1. Many firms operate in industries where demand is growing more slowly than the economy-wide average or is even declining.
2. Stagnant demand by itself is not enough to make an industry unattractive. Selling out may or may not be practical and closing operations is always a last resort.
3. Businesses competing in stagnant or declining industries must resign themselves to performance targets consistent with available market opportunities.
4. In general, companies that succeed in stagnant industries employ one or more of three strategic themes:
a. Pursue a focused strategy aimed at the fastest growing market segments within the industry
b. Stress differentiation based on quality improvement and product innovation
c. Strive to drive costs down and become the industry’s low-cost provider
CORE CONCEPT: Achieving competitive advantage in stagnant or declining industries usually requires pursuing one of three competitive approaches: focusing on growing market segments within the industry, differentiating on the basis of better quality and frequent product innovation, or becoming a lower-cost producer.
5. These three strategic themes are not mutually exclusive.
6. The most common strategic mistakes companies make in stagnating or declining markets are:
a. Getting trapped in a profitless war of attrition
b. Diverting too much cash out of the business too quickly
c. Being overly optimistic about the industry’s future and spending too much on improvements in anticipation that things will get better
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