Learning Objectives5-*After reading this chapter, you should have a good understanding of:LO5.1 The central role of competitive advantage in the study of strategic management, and the three generic strategies: overall cost leadership, differentiation, and focus.LO5.2 How the successful attainment of generic strategies can improve the firms relative power vis--vis the five forces that determine an industrys average profitability.4-*

Learning ObjectivesLO5.3 The pitfalls managers must avoid in striving to attain generic strategies.LO5.4 How firms can effectively combine the generic strategies of overall cost leadership and differentiation.LO5.5 What factors determine the sustainability of a firms competitive advantage.LO5.6 How Internet-enabled business models are being used to improve strategic positioning.

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Learning ObjectivesLO5.7 the importance of considering the industry life cycle to determine a firms business-level strategy and its relative emphasis on functional area strategies and value-creating activities.LO5.8 The need for turnaround strategies that enable a firm to reposition its competitive position in an industry.5-*

Sustaining a Competitive AdvantageConsiderThe viability of a firms success is driven by both the internal operations of the firm and the desires and preferences of the market. Firms that succeed have the appropriate resources and cost structure to meet the needs of the environment.They also have a strategy5-*

Sustaining a Competitive AdvantageBusiness-level strategies require a choice:How to overcome the five forces and achieve competitive advantage?Suggestion - use Porters three generic strategies:Overall cost leadershipDifferentiationFocus5-*

Three Generic StrategiesExhibit 5.1 Three Generic StrategiesSource: Adapted and reprinted with the permission of The Free Press, a division of Simon & Schuster Inc. from Competitive Strategy: Techniques for Analyzing Industries and Competitors. Michael E Porter. Copyright 1980, 1998 by The Free Press. All rights reserved.5-*

Three Generic StrategiesOverall cost leadership is based on:Creating a low-cost position relative to a firms peersManaging relationships throughout the entire value chain to lower costsDifferentiation implies:Products and/or services that are unique & valuedEmphasis on nonprice attributes for which customers will gladly pay a premium5-*

Three Generic StrategiesA focus strategy requires:Narrow product lines, buyer segments, or targeted geographic marketsAdvantages obtained either through differentiation or cost leadership5-*

Examples: Three Generic StrategiesCompanies pursuing an overall cost leadership strategy:McDonaldsWal-MartCompanies pursuing a differentiation strategy:AppleTargetCompanies pursuing a focus strategy:IkeaCostco5-*

Three Generic StrategiesExhibit 5.2 Competitive Advantage and Business Performance5-*

Overall Low-Cost LeadershipCost leadership involvesAggressive construction of efficient scale facilitiesVigorous pursuit of cost reductions from experienceTight cost & overhead controlAvoidance of marginal customer accountsCost minimization in all activities in the firms value chain, such as R&D, service, sales force, & advertising5-*

Overall Low-Cost LeadershipCost leadership requiresLearning to lower costs through experience: the experience curveWith experience, unit costs of production processes decline as output increasesThis strategy also requires competitive parityBeing on par with competitors with respect to low-cost, differentiation, or other strategic product characteristicsPermits cost leaders to translate cost advantages directly into higher profits5-*

Improving Competitive Position vis--vis the Five ForcesProtects a firm against rivalry from competitorsProtects the firm against powerful buyersProvides more flexibility to cope with demands from powerful suppliers who want to increase input costsProvides substantial entry barriers due to economies of scale and cost advantagesPuts the firm in a favorable position with respect to substitute productsAn overall low-cost position5-*

Pitfalls of Cost LeadershipToo much focus on one or a few value chain activities.Increase in the cost of the inputs on which the advantage is basedThe strategy is imitated too easilyA lack of parity on differentiationReduced flexibilityObsolescence of the basis of a cost advantage5-*

DifferentiationA differentiation strategy can take many forms:Prestige or brand imageTechnologyInnovationFeaturesCustomer serviceDealer network5-*

DifferentiationDifferentiation requires:A level of cost parity relative to competitorsIntegration of multiple points along the value chainSuperior material handling operations to minimize damageAccurate and responsive order processingPersonal relationships with key customersRapid response to customer service requestsDifferentiation along several different dimensions at once5-*

Improving Competitive Position vis--vis the Five ForcesCreates higher entry barriers due to customer loyaltyProvides higher margins that enable the firm to deal with supplier powerReduces buyer power because buyers lack suitable alternatives Establishes customer loyalty and hence less threat from substitutesAn overall differentiation strategy5-*

