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. Porter’s Five Forces for the Industry

  • Perform a Porter Five Forces analysis on the organization’s industry

The industry is the industry determined for Project 1 (See Dr. Kathy’s Notes for Week Two).

a. First, use the course materials to identify the five forces and what components make up each force.

b. Then, perform an analysis of each force that clearly discusses the ?why and how? and concludes with the effect of the given force on the fortunes of the industry (industry profitability) and/or industry dynamics; that is, whether the effect of the force on the industry is weak/modest/average/moderate or strong/severe.Use industry research for support.

You may not use a Porter Five Forces analysis that is already completed and available on the Internet. A zero will result if used as the analysis results from your research and your own development.

II. Porter’s Five Forces for the Company

  • Perform a Porter Five Forces analysis on the focal company in particular.

Perform an analysis of each force that clearly discusses the ?why and how? and concludes with the effect of the given force on the fortunes of the focal company; that is, whether the effect of the force is weak/modest/average/moderate or strong/severe on the focal company. Use company research and course materials for support.

You may not use a Porter Five Forces analysis that is already completed and available on the Internet. A zero will result if used as the analysis results from your research and your own development.

III. Competitive Analysis

  • Perform a Competitive Analysis using the focal company?s closest three competitors plus the selected company. Explain why these companies are competitors, using course materials for support of your rationale. Analyze the competition’s products and services, explaining features, value, targets, etc. What are the competition’s strengths and weaknesses, and what is the market outlook for the competition? Use industry research and course materials for support in this analysis.

IV. Critical Success Factors

  • Identify and discuss at least eight (8) key success factors (critical success factors), using both course materials and industry research for support. Each industry has different key success factors, so make sure the success factors fit the industry. Review the Competitive Profile Matrix Example under Week 3 Content for clarification.

V. Competitor Profile Matrix (CPM)

  • Develop a Competitor Profile Matrix (CPM) to compare your company with these three competitors (from section III). Explain how you developed the matrix. Make sure to support your reasoning with course materials and industry research.

VI. Partial SWOT (OT) Analysis

A SWOT analysis is a tool used to assess the strengths and weaknesses (internal environment) and the opportunities and threats (external environment) of an organization. You will complete a partial SWOT analysis only completing an analysis on the OT (Opportunities and Threats). The information presented is not based on your beliefs but fact-based, data-driven information. The items used in the OT are factors that are affecting or might affect the focal company or those companies within the identified industry.

VI.A. OT Table

  • Develop an OT table using your research to identify at least five (5) opportunities and five (5) threats that influence the industry and the focal company. Use industry or company research for support of each opportunity and threat. Make sure to cite the elements within the table.?

VI. B. OT Analysis

  • Perform an OT analysis (separate from the SWOT table). Use course materials and company and industry research for support.
  • You may not use a SWOT analysis that is already completed and available on the Internet. The OT is for the focal company and no other company. A zero will result if used as the analysis results from your research and your own development.?

VII. External Factor Evaluation (EFE) Analysis

The External Factor Evaluation (EFE) matrix will allow you to use the industry analysis and the competitive analysis to assess whether the focal company can effectively take advantage of existing opportunities while minimizing the identified external threats that will help you formulate new strategies and policies. You will use the opportunities and threats from the OT analysis.

  • Using the information gathered for the OT analysis, develop an EFE matrix using five (5) opportunities and five (5) threats. Discuss how you developed the EFE matrix and the outcome.? Make sure to support your reasoning with course materials and company/industry research.

VIII.? Conclusion

Create a conclusion. The Conclusion is intended to emphasize the purpose/significance of the analysis, emphasize the significance/consequence of findings, and indicate the wider applications derived from the main points of the project?s requirements. You will conclude with the findings of the external environment analysis. Use course materials and industry/company research for support in this section.

The Saylor Foundation. (2014).?Mastering Strategic Management. Retrieved from?https://learn.umgc.edu/d2l/le/content/525837/viewContent/18557183/View


Industry Financial Ratios

?To provide some tips for locating industry financial ratios, you are welcome to start your research with any of the following ?launch? website addresses for locating industry financial ratios.

