It becomes difficult for the producers to create new product
innovations and eventually they may not be able to sustain buyer
excitement.
6. International competition increases because growth-minded
companies try to find out ways to enter into foreign markets.
7. Industry profitability falls temporarily or permanently. This happens
due to slower growth, increased competition, and occasional periods
of overcapacity.
8. Competition becomes very stiff. As a result of this, competitors feel
the urge to go for merger or acquisitions rather than going for
competition against each other. The resultant outcome is that the
weak and inefficient firms are driven out of the industry.
Strategic Options in a Maturing Industry
A firm operating in a maturing industry needs to adopt appropriate
strategic moves to survive in the industry. Before it explores possible
strategic moves, it must understand the dynamics of the industry
environment. The maturing-industry dynamics include such elements as
head-to-head competition among the competitors, strong bargaining by
customers on product prices and attributes, a need for best combination
of price and service, problem in capacity expansion, a hard struggle for

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further product innovation, increased international competition, falling

profitability and industry consolidation due to merger and acquisition. A firm in a maturing
industry may adopt
Keeping all these in view, a firm in a maturing industry may adopt any of strategic moves to
the following strategic moves to strengthen its competitive position:2 strengthen its
competitive position.
1. Pruning the product line: A firm hardly has competitive
advantage in all areas of activities and in everything. Thus, it is not
a business-wisdom to continue with such products in which the
firm does not enjoy competitive advantage. This necessitates
pruning (eliminating) unprofitable or very-less-profitable product-
items from the product line. Pruning marginal products results in
cost savings. It also allows management give more concentration
on the profitable products.
2. Greater emphasis on value chain innovation: In the industry-
value-chain the major parties involved are suppliers, producers,
and distributors. Tripartite collaboration among these parties can
produce excellent business results. In order to streamline the
various value chain activities, they can collaborate on the use of
Internet technology. Their collaboration on the implementation of
cost-saving innovations can also lead to improving market
competitiveness. Overall, streamlining the industry-value-chain
can have positive impact on costs, product and service quality
capability to produce customized product versions and production
cycle.
3. Cost reduction: A firm may pursue a strategy of reducing costs in
all activities of the firm. Driving down unit costs of products is an
‘absolute must’ in a maturing industry. Costs can be reduced
through procuring raw materials and components at a cheaper
price, eliminating low-value activities from the firm’s value chain,
reorganizing/ reengineering business processes within the firm,
dropping some of the intermediaries from the marketing channel,
better supply chain management, using computerized systems
instead of manual systems whenever feasible and so on.
4. Strengthening resource base and competitive capabilities:
Obviously, a mature market is full of stiffening competitive
pressures. In order to combat these pressures, a firm needs to build
new capabilities as well as strengthen its resource base. The firm
can do it by adding new competencies making the competencies
harder to initiate (by rivals), and making the firm’s core
competencies more adaptable to customers’ requirements.
5. Increasing sales to existing customers: In a mature market it is
difficult to increase the number of customers who are already
customers of competing brands. So, strategy should be geared
towards retaining the present customers and persuading them to
increase their purchases. It is better for a firm to increase the
average sales per existing customer than trying to ‘snatch away’
customers of the competitors. For example, a restaurant may
increase its average sales to its customers by adding CD/VCD

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Corner, cybercafe, mobile prepaid card counter, and even a book

corner.
6. Acquisition strategy: If available, a firm in a mature market can
acquire weak firms (usually managerially poor) to expand market
share. Acquisition may also provide a firm greater opportunities
for greater economies of scale in production and marketing.
7. Multinational strategy: A successful firm may opt for entering
into foreign markets if the domestic market matures. However,
before deciding for going international, a firm must look for those
international markets where there is a potential for growth in the
future. As examples, Indian companies have a scope to expand into
such emerging markets as Bangladesh, Nepal, Sri Lanka,
Malaysia, Myanmar and Mauritius. Bangladeshi companies can
expand into Nepal, Bhutan and the Middle-East countries and in
some African countries. Even though the US market for soft drink
in mature, Coca-Cola has remained a growth company by upping
its efforts to penetrate foreign markets where soft-drink sales are
expanding rapidly.3

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Review Questions
1. What are the different types of industry environment or situations?
Describe their main features briefly.
2. What do you mean by an emerging industry? Discuss the strategy-
making challenges in the emerging industry?
3. What are the possible strategies that a company may pursue in an
emerging industry?
4. Discuss the meaning and nature of a maturing industry.
5. What are the fundamental changes that occur in a maturing
industry’s competitive environment due to market maturity?
6. Discuss the strategic options for a manufacturing company in a
maturing industry.