Pitfalls of DifferentiationUniqueness that is not valuableToo much differentiationToo high a price premiumDifferentiation that is easily imitatedDilution of brand identification through product line extensionsPerceptions of differentiation may vary between buyers and sellers5-*

FocusA focus strategy is based on the choice of a narrow competitive scope within an industry.A firm selects a segment or group of segments (or niche) and tailors its strategy to serve themA firm achieves competitive advantages by dedicating itself to these segments exclusively5-*

FocusA focus strategy has two variants:Cost focusCreates a cost advantage in its target segmentExploits differences in cost behaviorDifferentiation focusDifferentiates itself in its target marketExploits the special needs of buyers5-*

Improving Competitive Position vis--vis the Five ForcesCreates higher entry barriers due to cost leadership or differentiation or bothCan provide higher margins that enable the firm to deal with supplier powerReduces buyer power because the firm provides specialized products or servicesFocused niches are less vulnerable to substitutesAn overall focus strategy5-*

Pitfalls of FocusErosion of cost advantages within the narrow segment Highly focused products and services are still subject to competition from new entrants & from imitationFocusers can become too focused to satisfy buyer needs5-*

Combination Strategies: Integrating Low-Cost & DifferentiationIntegration of low-cost and differentiation strategies makes it difficult for competitors to duplicate or imitate strategyThe goal of a combination strategy is to provide unique value in an efficient manner5-*

Combination StrategiesCombining overall low-cost and differentiation strategies can take several forms:Automated & flexible manufacturing systems allow for mass customizationExploitation of the profit pool concept creates a competitive advantageUsing information technology, firms can integrate activities throughout the extended value chain5-*

Improving Competitive Position vis--vis the Five ForcesCreates higher entry barriers due to both cost leadership & differentiationCan provide higher margins that enable the firm to deal with supplier powerReduces buyer power because of fewer competitorsAn overall value proposition reduces threat from substitutesAn integrated overall low-cost & differentiation strategy5-*

Pitfalls of Combination StrategiesFirms that fail to attain both overall low-cost & differentiation strategies may end up with neither and become stuck in the middleFirms can also underestimate the challenges & expenses associated with coordinating value-creating activities in the extended value chainFirms can also miscalculate sources of revenue and profit pools in the firms industry5-*

Question?Which statement regarding competitive advantages is true?If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer.With an overall cost leadership strategy, firms need not be concerned with parity on differentiation.In the long run, a business with one or more competitive advantages is probably destined to earn normal profits.Attaining multiple types of competitive advantage is a recipe for failure.5-*

Internet-Enabled Low-Cost Leader StrategiesThe Internet and digital technologies lower transaction costs:No in-person sales callsPaperless transactionsDisintermediation or removing intermediaries also lowers transaction costsReduced search costsNo need for a permanent retail location5-*

Internet-Enabled Differentiation StrategiesThe Internet and digital technologies have created new ways of differentiating by enabling mass customizationCustomers can judge the quality & uniqueness of a product or service by their ability to be involved in its planning & designLowered transaction costs allow firms to achieve parity on cost while providing a unique experience5-*

Internet-Enabled Focus StrategiesThe Internet and digital technologies have created new ways of competing in a narrow market segmentCustomers can access markets less expensively, and small firms can extend their reachSocial media allows niche firms to solicit input and respond quickly to customer feedback5-*

Internet-Enabled Combination StrategiesThe Internet and digital technologies have provided all companies with greater tools for managing costsWith lower costs for all, the net effect is fewer rather than more opportunities for sustainable advantageThe ease of comparison shopping also erodes differentiation advantages5-*

Industry Life Cycle StagesThe industry life cycleIntroductionGrowthMaturityDeclineGeneric strategies, value-creating activities, & overall objectives all vary over the course of an industry life cycle5-*

Industry Life Cycle StagesExhibit 5.7 Stages of the Industry Life Cycle 5-*

Strategies in the Introduction StageThe introduction stage is when:Products are unfamiliar to consumersMarket segments are not well-definedProduct features are not clearly specifiedCompetition tends to be limitedStrategies:Develop a product and get users to try itGenerate exposure so the product becomes standard5-*

Strategies in the Growth StageThe growth stage is:Characterized by strong increases in salesAttractive to potential competitorsWhen firms can build brand recognitionStrategies:Create branded differentiated productsStimulate selective demandProvide financial resources to support value-chain activities5-*

