Competitive Advantage in Mature Industries. "Inefficiency in mature firms can be pervasive and institutionalised. Its elimination then requires shock treatment …" (Robert M Grant)
This chapter helped clarify for me the “what” and “why” of some of the
issues which a company operating in a mature industry faces. Equally important
the content applies to most related customers, which are usually also operating
in mature industries/markets.
your customers be smart enough to survive long enough to pay your invoices? Read
in mature firms can be pervasive and institutionalised. Its elimination then
requires shock treatment in the form of a threat to the existence of the firm
(e.g. an oil price collapse) or a change in management through acquisition."
"In general, the profitability of mature industries is constrained by
(1) sluggish demand growth and
(2) lack of product differentiation and
(3) customers' bargaining power.
sharp differences in profit rates can arise between industry segments."
a result, choice of segments is likely to be a key strategy issue in mature
industries." (page 297).
leadership ... is difficult to sustain, particularly in internationally
competitive industries. ... attaining some insulation from the constant threat
of price competition through some degree of differentiation is particularly
attractive in mature industries. ... Product standardisation is frequently
accompanied by increased differentiation of complementary services and
a broad range of mature industries we can observe firms attempting to escape
from the treadmill of price competition among standardised offerings, through a
multitude of differentiation variables." (page 298).
I find support for the difference which we in Credit can make in the words -
increased differentiation of complementary services - quoted above. This is the
added value part of our 'dual role', the part which clearly could be an
essential ingredient in any differentiated product offering.
limited opportunities for establishing sustainable competitive advantage ...
create impetus for innovation in marketing, product design, customer
service and organisation." (page 299)
propensity for strategic innovation in mature industries to be led by outsiders
may reflect the tendency for long-established firms and their executives to be
trapped within conventional thinking concerning key success factors and
business practices within their own industries." (page 302).
is not that the goal of cost efficiency has been superseded but rather that the
conditions for cost efficiency have changed. ... The requirements for
dynamic efficiency are different from the requirements for static efficiency.
Dynamic efficiency requires the
displacement of bureaucratically controlled, highly specialised routines by more
flexible working practices. Flexibility requires higher levels of autonomy not
only for divisional and plant managers but also for individual employees to
permit them to adjust their work to meet changing circumstances." (page
essence of dynamic is smooth, rapid adjustment to change. ... in addition to
being cost efficient, companies in the advanced industrialised countries have
been forced to seek new sources of competitive advantage through innovation and
the pursuit of scale economies with the need for responsiveness and flexibility
and the requirements of cost efficiency with the growing need for innovation and
differentiation is a complex challenge facing mature businesses.
Many of the most successful companies in mature industries are ones that have
Extracted from: "Contemporary Strategy Analysis - Concepts, Techniques, Applications" Second Edition, by Robert M Grant (Georgetown University).
© Robert M Grant 1995 ISBN 1-55786-513-2.
Editor: Ron Wells