GENERIC CHANGE SITUATIONS All industries are characterized by trends and new developments that, either gradually or speedily,

produce changes important enough to require a strategic response from participating firms. While it is important to judge what growth stage an industry is in, there is more analytical value in identifying the specific factors causing industry to change. Industrys conditions change because forces are in motions that create incentives or pressures for change. The most dominant forces are called driving forces because they have the biggest influences on what kinds of change will take place in the industrys structure and environment. Driving forces analysis has two steps: impact they will have on the industry. MOST COMMON DRIVING FORCES The most common driving forces are: a. Change in the Long-term Industry Growth Rate Shifts in industrys growth up and down are a force for industry change because they affect the balance between industry supply and buyer demand, entry and exit and how hard it will be for a firm to capture additional sales. A strong upsurge in Long-term demand frequently attracts new firms and encourages established ones to invest in additional capacity. In a shrinking market some firms will exit the industry, and the remaining ones may postpone further capacity investments. b. Change in Who Buys the Product and How they use it Shifts in buyer demographics and the emergences of new ways to use the product can force adjustments in customer service offerings, open the way to market the industrys product through a different mix of dealers and retail outlets, prompt producers to broaden their product Lines, increase/decrease capital requirements and change sales and promotion approaches. The computer industry has been transformed by the surge of interest in personal and mid-size computers. Consumer interest in cordless telephones and mobile telephones has opened a major new buyer segment for telephone equipment manufacturers. c. Product Innovation Product innovation can broaden an industrys customer base, rejuvenate industry growth and widen the degree of product differentiation among rival sellers. Successful new product introductions strengthen a companys position, usually at the expense of companies who stick with their old products or are slow to follow with their own versions of the new product. Industries where product innovation has been a key driving force includes copying equipment, camera and photographic equipment, computers etc. d. Technological Change Advances in technology can dramatically alter an industrys landscape, making it possible to produce new industry frontiers. Technological change can also change in capital requirements, minimum efficient plant sizes and desirability of vertical integration and learning or experience curve effects.

e. Entry or Exit of Major Firms The entry of one or more foreign companies into a market once dominated by domestic firms nearly always produce a big shake up in industry conditions. Likewise, when an established domestic entry either by acquisition or by launching its own startup venture, it usually intends to apply its skills and resources in some innovative fashion. Entry by a major firm often produces new key players and with new rules for competing. Similarly exit of a major firm changes industry structure by reducing the number of market leaders and causing a rush to capture the existing firms customers. f. Regulatory Influences and Government Policy Changes Regulatory and governmental actions can often force significant changes in industry practices and strategic approaches. Regulation has been a major driving force in the airline, banking, natural gas and telecommunications industries. Drunken-driving laws and drinking age legislation recently introduced became driving forces in the alcoholic beverage industry. In international markets, newly-enacted regulations of host governments to open up their domestic markets to foreign participation or to close off foreign participation to protect domestic companies are a major factor in shaping whether the competitive struggle between foreign and domestic companies occurs on a level playing field or whether it is one-sided. g. Changing Societal Concerns, Attitudes and Lifestyles Emerging social issues and changing attitudes and lifestyles can be powerful investigators of industry change. Consumer concerns about salt, sugar, chemical additives and nutrition are forcing the food industry to re-examine food processing techniques, redirect Research and Development efforts and introduce healthier products. Safety concerns are driving change in the automobile, toy, and outdoor power equipment industries. Increased interest in physical fitness is producing whole new industries to supply exercise equipment, jogging clothes and shoes and medically supervised diet programmers. Social concerns about air and water pollution are affecting industries that discharge waste products. Growing anti-smoking sentiment is posing a major long-term threat to the cigarette industry. h. Reduction in Uncertainty and Business Risk A young emerging industry is characterized by an unproven cost structure and much uncertainty over market size and Research a Development costs and distribution channels. Emerging industries tend to attract only the most entrepreneurial companies. Over time however, if pioneering firms succeed and uncertainty about the industrys viability fades, more conservative firms are usually enticed to enter the industry. Often, the entrants are larger financially-strong firms hunting for attractive growth industries. International markets conservatism is prevalent in the early stages of the globalization. Firms tend to minimize their risk by relying initially on exporting, licensing and joint venture. Then, as their experience accumulates and as perceived risk levels decline, companies move more quickly and aggressively to form wholly owned subsidiaries and to pursue full-seal multi-country competitive strategies.