Strategies in the Maturity StageThe maturity stage is when:Aggregate industry demand slowsMarket becomes saturated, few new adoptersDirect competition becomes predominantMarginal competitors begin to exitStrategies:Create efficient manufacturing operationsLower costs as customers become price-sensitiveAdopt reverse or breakaway positioning5-*

Strategies in the Decline StageThe decline stage is when:Industry sales and profits begin to fallPrice competition increasesIndustry consolidation occursStrategies:Maintaining the product positionHarvesting profits & reducing costsExiting the marketConsolidating or acquiring surviving firms5-*

Question?As markets mature,costs continue to increase.applications for patents increasedifferentiation opportunities increase.there is increasing emphasis on efficiency.5-*

Turnaround StrategiesA turnaround strategy involves reversing performance decline & reinvigorating growth toward profitability throughAsset & cost surgerySelected market & product pruningPiecemeal productivity improvementsExample = Ford Motor CompanyExample = Jamba Juice5-*

How firms compete with each other and how they attain and sustain competitive advantages go to the heart of strategic management. In short, the key issue becomes: why do some firms outperform others and enjoy such advantages over time? This subject, business level strategy, is the focus of this chapter.*Business-level strategy = a strategy designed for firm or a division of the firm that competes within a single business. Generic strategies = an analysis of business strategy into basic types based on breadth of target market (industrywide versus narrow market segment) and type of competitive advantage (low-cost versus uniqueness).*The overall cost leadership and differentiation strategies strive to attain advantages industrywide, while focusers have a narrow target market in mind. Generic strategies are plotted on two dimensions: competitive advantage and strategic target. *Overall cost leadership = a firms generic strategy based on appeal to the industrywide market using a competitive advantage based on low-cost. Differentiation = a firms generic strategy based on creating differences in the firms product or service offering by creating something that is perceived industrywide as unique and valued by customers.*Focus strategy = a firms generic strategy based on appeal to a narrow market segment within an industry.*Both McDonalds and Wal-Mart have paid attention to the value chain. Both have made sourcing of product and distribution of material a key focus of their long-term strategy. By cutting costs of procurement and distribution they have been able to pass these costs along to consumers. (See Case 15: McDonalds) and Both Apple and Target have made names for themselves by creating products that are unique and desired by the marketplace. Take a look at the TV commercials for both brands. These commercials are creative and innovative: mirroring the attributes of the products they sell. (See Case 6: Apple) Both Ikea a maker of furniture targeting first-time buyers and Costco a big-box retailer targeting the small business owner have used cost leadership and a focus on a specific consumer to excel in their respective industries. (For a possible example in the grocery industry, see Case 30: Fresh Direct)*Both casual observation and research supports the notion that firms that identify with one or more of the forms of competitive advantage outperform those that do not. According to the above study, businesses combining multiple forms of competitive advantage (differentiation and overall cost leadership) outperformed businesses that used only a single form. The lowest performers were those that did not identify with any type of advantage. They were classified as stuck in the middle. *Overall cost leadership = a firms generic strategy based on appeal to the industrywide market using a competitive advantage based on low-cost. Cost leadership requires a tight set of interrelated tactics, including close scrutiny of the value chain. See Exhibit 5.3.*Experience curve = the decline in unit costs of production as cumulative output increases. A business can learn to lower costs as it gains experience with production processes. Among the most common factors producing the experience curve are workers getting better at what they do, product designs being simplified as the product matures, and production processes being automated and streamlined. However experience curve gains will only be the foundation for a cost advantage if the firm knows the source of the cost reduction and can keep those gains proprietary. Competitive parity = a firms achievement of similarity or being on par with competitors with respect to low-cost, differentiation, or other strategic product characteristics. Competitive parity on the basis of differentiation permits the cost leader to translate cost advantages directly into higher profits than competitors. Thus, the cost leader earns above-average returns. A business that strives for a low-cost advantage must attain an absolute cost advantage relative to its rivals. This is typically accomplished by offering a no-frills product or service to a broad target market using standardization to derive the greatest benefits from economies of scale and experience. However such a strategy may fail if the firm is unable to attain parity on important dimensions of differentiation such as quick responses to customer requests for services or design changes.*An overall low cost position enables the firm to achieve above average returns despite strong competition. It protects a firm against rivalry from competitors, because lower costs allow a firm to earn returns even if its competitors eroded their profits through intense rivalry. Buyers can exert power to drive down prices only to the level of the next most efficient producer, because there are relatively few competitors that can provide a comparable cost/value proposition. A low-cost position puts the firm in a favorable position with respect to substitute products introduced by new and existing competitors because the cost advantage is able to be applied across all operations.