Application Discussion Questions

1. Find out an emerging industry in our country and then study its
notable market conditions. Explain why you think that it is an
emerging industry.
2. Study the market situations for different consumer goods industry in
our country. Make a list of the maturing industries based on your
information.

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Lesson-2: Matching Strategy to Industry Situations-II:

Declining and Fragmented Industries
Learning Objectives:
After studying this lesson, you should be able to:

Clarify the concept of declining industry.

Explain the situations that prevail in a declining industry.

Develop strategic options in a declining industry.

Define fragmented industry and discuss the possible strategic options
in the fragmented industry.
Introduction
Out of four types of industry situations, we have discussed about first
two types of situations in the previous lesson such as emerging industry
and maturing industry situations. The other two situations will be dealt
with in this lesson. These two industry situations are (a) declining
industry situation and (b) fragmented industry situation.
Declining Industry and Strategies
Meaning of Declining Industry
An industry is said to be a declining industry where demand for products
In declining industry, of the industry grows more slowly than the economy-wide average. In
the demand continues declining industry, the demand continues to go down. Examples of
to go down. declining industry in Bangladesh include pottery industry, jute industry,
textiles industry and silk industry.
Situations That Prevail in a Declining Industry
In a declining industry growth in demand and profitability goes down
In a declining indus-
try growth in demand continuously. There are many reasons for continuous declining tendency
and profitability goes in the demand for products. Major reasons are changes in the tastes and
down continuously. preferences of customers, emergence of sophisticated technology in the
industry that has ushered in new uses of products, or customers have
become tired of using the same types of products for a long period of
time, or substitute products have entered into the market with high
success. Profitability goes down mainly due to slackened demand for
products and very high competition among the producers.
Strategic Options in a Declining Industry
In a declining industry several strategic options are available to the
managers. We discuss them below:
Harvesting Strategy:
A firm in a declining industry may choose to employ harvesting strategy
to earn maximum possible amount of cash from the business. This
strategy involves sacrificing market position in return for bigger near-
term cash flows or current profitability. When a firm adopts harvesting
strategy, it cuts down the budget substantially, reinvestment is rarely
made, new equipments are not purchased rather old ones are used as long
as possible, and priority is given on the extensive use of existing
facilities of the firm. To obtain greater cash flows, advertising expenses

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are cut down, quality is reduced carefully and less-essential customer

services are curtailed.
Divestiture Strategy:
Another strategic option to a firm in a declining industry is to sell it out.
The firm may divest or sell off a portion of its assets like equipment,
land, stock of materials, etc. the cash proceeds can be used for improving
the core business. Or, the firm may dispose off the business entirely.
Niche or Focus Strategy:
Any industry, whether emerging or maturing or declining, may have
several niches (small segment of a market which remains generally
unserved or inadequately served by competitors.). A firm in declining
industry can look for niche markets where it can operate business
profitably. Some of these niche markets may be growing in spite of
stagnation in the industry as a whole.
Differentiation Strategy:
A firm can place more emphasis on differentiation of products based on
quality improvement and innovation. Differentiation can rejuvenate
demand through alluring customers to the firm’s products. Innovation-
based differentiation is also helpful for a firm in a stagnant/declining
industry to survive easy imitation by the competitors.
Low-Cost Strategy:
A firm may also follow low-cost strategy by driving costs down. If the
costs can be reduced on a continuous basis in an innovative way, it can
help the firm improve the firm’s profit margin and return-on-investment.
Cost reductions may take form of dropping less-essential business-
activities, outsourcing some functions to outside companies who are able
to perform those activities cheaply but in a better way, redesigning
internal business processes, consolidating unutilized production facilities,
closing down high-cost retail outlets, and pruning marginal products.4
Fragmented Industry and Strategies
A fragmented industry is related to an industry environment quite
different from the other three types of industry environment. Thus, it
cannot be included in the ‘industry life cycle’ that includes emerging,
maturing and declining industry environments. Because of its
uniqueness, we will discuss in this lesson about the meaning of
fragmented industry including its situational factors and then discussions
will be devoted to the possible strategic options in a fragmented industry.
Fragmented Industry Defined
A fragmented industry is one where the industrial or service units remain
scattered all over the country or over a particular geographical region and
none of the units has a substantial market share. As Thompson and
Strickland observed: “A number of industries are populated by hundreds,
even thousands, of small land medium-sized companies, many privately
held and none with a substantial share of total industry sales.” The
notable features of a fragmented industry include:
(i) Absence of market leaders;

