MGF 3684

Business Strategy
Week 5
 What you need to know today
1. External Analysis Part 2 3. Kodak Case
• Industry Lifecycle & Global Product 4. Capstone Competition R1
Lifecycle Debrief
• Disruptive Technology (addressed in
Tutorial)

Concepts Case Studies MGF

3684

Concepts StratBusines
eg y s
Mgt

IT Security Vs
Take-aways Cybersecurity
What we will be learning this week?
Housekeeping
Announcements
 S E C T I O N 1

Industry Life
Cycle (ILC)
 Analysing external forces using Industry Life Cycle theory

ILC stages is based on where an industry’s demand is at (i.e.

sales and growth)
Another Perspective
ILC impacts on how competitive forces develop over time “Industry life cycle analysis is part of the fundamental
 Anticipate changes and formulate appropriate strategies analysis of a company involving the examination of
the stage an industry is in at a given point in time.
A typical industry’s lifecycle stages
There are four stages in an industry life cycle:
expansion, peak, contraction, trough. An analyst will
determine where a company sits in the cycle and use
this information to project future financial
performance and estimate forward valuations (e.g.,
forward price-earnings ratios).”

(Investopedia, 2021)
Understanding An Industry lifecycle stages

An overview of the Lifecycle Stages

 The Stake-out Stage

Drill down to Embryonic Stage:

An overview of the Lifecycle Stages • The Embryonic Stage is a period of

experimentation…
E.g. car: three vs. four wheels, steam engine
vs. combustion engine vs. electric engine;
water-cooling vs. air-cooling, various
steering and braking systems, etc.

• …until a dominant design emerges…

Dominant design … general product features,
functionality and/or production methods emerge as
industry norm.

• …thus giving way to the Growth Stage.

 The Stake-out Stage

An overview of the Lifecycle Stages

As demand growth slows, rivalry tends to intensify.

Likely to result in consolidation

Weaker firms fail or get taken over  small number of
dominant firms (plus some small niche firms) during maturity stage.

Often triggered by build-up of overcapacity

 The Stake-out Stage

Analysing the Relationship between

Industry Capacity & Industry Demand
An overview of the Lifecycle Stages

Industry overcapacity means over

estimating demand. Producing too much
over what is demanded can result in
industry shake-out as price competition
intensifies
Overcapacity Case Classic in the US Auto Industry
Number of competitors over the ILC:
US Auto Industry 1895-1960

When there are too many firms

in an industry, overcapacity is a
likely risk associated with
industry shake-outs, evident in
2 major industry down-sizing in
the early 1900s to mid 1920s
Combining Porter’s 5 Forces & Industry Life Cycle Theories

ILC identifies the stage of an industry dynamic

Porter’s 5 Forces identifies the
trend-shifts and the associated impacts on a
Structural Elements of Competition
company’s financial or market performance

Combine the 2 theories & you have an analysis method that structures a
company’s financial or market analysis of an industry trend-shifts by more
granular depth using Porter’s 5 forces
Combining Porter’s 5 Forces & Industry Life Cycle Theories
Say you want to analysis the impacts of Barriers to Entry (in terms of using technology, economies of
scale & customer loyalty strategies) AND price Rivalry in each lifecycle stage of an industry, below is
how you apply the 2 theories into a matrix format.
The information in
Stage of Industry Evolution each cell is your
Embry- Shake- analysis findings,
onic Growth out Maturity Decline which you will use in
more analysis breadth
and depth with other
Technology High to Medium
Low* Low* Low*
medium to low analysis methods, to
finally identify the
Barriers Scale Low to Medium Medium Medium external opportunities
to Entry Economies Low medium to high to high to high (and threats) you can
focus in pin-point
Customer Low to Medium Medium Medium precision, to influence
Loyalty Low medium to high to high to high your ideation of
strategy formulation
Medium later on
(Price-based) Rivalry Low Low High ?
to high

*…possibly high in terms of process technology

 Criticisms of ILC Theory Application in Strategy Planning Work

Many exceptions to the rule  generalisability? E.g.: ILC is too generalising as a

analysis tool:

• Duration of stages varies widely (e.g. CD vs. automobile) 1. It does not consider the
complexity of different
lifecycle durations
• Possibility of industry life cycle regeneration: through new technology, across industries
socio-cultural changes, innovative competitor, etc.
2. It does not consider
that industry’s lifecycle
can be extended
through the use of new
technologies, changes
in demographics, new
innovative products
introduction, etc
 Criticisms of ILC Theory Application in Strategy Planning Work