Free business statistics and financial ratios. Retrieved from
http://www.bizstats.com/industry-financials.php

Yahoo Finance: Industry center. Retrieved from
https://biz.yahoo.com/ic/ind_index.html

UMGC library. Retrieved from http://sites.umgc.edu/library/libresources/index.cfm


Yahoo Finance: Stock research center. Retrieved from
https://biz.yahoo.com/r/;_ylt=A0LEVi9k1idYSmcAmaQnnIlQ;_ylu=X3oDMTEyOWtuZnZxBGNvbG8DYmYxBHBvcwM4BHZ0aWQDQjI1ODBfMQRzZWMDc3I-

? Industry financial ratios (quoted at the directly referenced ?actual drilldown? website page from reputable financial websites)

? Corporate financial ratios (actually computed with math from financial data from financial statements of the corporate ?drilldown? own website which must be referenced)

? You may use any other financial websites that can provide you with the similar reliable (or reputable) sources for showing industry financial ratios. These websites should not be any financial ?blogs? at all.

? Please keep in mind: You are required to ?drill down? to the very page where the industry ratios of your focal company are located. The reference sites that you use in your in-text citations and reference source list must be the very website page where your industry financial ratios are actually located, not any of the ?launch? websites.


Company Financial Ratios

? For your focal company?s financial ratios, you cannot use just any financial websites for quoting the financial ratios for the focal company. The only reference source is the focal company?s website or 10K information. You must drill down to the focal company?s website in locating the ?raw? financial ratio (that is, the income statement and balance sheet, or annual investor report), and use these financial data to compute the financial ratios on your own by showing the actual financial data in all the financial ratio computation formulae. In other words, show the actual math of computing the focal company?s financial ratios on your own, not ?cutting and pasting? them from anywhere else.

I Academy of Management Executive, 1990 Vol. 4 No. 1

Concentrated growth
strategies

John A. Pearce II, George Mason University
James W. Harvey, George Mason University

Executive Overview ‘Thi’his article offers a critical assessment of the merits of concentrated growth as
the centerpiece of a business strategy. It includes an analysis of the
environmental conditions that favor concentrated growth and why it often leads
to superior performance. It also reviews methods by which innovation and
expansion ccmjie managed at reasonable levels of risk to complement the iirm’s
basic focuSyThese guidelines make it possible to compare a firm’s core
characteristics with the knowledge and capabilities in technology and
marketing that are necessary for profit and growth. The most important aspects
of formulating and implementing concentrated growth strategies are analyzed
and examples of current practice show specific instances when those aspects
have resulted in success.

Article Many victims of merger mania were once mistakenly convinced that the best way
to achieve company objectives was to pursue unrelated diversification in the
search for financial opportunity and synergy, only to see corporate performance
fall well below expectation. By rejecting that “conventional wisdom,” Martin
Marietta, Kentucky Fried Chicken, Compaq, Avon, Hyatt Legal Services, and
Tenant have demonstrated the advantages of what is increasingly proving to be
sound business strategy.

Pursuing a Concentrated Growth Strategy
These companies are just a few of the majority of American business firms that
compete by focusing on a specific product and market combination. Yet, little has
been written about?and perhaps as little thought given to?the concentrated
growth strategy.

Concentrated growth is the strategy of the firm that directs its resources to the
profitable growth of a single product, in a single market, with a single dominant
technology. The main rationale for this approach, sometimes called a market
penetration or concentration strategy, is that the firm thoroughly develops and
exploits its expertise in a delimited competitive arena.’

