What strategies can a company employ in order to stay in business?

Question

Quizplus · Accepted Answer

The Answer is 1. Maintain a leadership stance: A leadership strategy requires a firm to continue investing in
marketing, support, and product development, hoping that competitors will eventually exit
the market. Despite declining sales and profit margins, there may still be opportunities to
generate above-average returns for firms that remain the industry leaders during this phase.
2. Pursue a niche strategy: The objective of a niche strategy is to find a specific segment
of the industry that may not decline as rapidly as the rest and where the firm can
expect to possess some form of competitive advantage to discourage direct competition
in the niche. For example, a tobacco firm facing declining cigarette sales may
decide to focus exclusively on the more robust cigar market and defend that niche
heavily against competitors by investing in marketing and sales support.
A firm can ultimately choose to switch to a harvest, exit, or consolidation strategy
after having pursued a leadership or niche approach; however, the reverse is not true.
3. Harvest profits: The harvesting profits strategy requires squeezing as much remaining
profit as possible from the industry by drastically reducing costs. The firm must eliminate
or severely restrict investments in the industry and take advantage of existing
strengths to generate incremental sales. This strategy is ultimately followed by the
firm's exit from the industry.
4. Exit early: The exit early strategy allows firms to recover some of their prior investments
in the industry by exiting the market early in the decline phase, when assets may
still be valuable to others and there is greater uncertainty concerning the speed of the
decline. Some firms also choose to exit the industry during the mature phase to truly
maximize the value from the sale of its assets. Once decline becomes evident, assets are
worth much less to potential buyers, who are in a stronger bargaining position. The risk
of exiting so early is that an organization's forecast for decline may prove inaccurate.
5. Consolidate: A consolidation strategy involves acquiring at a reasonable price the best of
the remaining firms in the industry. This allows the acquirer to enhance its market power
and generate economies of scale and synergies to further reduce costs and make up for
declining demand.

What Strategies Can a Company Employ in Order to Stay