*Firms need to pay attention to all activities in the value chain. Managers should explore all value chain activities, including relationships among them, as candidates for cost reductions. Firms can also be vulnerable to price increases in the factors of production. A firms strategy may consist of value-creating activities that are easy to imitate. Firms striving to attain cost leadership advantages must obtain a level of parity on differentiation. Building a low-cost advantage often requires significant investments in plant and equipment, distribution systems, and large, economically scaled operations. As result, firms often find that these investments limit their flexibility. As a result they have difficulty responding to changes in the environment. Ultimately, the foundation of the firms cost advantage may become obsolete. In these circumstances, other firms develop new ways of cutting costs, leaving the old cost-leaders at a significant disadvantage. See Cases 31 & 32: General Motors, & Ford.*Differentiation strategy = a firms generic strategy based on creating differences in the firms product or service offering by creating something that is perceived industrywide as unique and valued by customers. Firms may differentiate themselves in both primary and support activities (see Exhibit 5.4). Firms achieve and sustain differentiation advantages and attain above-average performance when their price premiums exceed the extra costs incurred in being unique. *Firms achieve and sustain differentiation advantages and attain above-average performance when their price premiums exceed the extra costs incurred in being unique, but a differentiator cannot ignore cost. Differentiators must reduce costs in all areas that do not affect differentiation. *Differentiation provides protection against rivalry since brand loyalty lowers customer sensitivity to price and raises customer switching costs. Higher entry barriers result because of customer loyalty and the firms ability to provide uniqueness in its products or services. By increasing the firms margins, differentiation also avoids the need for a low-cost position, and also enables the firm to deal with supplier power. Suppliers would also probably desire to be associated with prestige brands, thus lessening their incentives to drive up prices. Differentiation reduces buyer power, because buyers lack comparable alternatives and are therefore less price sensitive. Differentiation enhances customer loyalty, thus reducing the threat from substitutes.*Its not enough just to be different. A differentiation strategy must provide unique bundles of products and/or services that customers value highly. Firms may also strive for quality of service that is higher than customers desire thus they become vulnerable to competitors who provide an appropriate level of quality at a lower price. In addition customers may desire the product but are repelled by the price premium. Differentiation advantages can be eroded through imitation. Firms may also erode their quality brand image by adding products or services with lower prices and less quality, thus confusing the customer. (For instance, see Case 9: Ann Taylor what IS the difference between Ann Taylor and LOFT?) Companies must also realize that although they may perceive their products and services as differentiated, their customers may view them as commodities.*Focus strategy = a firms generic strategy based on appeal to a narrow market segment within an industry. A firm following this strategy selects a segment or group of segments and tailors its strategy to serve them. The essence of focus is the exploitation of a particular market niche.*A narrow focus by itself is not sufficient for above average performance. Firms must choose either a cost or a differentiation focus. But both variants of the focus strategy rely on providing better service than broad-based competitors who are trying to serve the focusers target segment. Cost focus exploits differences in cost behavior in some segments, while differentiation focus exploits the special needs of buyers in other segments.*Focus requires that a firm either have a low cost position with its strategic target, high differentiation, or both. These positions provide defenses against each competitive force because of higher margins or more specialized products or services. Focus is also used to select niches that are least vulnerable to substitutes or where competitors are weakest.*The advantages of a cost focus strategy may be fleeting if the cost advantages are eroded over time. Dell is given as an example. Some firms adopting a focus strategy may enjoy temporary advantages because they select a small niche with few rivals. However, this strategy can be imitated. Finally, some firms attempting to attain advantages through a focus strategy may have too narrow a product or service.*Combination strategies = firms integrations of various strategies to provide multiple types of value to customers. A combination low-cost and differentiation strategy enables a firm to provide two types of value to customers: differentiated abilities ( e.g., high quality, brand identification, reputation) and lower prices (because of the firms lower costs in value creating activities). For example, superior quality can lead to lower costs because of less need for rework in manufacturing, fewer warranty claims, a reduced need for customer service personnel to resolve customer complaints, and so forth.*Mass customization = a firms ability to manufacture unique products in small quantities at low cost. This is facilitated by advances in manufacturing technologies such as CAD/CAM. Nike, Lands End, Cannondale, and Andersen Windows are given as examples. Profit pool = the total profits in an industry at all points along the industrys value chain. The structure of the profit pool can be complex. The potential pool of profits will be deeper in some segments of the value chain than others, and the depths will vary within an individual segment. Segment profitability may vary widely by customer group, product category, geographic market, or distribution channel. Additionally, the pattern of profit concentration in an industry is often very different from the pattern of revenue generation. Many firms have also achieved success by integrating activities throughout the extended value chain by using information technology to link their own value change with the value chains of their customers and suppliers.