Despite the popularity and success of concentrated growth strategies, managers
have been left without guidelines to help them determine when their firm should
employ concentrated growth and how they should go about maximizing the
advantages of the strategy. Furthermore, current adopters of the concentrated
growth strategy are frequently tempted to expand into unrelated areas without
fully understanding the consequences. The enticements to stray from this strategy
include impatience to grow, pressure to use idle capacity, need to meet short-term
goals, and underestimating current opportunities.^ Fascination with new product
development and expansion into new markets should be tempered with the fact
that new products fail at an average rate of 40% for consumer goods, 20% for
industrial products, and 18% for services.^

A further enticement is to accelerate focused growth through horizontal

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integration. While such a strategy offers the advantage of enabling the firm to
retain its basic product and market orientation, it exposes the company to a wide
range of financially threatening complications. These potential problems include
extended debt involvement; geographic variations in unions, worker contracts,
and conditions of employment; added complexity in strategic planning and
management coordination; and difficulties owing to multiple suppliers, local
competitors, and governmental agencies. So numerous and great are these
complications that their discussion is beyond the scope of this article. We restrict
our attention to challenges confronted by managers who undertake a
concentrated growth strategy through reliance on internal development.

Diversity and Perlormance
“Stick to the knitting” is the phrase used by Peters and Waterman to describe one
of several characteristics of successful corporations. “* Staying with what the firm
does best and avoiding areas of operation of undeveloped skills are the bases for
their endorsement of concentrated growth.

Systematic analysis of new product successes and failures further underscores the
risk of deviating from company strengths. After examining 195 case histories,
Calantone and Cooper identified nine new product introduction scenarios, based
on resource compatibility and product superiority.^ The type of introduction that
had the highest level of market success (72%) was described as a synergistic
“close-to-home” product. These successful introductions had significant overlap
with the firm’s existing products, markets, technical expertise, and production
proficiency. For example, “The Better Mousetrap with No Marketing” type of new
product introduction had a success rate of 36%, while the “Me Too” product, with
no technical or production synergy, averaged only 14%.

This study revealed that the pursuit of growth through expansion into previously
unmastered technologies, or new markets, is done so at comparatively great
risk. Other evidence adds support to the view that diversification, particularly
unrelated diversification, is risky.

An analysis of the 250 largest firms in America’s 25 largest industries revealed that
firms that have higher measures of concentrated growth show greater financial
performance.^

Another indictment of unrelated diversification was found in a study of America’s
best midsize businesses.^ Among the key findings was that “unrelated
diversification is a mortal enemy of winning performance.” In contrast, successes
often resulted from “edging out.” This term refers to strategies based on clear
mission statements that are well-understood within the firm, predicated on
offerings with value, and serve selected market segments while cautiously moving
into related products, related markets, or both. Success with edging out strategies
is derived from a commitment to innovation within well-known technology and
well-defined market niches.

Rationale for Superior Performance
Why do concentrated growth strategies lead to enhanced performance? An
analysis of product successes and failures across multiple industries suggests
several reasons. This study shows that the greatest influences on market success
are those characteristic of firms that implement a concentrated growth strategy.^
These influences include the ability to assess market needs, knowledge of buyer
behavior, customer price sensitivity, and effectiveness of promotion. Further
underscoring the importance of concentrated growth-based company skills, the
study also showed that these core capabilities are more of a determinant of

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The concentrating
firm’s ability to grow
stems mainly from its
development of one or
more of three
important strategic
capabilities:
marketing abilities,
efficiencies of scale
and other cost
reductions, and
product
differentiation.

competitive market success than are the environmental forces faced by the firm.
High success rates of new products are also tied to avoiding situations that require
undeveloped skills, such as serving new customers and markets, acquiring new
technology, building new channels, developing new promotional abilities, and
facing new competition.^

A major misconception about the concentrated growth strategy is that the firm that
practices it will settle for little or no growth. This is certainly not true for a firm that
correctly utilizes the strategy. A firm employing concentrated growth grows by
building on its competencies and achieving a competitive edge by concentrating
in the product-market segment it knows best. The firm employing this strategy is
aiming for the growth that results from increased productivity, better coverage of
its actual product-market segment, and more efficient use of its technology.