The foregoing list of potential driving forces in an industry indicates why it is too simplistic to view industry change only in terms of moving from one growth stage to another and why it is essential to probe for the causes underlying the emergence of new industry conditions. Analysis of driving forces has practical strategy-making value. First, the driving forces in an industry indicate to managers. What external factors will have on the companys business over the next one to three years. Second, to position the company to deal with these forces, managers must assess the implications and the consequences of each driving force - that is, they must project what impact the driving forces will have on the industry. Third, strategy makers need to craft a strategy that is responsive to the driving forces and their effects on the industry. What Are Strategies for a Business to Quickly Adapt to Market Changes? Change in business comes in many forms and affects companies in every industry and in order to facilitate smooth fluctuations in business, there should be strategies for adapting to change. Speed, flexibility and agility are essential requirements for organizations that operate in rapidly-changing markets. Agility - Develop greater agility. Agile organizations have four characteristics: visibility, speed, flexibility and scalability. Visibility enables the organization to anticipate change. Speed is essential to develop and deliver innovative products and services, and strengthen market position. Flexibility means the organization can make rapid adjustments in response to changes in market demand. Scalability makes it possible to align people, resources and capacity with a changing environment. Strategic Agility is the ability to continuously adjust and adapt strategic direction in core business, as a function of strategic ambitions and changing circumstances, and create not just new product and services, but also new business models and innovative ways to create value for a company. Strategic Agility: the Key enabling Capabilities 1. Strategic Sensitivity : both the sharpness of perception and the intensity of awareness and attention, 2. Resource Fluidity : the internal capability to reconfigure business systems and redeploy resources rapidly, 3. Collective Commitment : the ability of the top team to make bold decisions fast, without being bogged in win-lose politics at the top.

Strategic Flexibility - The nature of the forces in the new competitive landscape requires a continuous rethinking of current strategic actions, organization structure, communication systems, corporate culture, asset deployment, investment strategies, in short every aspect of a firm's operation and long-term health. This requires flexibility and the ability to balance stable and fluid states of the organization. Strategic flexibility is the capability of the firm to proact or respond quickly to changing competitive conditions and thereby develop and/or maintain competitive advantage. (1) developing dynamic core competences, (2) focusing and building human capital, (3) effectively using new technology, (4) engaging in valuable strategies and (5) building new organization structures and culture.

Analyze

Modify the strategy based on insight into the marketplace. Set up a process to monitor changes in the market and identify trends that might impact the organization. Analysts' reports and forecasts provide a useful starting point. Combine research information with company data to build a more specific picture. Ask the sales and customer service teams to report any significant changes in customer requirements. Arrange review meetings with major customers to discuss their changing needs and challenges.

Lead

Demonstrate strong leadership. Strong leadership is essential to market adaptation. Business leaders need the right tools and tactics so that they can align the business with current corporate strategy, adapt quickly to changing market conditions and motivate their people. People

Create a more flexible workforce. Market change may require people with different skills or more people with the same skills. To bypass the standard recruitment, training and induction process, organizations can use a variety of temporary solutions. Hiring contractors for fixed terms or using a resourcing service on a more flexible basis can provide high-caliber staff to meet short- or medium-term needs. Technology

Utilize cloud computing to scale information technology resources. Market change may require a significant increase in computing resources to deal with increased demand. To avoid the time lag associated with internal investment, an organization can utilize cloud computing -- renting additional capacity on massive servers based in data centers run by external service providers. This provides immediate access to essential resources and reduces time to market for new business opportunities.

Partners

Build a network of trusted partners. If an organization cannot meet changing market demand from its own resources, it can work with partners who offer suitable products, technology or manufacturing capacity. Identify each partner's strengths and set up contingency plans to identify the fastest route to market through collaboration.

Responding to the Challenge of Change Change is especially necessary in organizations that wish to prosper in a volatile, uncertain, complex, and ambiguous environment. If changes rocking the external environment were temporary, the slow and uncertain pace at which organizations change would matter less. Powerful forces in the environment are pressuring public and private organizations to alter permanently existing structures, policies, and practices. Globalization is one example of pressure to change. With globalization comes greater competition, especially for workforce quality. Wider differences in the skills, attitudes, and needs of the workforce are coupled to increases in communications problems. Geographic dispersion creates conflict between regional offices (e.g., unified commands) and the central headquarters as well as conflict among regional offices. Globalization creates the challenge of building cohesion and common purpose in the face of cultural and organizational differences. All of this is complex because many of the variables in the equation are not under the control of the leaders who are creating the vision for change. Another example of environmental pressure for change is information technology. Information technology facilitates structural decentralization and downsizing. People must develop new skills. Power often shifts from centralized functions to operating units. Demographic changes in the population are creating enormous pressure for change in organization. Structural responses to demographic diversity include policies and programs like equal opportunity and affirmative action. The changing workforce has varied needs (e.g., religious and language) and often creates new training requirements. Friction and conflict develops between demographic groups. In the private sector, deregulation has created major structural changes in some industries. People in the workforce can sense that they can be cut loose without warning. Deregulation can bring major shifts in power (e.g., from the government to the consumer). And, deregulation results in the need for the redefinition of organizational mission and culture.

