ASSIGNMENT COVER SHEET Kunene Surname First Name/s Student Number Subject Assignment Number Tutor’s Name Examination Venue Date Submitted Submission (√) First Submission P.O Box 70756 Overport Postal Address Durban 4067 E-Mail Contact Numbers firstname.lastname@example.org (Work) 031 365 7602 (Home)0795155872 (Cell) Course/Intake MBA Year Two Jan 2011 Durban 2 MAY 2012 X .resubmission Ntsoaki 117340 CORPORATE STRATEGY 01
Declaration: I hereby declare that the assignment submitted is an original piece of work produced by myself.
Signature: Signed Ntsoaki Kunene
Date: 2 MAY 2012
Table of Contents Question 1 Question 2 Question 3 Question 4 Question 5 Jockeying for position Industry life cycle Five generic competitive strategies Strategic management processes Development of a dynamic company strategy References 3-8 9-12 13-15 16-19 19-26 26-26
QUESTION 1 JOCKEYING FOR POSITION WITHIN AN INDUSTRY
In 2001, as the first Xbox was preparing to launch, the home console market was a fiercely competitive space dominated largely by Japanese stalwarts. Sega were already up and running with the sadly doomed Dreamcast, Sony had released the successor to the hugely successful PlayStation, while Nintendo had their own plans for the 'next-generation’ with the GameCube. The Xbox, it was thought, was folly, the market impenetrable. Especially by an American software company. Chris Lewis, who was the Microsoft’s vice president of Interactive Entertainment for Microsoft Europe at that time, remembers the challenge that first console brought to bear on Microsoft, despite the firm’s success elsewhere. “The industry at that time was dominated by Sega, Nintendo and Sony, “he says. “While we had a great pedigree as a company, people were skeptical about our chance in the console space. We had some experience in PC gaming, with Flight Simulator and our Sidewinder franchise of controllers. But we were new to this highly competitive market, we had a lot to learn and we had to learn it fast.” By launching the game console Xbox, Microsoft did not only introduce a new product but stepped into a totally new market where there company did not have any experience yet. Although they had a huge marketing budget, they focused on spending it as effective as possible. Professor Michael E. Porter in his 1979 article “How Competitive Forces Shape Strategy“. Porter used the article to introduce his now-famous “five-forces” that can be used to determine whether or not a company has a sustainable competitive advantage. The forces are: (1) the threat of entry; (2) the power of suppliers; (3) the power of buyers; (4) the threat of substitute products or services; and (5) jockeying for position among current competitors. The latter is the strongest of the five forces within any industry in that making successful long-term investments necessitates an understanding of the companies’ underlying competitive positions. This section will critically discuss Microsoft’s approach to jockeying for position within the home video gaming industry. 3
Jockeying for Position Porter argues that the intensity of competition is likely to be greatest when the following conditions are present within an industry:
Competitors are numerous or are roughly equal in size and power. Industry growth is slow, precipitating fights for market share that involve expansion-minded members.
The product or service lacks differentiation or switching costs which lock in buyers and protect one combatant from raids on its customers by another.
Fixed costs are high or the product is perishable, creating strong temptation to cut prices.
Capacity is normally augmented in large increments. Exit barriers are high. The rivals are diverse in strategies, origins and “personalities”.
In 2000, when Microsoft announced its intentions to enter the video game market it was a project driven forward by the passion and determination...