The concentrating firm’s ability to grow stems mainly from its development of one
or more of three important strategic capabilities: marketing abilities, efficiencies of
scale and other cost reductions, and product differentiation. Since the firm will try
to develop a specific product-market it has two alternatives to no growth: (1)
stimulate increased consumption of the product through marketing-related
activities achieving efficiencies in production and distribution that allow the firm to
cut its costs or to increase the value of the product in the consumer’s mind, or (2) to
develop special attributes that brands the product as different.

Taken together, these points provide insights into why concentrated growth
strategies work. Managers should focus on well-understood markets, competitors,
technology, manufacturing processes, promotion, and distribution. This approach
significantly improves the likelihood of market success.

Conditions that Favor Concentrated Growth
There are specific conditions in the firm’s environment that are particularly
conducive to the concentrated growth strategy. The first is when the firm’s industry
is resistant to major technological advancements. This is usually the case in the
late growth and maturity stages of the product life cycle and in product-markets
where product demand is stable and industry entry barriers, such as
capitalization, are high. Machinery for the paper manufacturing industry, where
the basic technology has not changed in more than a century is a good example.

A second especially favorable condition is when the firm’s target markets are not
product saturated. Markets with competitive gaps leave the firm with alternatives
for growth in addition to taking market share away from competitors. The
successful introduction of traveler services by Allstate and Amoco demonstrates
that even an organization as entrenched and powerful as AAA could not build a
defensible presence in all segments of the automobile club market.

A third condition that favors concentrated growth exists when the firm’s
product-markets are sufficiently distinctive to dissuade competitors in adjacent
production markets from trying to invade the firm’s segment. John Deere and Co.
refrained from its planned growth in the construction machinery business when
mighty Caterpillar threatened to enter Deere’s mainstay, the farm machinery
business, in retaliation. Rather than risk a costly price war on its own turf, Deere
scrapped these plans for growth.

A fourth condition favorable to concentrated growth exists when the firm’s inputs
are reasonably stable in price and quantity and when they are available in the
amounts and at the required times. Maryland-based Giant Foods is able to
concentrate in the grocery business largely due to its long-term, stable
arrangements with suppliers of its private label products. Most of these suppliers
are the same makers of national brands that compete against the Giant labels.

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Academy of Management Executive

With a high market share and aggressive retail distribution. Giant controls the
national brands’ access to the consumer. Consequently, suppliers have
considerable incentive to honor verbal agreements, called “bookings,” in which
they commit themselves to Giant for price, quality, quantity, and timing of
shipments for a one year period.

The firm pursuing concentrated growth also benefits from being in a market with
minimal seasonal or cyclical swings that would propel the firm to diversify. Night
Owl Security, the Washington, D.C. market leader in home security services,
commits customers to initial four-year contracts. In a town where affluent
consumers tend to be quite transient, the length of this relationship is remarkable.
Further reinforcement for Night Owl’s concentrated growth strategy comes from
the company’s success in getting subsequent owners of its customers’ homes to
extend and renew the security service contract.

The firm can also grow while concentrating when it experiences competitive
advantages based on efficient production or distribution channels. These
advantages enable the firm to formulate advantageous pricing policies. More
efficient production methods and better handling of distribution also allow the firm
to achieve greater economies of scale or, in conjunction with marketing, result in
a product that is differentiated in the mind of the consumer. Graniteville
Company, the large South Carolina textile manufacturer, realized decades of
growth and profitability by adopting a “follower” tact as part of its concentrated
growth strategy. By producing fabrics only after market demand was well
established, and by featuring products that could reflect its expertise in adopting
manufacturing innovations and in highly efficient, long production runs,
Graniteville prospered through concentrated growth.

Finally, the success of market generalists creates conditions for successful
concentrated growth. ?^

When generalists succeed using universal appeals, they avoid making special
appeals to different groups of customers. The net result is that markets
dominated by generalists leave open many small pockets of markets where
specialists can emerge and thrive.

For example, hardware store chains such as Stanbaugh-Thompsons and
Hechinger, focus primarily on routine household repair problems and offer
solutions that can be easily sold on a self-service, do-it-yourself basis. This
approach leaves gaps at both the “semi-professional” and “neophyte” ends of the
market?in terms of the purchaser’s skill at household repairs and the extent to
which available merchandise matches individual homeowner requirements.

