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Sushil Khanna
Dec. 2016
INDUSTRY EVOLUTION
•Growth Ph
•Intro Phase
INTRO GROWTH MATURITY DECLINE
PRODUCTS *Poor Quality *Tech & Performance *Superior Quality * Little Product
*No Standards Differences *Standardization Differences
*Design & *Good Quality *Less Product
Development Key *Improvements Differences
Activity
STRATEGY * Time to Increase * Change P/Q * Bad Time to Increase * Key : Cost
Market Share Relation share/cap Control
* R&D : Or Quality Image * Bad Time Change P/Q
Engineering * Marketing Key * Competitive Costs &
Key Activity Marketing - Key
CRITIQUE OF PLC. THEORY
Shaped By:
Investment Decisions
Pressures and incentives -- to take
advantage of new possibilities with
changing technology, market, etc.
Shift in Entry Barriers
Despite Potential For Structural
Change Industry May Not Change, As
No Firm Discovers A Strategy To Push
Industry Towards A New Structure.
EVOLUTIONARY PROCESSES
EVOLUTION SHAPED BY RELATIVE
STRENGTH OF FOLL. PROCESSES:
1.LONG RUN CHANGES IN GROWTH
DEMOGRAPHIC FACTORS
(AGE STRUCTURE, INCOMES, EDUCATION,
GEOGRAPHICAL LOCATION)
TRENDS IN NEEDS
(LIFESTYLES, TASTES, URBANISATION,
SOCIAL CONDITIONS, CRIME)
CHANGES IN RELATIVE POSITION OF
SUBSTITUTES
LONG RUN CHANGES
CHANGES IN POSITION OF
COMPLEMENTARY PRODUCTS
EFFECTIVE COST SHAPED BY QUALITY &
AVAILABILITY OF COMPLEMNRY
PRODUCTS E.g. MUSIC TAPES/DISCS,
COMPACT DISC, DATABASE, STEREO FOR
CARS).
PENETRATION OF CUSTOMER GROUP
i) HIGH GROWTH DUE TO NEW
CUSTOMERS TILL COMPLETE
PENETRATION; THEN DROP
ii) PRODUCT & MARKETING CHANGES CAN
SOMETIMES RE-NEW EXPANSION)
LONG RUN CHANGES
CHANGES IN THE BUYER SEGMENT
SERVED
LEARNING BY BUYERS
REDUCTION OF UNCERTAINTY
UNCERTAINTY ABOUT MARKET SIZE,
PRODUCT CONFIGURATION, STANDARDS,
NATURE OF BUYERS AND CHANNELS etc.
LEADS TO DIFFERENT STRATEGIES.
b. OVER TIME, WITH MORE INFO,
SOME STRATEGIES WIN OUT & ARE
IMITATED. OTHERS ABANDONED
EVOLUTIONARY
PROCESSES
DIFFUSION OF PROPRIETARY
KNOWLEDGE
EXPANSION/CONTRACTION OF
SCALE
CHANGES IN INPUT COSTS &
EXCHANGE RATES
PRODUCT INNOVATION
EVOLUTIONARY
PROCESSES
MARKETING/INNOVATIONS
PROCESS INNOVATIONS
STRUCTURAL CHANGES IN
ADJACENT INDUSTRIES
ENTRY & EXIT
KEY RELATIONSHIPS
INDUSTRY CONSOLIDATION OR
FRAGMENTATION ???
CONSOLIDATION IF:
MOBILITY BARRIERS RISING
FRAGMENTATION IF:
MOBILITY BARRIERS FALLING OR
EXIT BARRIERS DETER
CONSOLIDATION
LONG RUN PROFIT DEPENDS ON
FUTURE STRUCTURE
KEY RELATIONSHIPS