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(ii) None of the units has king-sized market share;

(iii) No single unit has widespread buyer recognition.
Examples of fragmented industry are many. Let us cite some of them –
health clinics, restaurants, hotels, automobile repairing, furniture-
making, garments, computer software development, boutiques, pottery,
real estate, etc.
Possible Strategic Options in a Fragmented Industry
The type of strategic options that a firm can employ would vary
The type of strategic
options that a firm
depending on the extent of competition. Before finalizing on the options,
can employ would a firm should take into consideration the basic characteristic features of
vary depending on the fragmented industry such as low-entry barriers, competition from
extent of competition. substitutes, weak bargaining power of firms due to their relatively small
size, and the like. Such an industry environment may call for niche
strategy rather than mass-market strategy. Differentiation strategy may
also be suitable for firms. We can summarize the strategy options of a
firm in a fragmented industry as follows:
 Focus/market niche strategy:
For a firm in a fragmented industry niche strategy to operate business in
a well-defined small segment of a big market may be better suited. This
is expected to offer better competitive advantage.
A firm may either focus on one product category or it may focus on
Product-category- specific types of customers. Product-category-based niche strategy
based niche strategy enables a firm to specialize by product type. Thus, it can concentrate on
enables a firm to
specialize by product
the production or distribution of specific product. When a firm adopts a
type. niche strategy based on customer type, the firm can specifically cater to
the needs of specific types of customers who want products with unique
need-satisfying features. For example, a software firm may specialize on
the development of only Accounting Information Systems or Retail
Software. 5M InfoTech Limited is a firm of this type. It specializes on
the production of hospital/clinic management and hotel management.
Similarly, a hotel may focus on only foreign tourists or low-cost-lover
customers.
 Focusing on Limited Geographical Area:
A firm may concentrate its operation within a particular geographical
area. Supermarkets, convenience stores, or repair shops often undertake
this strategy.
 Low-Cost Strategy:
Many supermarkets and local stationery/grocery stores adopt low-cost
strategy very successfully. They charge low prices for their products and
thus are ale to attract customers. This strategy is better suited when price
competition is high.
 Operating Standardized Outlets:
Some firms in a fragmented industry follow the strategy of operating
standardized outlets in different locations. However, these outlets (or
operational shops/stores/sales centers) must be operated very efficiently.
This strategy is successfully pursued by two international giant fast-food
chains - Pizza Hut and Kentucky Fried Chicken (KFC).

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Review Questions
1. Define a declining industry. What are the distinctive situations that
prevail in a declining industry?
2. Discuss the strategic options that you can undertake in your
company.
3. What do you mean by a fragmented industry? What are the notable
features of fragmented industry?
4. If your business is being operated in a fragmented industry, what
strategies would you adopt for your survival?

Application Discussion Questions

1. In Bangladesh, jute industry is said to be a declining industry. Why?
Give your arguments.
2. Based on the knowledge that you have gained from this lesson,
identify ten business-units that can be classified as operating units of
fragmented industry.

Lesson-19

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Lesson-3: Matching Strategy to Company Situations

Learning Objectives:
After studying this lesson, you should be able to:
• Learn why and how strategy needs be matched to the situations
prevailing in the company.
• Define an industry or market leader
• Identify the strategic options for the industry leaders.
• Understand the meaning of runner-up companies and the strategic
approaches for the runner-up companies.
• Formulate appropriate strategies for the companies which are
competitively weak or plagued by crisis conditions.
Introduction
We have discussed how companies need to match strategy to industry
situations. This lesson examines how strategy has to be matched to a
Matching of strategy company’s own strengths, weaknesses, opportunities, threats,
to industry situations
and company
competitive capabilities and market position. Matching of strategy to
situations helps industry situations and company situations helps managers customize its
managers customize strategy. We will look at a manager’s strategy-making task when the
its strategy. company is the industry leader, or it is a runner-up company, or it is a
weak company.
Matching Strategy When a Company is an
Industry Leader/Market Leader
Industry leaders are those firms which enjoy larger market share than the
average industry players. Some firms in an industry are simply leaders
because they are stronger than average competitors but they cannot
dominate the industry. Some firms are dominant leaders because of their
dominating competitive positions in the industry. In our country, a few
strong leaders are:
Products Name of Industry Leaders
Mineral water Partex Group
Spices Square
Electric cables Eastern Cables Ltd. And BRB
Mobile phone Grameen Phone and BanglaLink
Tissue paper Bashundhara
Islamic banking Islami Bank Bangladesh Limited
Large-scale retailing Agora
Leasing business IDLC
Some global industry leaders are Coca-Cola (in soft drink), Gillette (in
razor blades), Microsoft (in computer software), Sony (in television set),
Toyota (in motor car), P&G (in detergent powder), JVC (in video
camera), and Fuji (in camera film).