Putting A New “Spin” on Concentrated Growth
Firms that rely primarily on concentrated growth strategies may wish to modify
their courses of action, yet retain their bases of strength. Managerial options
represent varying degrees of concentrated growth. Managers can practice “Pure
Concentrated Growth,” edge out into related markets (let’s call this “Market
Extension”), or make minor modifications in products or develop closely related
new ones that fit within existing lines (“Product Extension”). A final opportunity for
growth is to combine market and product extensions to form a “Hybrid Extension”
strategy.

Pure Concentrated Growth
The pure concentrated growth strategy involves product improvement, intensifying
promotion, expanding channels, and pricing for penetration, as exhibited by

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Kentucky Fried Chicken. Using the theme “We Do Chicken Right,” KFC stresses
product specialization, limited menu, expanded distribution, and aggressive
advertising, sales promotion, and pricing.

Tenant Corporation, MasterCard and Visa pursued pure concentrated growth
through product improvement. Tenant, a manufacturer of mechanized cleaning
equipment for industrial markets, recently embarked on a major recommitment to
product quality and performance. The results include a 60% share of the domestic
market, a 40% share of the international market, and a rebuff to Toyota which had
plans for increasing its share of the American market. MasterCard’s and Visa’s
development of “affinity cards,” which allows the holder to select an outside
organization (usually nonprofit) for a contribution for each transaction, has
succeeded in stimulating the use of its credit cards.

Market Extension
Market extension allows companies to practice a different form of concentrated
growth by identifying new uses for existing products and new demographically,
psychographically, or geographically defined markets. Frequently, changes in
media selection, promotional appeals, and distribution are used to initiate this
approach. Market extension, by finding a new use for a product, was shown by
Du Pont’s Kevlar, an organic material used by police, security, and military
personnel primarily for bullet-proofing. The product is now being used to refit and
maintain wooden-hulled boats, since the material is both lighter and stronger than
glass fibers and has eleven times the strength of steel.

News in the medical industry provides other examples of new markets for existing
products. The National Institutes of Health’s report of a study showing that aspirin
may lower the incidence of heart attacks in healthy men is expected to boost sales
in the $2.2 billion analgesic market. Due to the expansion of this market, it is also
predicted that share values of non-aspirin brands, such as industry leaders
Tylenol and Advil, will be hurt. Product extensions currently planned include
“Bayer Calendar Pak,” 28-day packaging to fit the once-a-day prescription for
second heart attack prevention.

Product Extension
The strategy of product extension is based on penetrating existing markets by
incorporating product modifications in existing items, or developing new products
with a clear connection to the existing line. The telecommunications industry
provides an example of product extension based on product modification. To
increase its estimated 8-10% share of the $5-6 billion corporate user market, MCI
Communication Corp. augmented its product offering by extending its direct-dial
service to 146 countries, the same as AT&T, at lower average rates. The recent
addition of 79 countries to its network underscores management’s belief in this
market, estimated to grow 15-20% annually.

Other examples of expansions linked to existing lines include Gerber products
decision to growth through general merchandise marketing to offset the flat baby
food industry. Recent introductions include 52 items, ranging from feeding
accessories to toys and children’s wear.

The Hybrid Extension
The hybrid extension is the search for new growth opportunities by simultaneously
combining market and product modifications. This strategy is used by NAPA, a
franchise organization of auto parts aftermarket distributors serving the repair
industry and do-it-yourselfers. NAPA has expanded its operations to offer
installation of its products. This new service is directed at the market of drivers

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Academy of Management Executive

who want complete services that NAPA has never served, and to those
do-it-yourselfers who want to “trade up” to such services.

The greatest risk is
that by concentrating
in a single product-
market the firm
is particularly
vulnerable to changes
in that segment.

Overcommitment to a
specific technology
and product-market
can hinder a firm’s
ability to enter a new
or growing product
market that offers
more attractive
cost-benefit tradeoffs
for the firm.

