PLC
Key Competitive
Characteristics
Means of
Entry
Ease of
Entry
Corporate Portfolio:
Product Life Cycle &
Corporate Strategy
© Dr Adrian Kuah 2008
1
Strategic alternatives for
declining businesses
• Divestment
• Harvest
•
Leadership• Niche
© Dr Adrian Kuah 2008
Leadership Strategy
• A company with some market-share
leadership will try to become one of the few
companies remaining in a declining
industry.
• Once a company attains this position,
depending on the subsequent pattern of
industry sales, it usually switches to holding
position or controlled harvest strategy.
© Dr Adrian Kuah 2008
Achieving a
leadership position
• Ensure that other companies
rapidly retire from the industry
• Reduce competitors’ exit barriers
• Develop and disclose credible
market information.
• Raise the stakes.
© Dr Adrian Kuah 2008
Niche Strategy
To identify a segment of the
declining industry that will
either maintain stable
demand or decay slowly
and that has structural
characteristics allowing high
returns.
© Dr Adrian Kuah 2008
Niche Strategy
A company then moves pre-emptively to
gain a strong position in this segment
while disinvesting from other segments.
© Dr Adrian Kuah 2008
Harvest Strategy
In the harvest strategy,
management seeks to get the
most cash flow it can from the
business. with a controlled
disinvestment intent
© Dr Adrian Kuah 2008
To increase cash flow,
the management:
• eliminates or severely curtails new
investment
• cuts maintenance of facilities, and
• reduces advertising and research
while
• reaping the benefits of past goodwill.
© Dr Adrian Kuah 2008
Other common harvest
tactics include:
• reducing the product differentiation,
• cutting the number of distribution channels,
• eliminating small customers, and
• eroding service in terms of delivery time
(thus reducing inventory) speed of repair, or
sales assistance.
© Dr Adrian Kuah 2008
Quick divestment
Executives employing this
strategy assume that
the company can recover
more of its investment
from the business by
selling it in the early
stages of the decline.
© Dr Adrian Kuah 2008
Choosing a strategy
for decline
• Can the structure of the industry support a
hospitable, potentially profitable, decline phase
• What are the exit barriers that each significant
competitor faces? Who will exit quickly and who will
remain?
With an understanding of the characteristics
that shape competition in a declining
industry and the different strategies they
might use, managers can now ask themselves
what their position should be:
© Dr Adrian Kuah 2008
Choosing a strategy
for decline
• Do your company’s strengths fit the
remaining pockets of demand?
• What are your competitors’ strengths in
these pockets? How can their exit
barriers be overcome?
In selecting a strategy, managers need
to match the remaining opportunities in the
industry with their companies’ position.
© Dr Adrian Kuah 2008
Strategies for
declining businesses
Leader-
Ship or
niche
Harvest
or divest
qu
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