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Strategy Options for Industry Leaders

The main strategic intent of the industry leaders is focused on defending
the existing market position as well as steadily strengthening the
position. In order to retain the leadership position in the industry, the
leaders might follow several strategic approaches.5
(a) Offensive Strategy: A leader can follow offensive strategy to stay a
Offensive strategists
step ahead in the market. Offensive strategists are always proactive. are always proactive.
They undertake competitive action earlier than the competitors.
Thus, they force the competitors to become reactive. Offensive
strategies usually include such actions as:
i. Relentless pursuit of continuous improvement of products;
ii. Continuous innovation for introducing new or better products;
iii. Adding unique features in the products;
iv. Improving customer service;
v. Reducing operating costs;
vi. Devising ways to attract the customers or runner-up firms;
vii. Undertaking initiatives to expand overall demand in the industry
through producing new families of products, discovering new
uses of products, attracting new users and promoting more
frequent use.
(b) Defensive Strategy: Defensive strategy is suitable in situations
where a company wishes to make most profit out of its present Defensive strategy is
market position. Such a strategy requires enough capital to spend for suitable in situations
where a company
strategic actions in order to protect the company’s ability to compete wishes to make most
in the market. The major objectives of defensive strategy include profit out of its
protecting the present market share, strengthening the market present market
position and protecting the company’s existing competitive position.
advantages.
Defensive strategy entails a number of defensive actions:
a) Increasing expenditures for marketing promotion and better
customer service to outcompete the competitors.
b) Introducing more product versions (e.g., toothpaste may have
three versions: family size, small size and mini-pack).
c) Adding customized services that have personal touch of the
provider.
d) Charging reasonable prices.
e) Making product quality attractive to customers.
f) Adding new production capacity ahead of competitors to
discourage than from entering into market with additional
capacity.
g) Making enough investments for technology development.
h) Building a strong relationship in the supply chain (especially
with suppliers and dealers/distributors).

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(c) Muscle-flexing Strategy: An industry leader may undertake a

strategy of muscling smaller competitors and customers to bolster its
own competitive position. Dominant market leaders may adopt the
following approaches:
i. Respond to price cuts of small competitors very quickly.
ii. Undertake aggressive marketing campaigns to halt competitors’
moves to expand market share.
iii. Offer better facilities to big customers (large-quantity buyers).
iv. Dissuade distributors/dealers from selling competitors’ products.
v. Employ the successful executives of the competing companies by
offering attractive benefits.
vi. Create pressure on present big customers not to use the products of
the competitors (Microsoft Corporation did so with its major
customers like IBM and Gateway). Microsoft asked these two
companies not to use competitors’ products on their PCs.
vii. Offer special discounts to certain customers (or grant preferred
treatment) if they use only the company’s products (not the
products of rivals).
However, the market leaders need to be highly ethical in using the above
tactics. If they use bullying tactics to routinely pressure customers, crush
competitors and throttle competition, they will simply alienate customers
and arouse adverse public opinion.
Matching Strategy in Runner–up Companies
The position of runner-up firms is next to the market leaders in the
The position of marketplace. Some of these firms are up-and-coming market-challengers.
runner-up firms is
next to the market Some are market-nichers. And, some are perennial runners-up. The
leaders in the market- challengers use offensive strategies to expand market share. The
marketplace. market-nichers or market-focusers concentrate their operations in limited
market segments. The perennial runners-up are usually satisfied with the
trend-setting moves of the market leaders and follow them without any
challenge.
The possible strategic approaches for the runner-up firms are as follows:
(a) Offensive Strategy: This strategy is useful to a market-challenger
runner-up firm. The firm wishing to build a competitive advantage
may adopt offensive strategy through:
a. Innovating products;
b. Building a good brand image;
c. Introducing better products ahead of the competitors;
d. Forming strategic alliances with the key intermediaries;
e. Establishing a long-term business relationship with the marketers
of complimentary products; and
f. Devising ways to reduce costs.