New economic development and changes in political rules (e.g., free-trade agreements), make it easier for firms to enter international markets, oftentimes through

strategic alliances with or acquisitions of firms currently operating in these domestic markets. Moving into new markets provides many opportunities but also multiple challenges. For example, moving into global markets increases incentives for innovation and improved opportunities to earn returns on innovation because of the expanded marketplace. However, international expansion also greatly complicates operating environments. To take advantage of the opportunities for economies of geographic scope, firms must learn effective ways of coordinating operations across country borders, oftentimes in many different countries. This often requires complex structural arrangements. Furthermore, globalization creates a greater number of stakeholders and contingencies with which managers must deal and it also complicates incentive systems for managers and evaluation of the performance of a firm's various subunits. In short, increasing globalization is reshaping the competitive landscape and will continue to do so for the foreseeable future. In a constantly changing business environment, the ability to modify and implement new strategies quickly is important. Economic pressures, industry changes, regulatory pressures and changes in consumer preference can all impact a business' ability to sell its products or services. Dynamic business strategies help to ensure that a business can respond appropriately to changes that may represent both potential opportunities and new threats to its operations.

Watch Competitors - Businesses must be constantly alert to competitive pressures and adjust their business strategies accordingly. Even the best businesses can be knocked off their pedestals by a new market entrant or a major industry innovation, and should continue to adjust to their markets by remaining dynamic and changing their strategies as changes in their environments dictate. Plan Flexibly - Today's businesses need plans that are more dynamic and that serve as living documents to guide the organization's practices on an ongoing basis. A formal annual plan update is common, but a business should continually monitor its plan and plan performance and be able to make adjustments as necessary. Seek Information - Good intelligence is essential for good decisions. Dynamic business strategies require businesses to pay close attention to a variety of sources, both from business operations (sales data, for instance) and stakeholders (customers). Monitor your environment and put processes in place to collect, aggregate, analyze and react to information from various sources, both inside and outside your company. Business continuity planning (BCP) "identifies an organization's exposure to internal and external threats and synthesizes hard and soft assets to provide effective prevention and recovery for the organization, while maintaining competitive advantage and value system integrity. A business continuity plan is a roadmap for continuing operations under adverse conditions. Any event that could impact operations is

included, such as supply chain interruption, loss of or damage to critical infrastructure (major machinery or computing/network resource. Globalization, new technologies,and greater transparency have combined to upend the business environment. Sustainable competitive advantage no longer arises from positioning or resources. Instead, it stems from the four organizational capabilities that foster rapid adaptation: The ability to read and act on signals of change The ability to experiment rapidly and frequentlynot only with products and services but also with business models, processes, and strategies The ability to manage complex and interconnected systems of multiple stakeholders The ability to motivate employees and partners

The Ability to Read and Act on Signals In order to adapt, a company must have its antennae tuned to signals of change from the external environment, decode them, and quickly act to refi ne or reinvent its business model and even reshape the information landscape of its industry.

The Ability to Experiment That which cannot be deduced or forecast can often be discovered through experimentation. a growing number of adaptive competitors are using an array of new approaches and technologies, especially in virtual environments, to generate, test, and replicate a larger number of innovative ideas faster, at lower cost, and with less risk than their rivals can. But in an increasingly turbulent environment, business models, strategies, and routines can also become obsolete quickly and unpredictably. Adaptive companies therefore use experimentation far more broadly than their rivals do. The Ability to Manage Complex Multicompany Systems With an increasing amount of economic activity occurring beyond corporate boundariesthrough outsourcing, offshoring, value nets, value ecosystems, peer production, and the likewe need to think about strategies not only for individual companies but also for dynamic business systems. Increasingly,industry structure is better characterized as competing webs or ecosystems of codependent companies than as a handful of competitors producing similar goods and services and working on a stable, distant, and transactional basis with their suppliers and customers. In such an environment advantage will fl ow to those companies that can create eff ective strategies at the network or system level. Adaptive companies are therefore learning how to push activities outside the company without benefiting competitors and how to design and evolve strategies for networks without necessarily being able to rely on strong control mechanisms. Typically, adaptive companies manage their ecosystems by using common standards to foster interaction with minimal barriers.

The Ability to Mobilize Organizations therefore need to create environments that encourage the knowledge fl ow, diversity, autonomy, risk taking, sharing, and fl exibility on which adaptation thrives. Contrary to classical strategic thinking, strategy follows organization in adaptive companies. A fl exible structure and the dispersal of decision rights are powerful levers for increasing adaptability. Typically, adaptive companies have replaced permanent silos and functions with modular units that freely communicate and recombine according to the situation at hand. To reinforce this framework, it is helpful to have weak or competing power structures and a culture of constructive conflict and dissent.

PAMANTASAN NG LUNGSOD NG MAYNILA (University of the City of Manila) Intramuros, Manila Graduate School of Management MBA

CORPORATE PLANNING Generic Change Situations

Submitted By: MARYCAR DM LINA MBA

Submitted to: Prof. Geraldine Reyes CPA, DBA Professor