Competitive Strategy and the Industry Environment

CHAPTER 6

Competitive Strategy and the Industry Environment

Synopsis of Chapter

This chapter extends the analysis of business-level strategy by considering the different competitive strategies that firms can and should adopt as they enter different industry environments. The formulation of business-level strategy does not take place in a vacuum; companies have to consider the reaction of other firms to their competitive moves. The chapter is therefore a necessary addition to Chapter 5 and provides a building block to the chapters on corporate-level strategy.

The chapter begins with an examination of the problems of managing a generic business-level competitive strategy in different kinds of industry environments: fragmented industries, embryonic and growth industries, mature industries, and finally in declining industries. In each type of industry, there is a discussion of the competitive problems associated with that particular environment and the appropriate strategies that firms can use to tackle those problems.

Teaching Objectives

1. Familiarize students with the different kinds of competitive problems that exist in different industry environments.

2. Discuss the problems of developing a competitive advantage in a fragmented industry and the solutions to such problems.

3. Discuss the problems of maintaining a first-mover advantage in embryonic and growth industries.

4. Examine the main kinds of competitive strategies that firms use to manage competitive industry relations in mature industries.

5. Familiarize students with the main strategies for handling a declining industry environment.

Opening Case: Information Technology, the Internet, and Changing Strategies in the Fashion World

Fashion houses, such as Armani and Gucci, produce highly differentiated, expensive clothes that are affordable only to the very rich. They supplement their sales by producing a line of upscale ready-to-wear fashion for sale in luxury department...