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(b) Growth Strategy: Another viable strategy for a market-challenger

is to follow the strategy of growing through acquiring other similar
firms. This helps expand the market share.
(c) Market-Niche Strategy or Focus Strategy: A runner-up firm may
look for a vacant-niche market. The niche market that has been
bypassed or neglected by the market leaders is suitable for the
runner-up firms. However, in order to be viable, the niche should
have enough member of customers to be profitable, reasonable
growth potential, difficult for large firms to serve (for this or that
reason), and appropriate to the resources of the firm.
(d) Specialist Focus Strategy: A runner-up firm can employ specialist
focus strategy to build competitive advantage through leadership in a
specific area or product or technology. For example, a firm may
concentrate on producing only glass sheets for window. Another
form may specialize in ‘transparent ball pen’.
(e) Content-Follower Strategy: The firms that follow the paths of
market leaders are content-followers. They simply imitate what the
leaders do. They don’t challenge the leaders rather follow them.
They don’t imitate any trend-setting moves. They react and respond
to the leaders’ actions. They are defensive, never offensive. In Dhaka
city, the homemade bread marketers are generally content-followers.
(f) Distinctive Image Strategy: Runner-up firms may opt for such
strategies that would make them distinctive in the market. They can
be distinctive for lower price, high quality with good price,
extraordinary customer service, unusually creative advertising, etc.
Matching Strategy in Weak Firms
The firms that are competitively weak or plagued by crisis conditions
may follow any of the following strategies:
(a) Turnaround Strategy: Weak firms may launch an offensive
turnaround strategy (based on low cost or unique differentiation) to Before formulating
improve their market position. Before formulating this strategy, turnaround strategy
managers need to
managers need to identify the causes of poor performance of the identify the causes of
company. There can be a wide array of causes such as high costs, poor performance of
resources constraints, inefficiency and ineffectiveness of the company.
managers/employees, debt-burden, weak economy of the country,
Inappropriately implemented strategies in the past or natural disaster.
After proper identification of the causes, if it appears that the
company is worth rescuing, then the company can go for turnaround
strategy to get the business out of crisis. Actions may include;
revising existing strategy, devising ways for cost reduction, or
selling some assets for cash to save the remaining part of the
business. Some crisis-ridden companies may require a combination
of these efforts.
(b) Defensive Strategy: Some weak companies use ‘fortify and defend’
strategy to protect their current market positions. The objectives of
this strategy are to keep the sales volume at current level, maintain

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the present market share, sustain the existing profitability and protect
the current competitive position.
(c) Liquidation Strategy: When turnaround or defensive strategy is
not pragmatic or due to reasons beyond the control of the
management, it is better to go for closing the business and liquidate
the assets. Such a strategy is the last resort when hopeless situations
prevail in the company.
(d) End-Game Strategy: Weak companies also can employ end-game
strategies. Such strategies entail undertaking actions to maximize
short-term cash flows and gradually to exit the market. An end-game
strategy is suitable under certain situation:

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Review Questions
1. Make a list of the possible strategies that are suitable for a market
leader company. Explain their use in the real-world situations.
2. What kind of companies can be called runner-up companies? What
strategies are suitable for such companies?
3. If a company is plagued by crisis conditions, what strategic options
are open to it? Give your answer with examples.

Application Discussion Questions

1. Bashundhara is the market leader in the production and marketing of
tissue paper. What have made it the market leader?
2. In the tissue industry which of the companies are the runner-up?
Why do you think so? Explain.

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Lesson-4: Commandments for Formulating Winning

Strategies and Strategic Action Plan
Learning Objectives:
After studying this lesson, you should be able to:

Suggest guiding principles for strategy formulation in a single-
business company.