Using a similar strategy, Dunkin’ Donuts now offers a wider variety of breakfast
items, such as eggs, breakfast meats, and croissants, targeted at the market
segment not previously served by its donut and coffee offering, and at existing
customers desiring diversity. Additionally, by packaging its coffee in cans for the
first time, Dunkin Donuts is implementing a market extension strategy aimed at
new customers who wish to serve its coffee at home or in the office.

Risks and Rewards of Concentrated Growth
Under stable conditions, a concentrated growth strategy poses the lowest risk
among grand strategies to a firm’s economic stability. However, in a changing
environment, a firm committed to concentrated growth faces high risks. The
greatest risk is that by concentrating in a single product-market the firm is
particularly vulnerable to changes in that segment. Slowed growth in the segment
may jeopardize the company because its investment, competitive edge, and
technology are deeply entrenched in a specific offering. Sudden changes by the
firm are difficult when the product is threatened by near-term obsolescence, a
faltering market, new substitutes, or changes in technology or customer needs. For
example, the manufacturers of IBM-clones faced such a problem when IBM
announced its adoption of the OS/2 operating system for its personal computer
line. The change effectively made existing clones “out of date.”

By entrenching in a specific industry, the concentrating firm is particularly
susceptible to changes in the economic environment of its industry, since the firm
does not have a cushion from involvement in other industries. For example. Mack
Truck, the second largest truck maker in America, saw an 18 month slump in the
truck industry result in a $20 million loss for the company.

Entrenchment in a specific product-market tends to make a concentrating firm
more adept than competitors at detecting new trends. However, any failure to
properly forecast major changes in the industry can result in extraordinary losses.
Numerous makers of inexpensive digital watches declared bankruptcy when they
failed to anticipate the competition posed by Swatch, Guess, qnd other trendy
watches that emerged from the fashion industry.

A firm pursuing a concentrated growth strategy is also vulnerable to high
opportunity costs by remaining in a specific product-market when other options
are ignored that could employ the firm’s resources more profitably.
Overcommitment to a specific technology and product-market can hinder a firm’s
ability to enter a new or growing product market that offers more attractive
cost-benefit tradeoffs for the firm. Had Apple computers maintained its policy of
making equipment that did not interface with IBM equipment, it would have
voluntarily ignored the strategic options that instead have proven to be its most
profitable.

Rewards
Examples abound of concentrating firms that report exceptional returns on its
strategy. Companies like McDonald’s, Goodyear, and Apple Computers have
used first-hand knowledge and deep involvement with specific product segments
to become powerful competitors in its markets. The strategy is even more often
associated with successful smaller firms that have steadily and doggedly improved
market position.

The limited additional resources necessary to implement concentrated growth,
coupled with the limited risk involved, also make this strategy desirable for a firm

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Pearce and Harvey

with limited funds. For example, through a carefully devised concentrated growth
strategy, medium-sized Deere and Company was able to become a major force in
the agricultural machinery business even when competing with much bigger firms
like Ford Motor Co. While other firms were trying to exit or diversify from the farm
machinery business, Deere spent $2 billion in upgrading its machinery, boosting
efficiency, and engaging in a program to strengthen its dealership system. This
concentrated growth strategy enabled the company to become the leader in the
farm machinery business, despite the fact that Ford was 10 times its size.

Firms that remain within a chosen product-market often extract the most from
technology and market knowledge and minimize the risks associated with
unrelated diversification. The reason for the success of a concentration strategy
lies with the firm’s superior insights into its technology, product, and customer, as
a means of obtaining a sustainable competitive advantage. Superior performance
on these aspects of corporate strategy has a significant positive effect on market
success.

Conclusion
Firms that are tempted to seek revenue streams through commitment to unrelated
technology and markets or to lessen their dependence on mature products, must
fully understand the risks of such actions. The enticement to develop new products
and to expand into new markets must be tempered with the knowledge of high
new product failure rates. When assessing st

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