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Strategic Management
, Sixth Edition
Charles W. L. Hill, University of Washington
Gareth R. Jones, Texas A&M University
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Chapter Summaries
Chapter 6: Competitive Strategy and the Industry Environment
- In fragmented industries composed of a large number of small and medium-sized
companies, the principal forms of competitive strategy are chaining, franchising,
and horizontal merger.
- In embryonic and growth industries, the way in which different kinds of customers
groups emerge over time, and customer needs change, are important determinants
of business-level strategy. Similarly, understanding the factors that affect a market's growth rate allow managers to tailor their business model to a changing
industry environment.
- Mature industries are composed of a few large companies whose actions are
so highly interdependent that the success of one company's strategy depends on the responses of its rivals.
- The principal competitive tactics and moves used by companies in mature industries
to deter entry are product proliferation, pricing games, and maintaining excess capacity.
- The principal competitive tactics and maneuvers used by companies in mature
industries to manage rivalry are price signaling, price leadership, nonprice
competition, and capacity control.
- Companies in mature industries need to develop a supply-and-distribution
strategy to protect the source of their competitive advantage.
- In declining industries in which market demand has leveled off or is falling, companies must tailor their price and nonprice strategies
to the new competitive environment. They also need to manage industry capacity
to prevent the emergence of capacity expansion problems.
- There are four main strategies a company can pursue when demand is falling: leadership,
niche, harvest, and divestment. The choice is determined by the severity
of industry decline and the company's strengths relative to the remaining pockets of demand.
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