Prepare strategic action plan for a company on the basis of your
knowledge gained from the study of all the previous lessons.
Introduction
On the basis of your understanding of the issues discussed in the
previous lessons, you should now be able formulate successful strategies
for your business firms. In this lesson we would first give you some
guidelines that you may follow for crafting successful business
strategies. Then we would provide a sample format for designing
strategic action plan.
Ten Commandments for Formulating Winning Business Strategies
Formulating a winning strategy is not an easy task. If not carefully
The strategy-
crafted, strategies may turn out to be highly disastrous. That is why, the
makers/strategists strategy-makers/strategists should follow a number of good strategy-
should follow a making principles. Thompson and Strickland suggested 10 principles
number of good (they call them commandments) based on the lessons learned from the
strategy-making strategic successes and mistakes of companies.6 These principles or
principles.
commandments serve as useful guides for developing sound strategies. A
brief description is given below of these commandments.
1. Placing top priority on long-term competitive advantage: If strategy
can strengthen a company’s long-term competitiveness, it would
protect the company’s long-term profitability.
2. Being proactive: A company needs to be proactive and prompt in
responding to changes in market conditions and other dynamic issues
strategy should be geared to meeting ‘unmet’ customer need,
providing better products as per wishes of customers, adopting latest
technology, etc. they should also be prompt in dealing with the new
initiatives of competitors.
3. Investing in creating a sustainable competitive advantage: A
company may need to adopt aggressive offensive strategy to create
competitive advantage as well as aggressive defensive strategy to
protect it.
4. Avoiding an overly ambitious strategic plan: Such a plan overtaxes
the company’s resources and capabilities.
5. Adopting strategy capable of yielding good results in the worst of
times: A company’s strategy works well if it is formulated after
considering the anticipated unfavorable market situations.
6. Carefully taking into cognizance the reactions and commitment of
competitors: Strategy-makers must not underestimate the

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competitors. In response to a company’s strategy, the competitors

may launch tough programs if their interests are threatened.
7. Focusing on competitors’ weaknesses: A strategy-maker, to craft a
successful strategy, should attack the weaknesses of competitors
rather than strengths. If attacked, resourceful competitors might
retaliate very strongly, through price-cuts or other measures.
8. Pursuing differentiation strategy meaningfully: A company should
adopt a differentiation strategy only when it can create a meaningful
gap in product features. Customers may reject differentiation strategy
if the differences are negligible.
9. Avoiding a strategy of middle course: Middle-course strategy (or we
can say, compromise strategy) does not usually work well. It often
fails to create competitive advantage. Compromise strategy may lead
to ‘average costs, average differentiation, an average image and
reputation, and little prospect of industry leadership.’
10. Adopting low-cost strategy when cost advantage is prominent: A
company should not opt for cutting down prices unless it can
establish a sustainable cost advantage.
Strategic Action Plan for a Single-Business Enterprise
On the basis of our knowledge that we have gained from the previous
chapters, we should now be able to develop a strategic action plan for a
company. A comprehensive strategic action plan should ideally contain
such items as company’s vision and mission strategic objectives,
financial objectives, business strategy (i.e., enterprise strategy),
functional strategies for various organizational functions, and possible
actions to improve the predominance of the company.
Figure 7.1 presents a suggested format for strategic action plan for a
single-business enterprise. It may be noted that strategic action plans for
a diversified company having several lines of business are much more
complicated.
# Items # Items
1 Company Vision 5 Functional Strategies:
2 Company Mission  Marketing
3 Company Objectives:  Production
3A Strategic Objectives:  Human Resources
 Long-Term objectives  Finance
 Short-Term Objectives  Research & Development
3B Financial Objectives:  Others
 Long-Term objectives 6 Recommended Actions to
 Short-Term Objectives Improve Performance:
4 Overall Business Strategies  Long-Term Actions
 Immediate Actions
Figure 7.1: Format of a Strategic Action Plan for a Manufacturing Company
Thus far we have discussed about strategy formulation in the context of a
single-business enterprise. The next Part addresses the issue of strategy
formulation in diversified companies.

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Review Questions
1. Thompson and Strickland have suggested ten commandments that
serve as useful guides for developing sound strategies. Explain these
commandments briefly.
2. Prepare a strategic action plan for a single-business company.

Application Discussion Questions

1. The owner of a local dairy firm has approached you and requested
you to help him in the preparation of a strategic action plan for firm.
How would you help him keeping in view the onslaught of ‘bird flu’
in the neighboring countries.

NOTES
1. Michael Porter, Competitive Strategy (New York: Free Press, 1980),
pp. 238-40.
2. On the basis of his research results, Porter suggested seven possible
strategic options that a firm may consider to stay competitive in a
maturing industry. Ibid, pp. 241-46.
3. Thomson and Strickland, op cit., p. 258.
4. For details, see R. G. Hammerers and S.B. Silk, “How to Compete in
Stagnant industries,” Harvard Business Review, vol. 57, No. 5
(September-October 1979), p. 161-165.
5. Thompson and Strickland, op.cit. pp. 265-67.

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