Additional Comments
ILC in analysing an Individual Firm
When ILC is used to analysis firms
individually, there are uncertainties:
Firms often find it hard to adapt to the differing stages of the
ILC, especially if fast-paced industry evolution.
1. Theory is easier said than done. Firms
may not be able to influence or adapt to
It is dangerous to assume a pre-determined pattern of
predicted lifecycle phases
industry/firm development.
2. The Lifecycle pattern is an assumption,
ILC is not destiny! Companies / entire industries sometimes
not guaranteed as an exact reality that
manage to shape ILC.
will prevail

3. ILC is recommended to be used in

scenario planning, because of (2)
 S E C T I O N 2

Global Product
Lifecycle Analysis
 International Firms complicates ILC analysis

This creates complexity of ILC analysis for international firms

If the firm operates Industry X

internationally, the firm will Industry 2
have to conduct different ILC
across the countries it Individual
operates Firm

Each firm analyses

Individual
Firm
its
financial/market
performance Industry 1
Individual potentials in its
Firm
own industry

Individual
Firm
 Using ILC analysis in global context

How does the ILC impact companies that operate in an

industry across multiple countries?
Global Product Life Cycle analyses
Industry Lifecycles by Country-
Khanna and Rivkin’s (2014) finding: Categories, rather than by individual
Industry profitability is not well correlated across country, eg
countries, because:
1. Developing Countries
1. Industry structure (the five forces) may be 2. Developed Countries
different.
2. Industry life cycle may be different. 3. Asia Pacific Region
4. Americas Region
5. Europe Region
Firms can manage the “Global Product Life Cycle”
Khanna & Rivkin (2014) Research Finding
How well correlated is industry profitability across countries?
 Global Product Life Cycle Analysis

Views the industry lifecycle stages by country-groupings:

1. Developing countries
• Pakistan, Nigeria & Bangladesh

2. Emerging countries
• China, India, Malaysia & Thailand

3. Newly industrialised countries

• Korea, Taiwan, Hong Kong & Singapore

4. Industrialised countries
• North America, Western Europe & Japan
 Global Product Life Cycle Analysis Concepts
You use Global Product Life Cycle Analysis
Product Lifecycle Stages Inside an Industry to determine which products you
introduce into a new country
A firm can analysis less matured markets
in a target country to understand which
stage is the country’s industry lifecycle.

If the target country’s ILC is embryonic,

then competition is lesser and there is
the opportunity to introduce new
products that are most maturing in your
country.

If the target country’s ILC is growth, then

you can still introduce your lesser
maturing products

If the target country’s ILC is maturity or

decline, then you are unlikely to
introduce any maturing product
 You can use the Global Product Lifecycle to analyse demand across countries

2 Against each comparison criteria, you research and consolidate your research findings
into key notes for each country-categories (or indiv country)

Demand Developing Emerging Newly Industrialized

Characteristics Countries Countries Industrialized Countries
Economies
1 Growth Low High High Low
Size Small Small to High Small to High High
Segmentation - Dominant - Fast growing - Established - Established
You specific DEMAND subsistence middle class middle class middle class
drivers as your analysis aka sector - Large Low - Increased - Diverse and
comparison criteria - Large low end End segment Diversity of sophisticated
segment segments segmentation
Customer Value - Price - Price - Product - Product
Curve - Availability - Distribution functionality functionality
- Emerging - Performances - Performances
Advertising - Services - Services
Distribution - Push logistics - Push logistics - Pull - Diversity
- Beginning of - Beginning of - Mass Retail
pull mass retailing important
Competition - Regulated - Beginning of - Deregulated - Deregulated
de-regulation - Active - Active
- New entrants - Diverse - Diverse
You analyse the tabulated info in identifying which countries are profitable and
3 preliminary insights about the nature of strategies required
 Question
Can the global product life cycle
alleviate (improve) the impact of
industry life cycle?
Other Countries’ Industry
Lifecycles: Which stage is
each country?
Firm’s Own Country Lifecycle:
Which stage is your firm?
Which stage is the target country @?

Answer will determine whether to &

which of your domestic products to
internationalise to that target country

The KODAK case will give insights of how this Global PLC was applied and the risks involved.
 S E C T I O N 3

Technology
Disruption
 Disruptive Technology

Bower & Christensen use a broad-based

definition of “technology” (subsequently:
disruptive innovation, disruptive change) Please read this
Week 5 Reading
Disruptive technology is a vexatious and apply some
phenomenon. of its concepts
in your Kodak
Failure in such circumstances not a sign of Case Analysis
technological complacency.

More Discussions in Tutorial

Next Week’s Lesson

Title