*Firms that successfully integrate both differentiation and cost advantages create an enviable position. This dominant competitive position serves to erect high entry barriers to potential competitors that have neither the financial nor physical resources to compete head-to-head. The organizations larger size can provide enormous bargaining power over suppliers. Low pricing and wide selection can reduce the power of buyers because there are relatively few competitors that can provide a comparable cost/value proposition. This overall value proposition also makes potential substitute products a less viable threat. Walmart is given as an example.*A key issue in strategic management is the creation of competitive advantages that enable the firm to enjoy above average returns. Some firms may become stuck in the middle if they try to attain both cost and differentiation advantages. While integrating activities across a firms value chain, firms must consider the expenses linked to technology and investment, managerial time and commitment, and the involvement and investment required by the firms customers and suppliers. The firm must be confident that it can generate a sufficient scale of operations and revenues to justify all associated expenses. Finally, firms may fail to accurately assess sources of revenue and profits in their value chain.*Answer: A. Recall the discussion of competitive advantage and business performance, Exhibit 5.2, and reflect on whether competitive strategies can be sustained. See the case example in the textbook of Atlas Door, a company that, so far, has been able to sustain a competitive advantage over time.*Digital technologies = information that is in numerical form, which facilitates its storage, transmission, analysis and manipulation. Transaction costs refer to all the various expenses associated with conducting businesses. It applies not just to buy/sell transactions but to the costs of interacting with every part of the firms value chain, within and outside the firm. Disintermediation = the process of bypassing buyer channel intermediaries such as wholesalers, distributors, and retailers. Removing intermediaries lowers transaction costs. The Internet reduces the costs to search for a product or service. Not only is the need for travel eliminated but so is the need to maintain a physical address or permanent retail location. However most of the advantages associated with lower transaction costs can be duplicated quickly and without threat of infringement on proprietary information. Companies can also become overly enamored with using the Internet for cost cutting and thus jeopardize customer relations or neglect other cost centers.*Mass customization has changed how companies go to market. Online customer interaction has replaced the showroom floor. Customers can be involved in planning and design of products and then receive these products quickly with reliable results. Differentiators can make exceptional products and achieve superior service at a reasonable cost, therefore allowing firms to achieve parity on the basis of overall cost leadership as well as differentiation. However, traditional differentiation strategies such as building strong brand identity and prestige pricing have been undermined by Internet-enabled capabilities such as the ability to compare product features side-by-side or bid online for competing services.*The Internet offers companies with a focus strategy the ability to access markets less expensively (low-cost) and provide more services and features (differentiation). Niche players can access small markets in a highly specialized fashion. With social media tools, these companies can solicit input, respond quickly to customer feedback, and provide overall improved customer service. However, focusers can misread the scope and interests of their target markets. This can cause them to focus on segments that are too narrow to be profitable, or to lose their uniqueness in an overly broad niche, making them vulnerable to imitators or new entrants. Focusers can also over extend their niche. Offering additional services can cause the company to lose the cost advantages associated with a limited product or service offering.*The Internet has provided all companies with greater tools for managing costs. However, for individual companies, it may shave critical percentage points off profit margins and create a climate that makes it impossible to survive, much less achieve sustainable above-average profits. The differentiation advantage is also diminished by the Internet because of the ability to comparison shop. A combination strategy challenges a company to carefully blend alternative strategic approaches and remain mindful of the impact of different decisions on the firms value-creating processes and its extended value chain entities. Strong leadership is needed to coordinate the multiple dimensions of a combination strategy.*Industry life cycle = the stages of introduction, growth, maturity, and decline that typically occur over the life of an industry. Managers must become even more aware of their firms strengths and weaknesses in many areas to attain competitive advantages. Factors such as generic strategies, market growth rate, intensity of competition, and overall objectives can change over the course of an industry life cycle. Managers must strive to emphasize the key functional areas during each of the four stages and to attain a level of parity in all functional areas and value-creating activities. Note: products and services go through many cycles of innovation and renewal. Typically, only fad products have a single lifecycle. Maturity stages of an industry can be transformed or followed by the stage of rapid growth if consumer tastes change, technological innovations take place, or new developments occur.*Industry life cycle = the stages of introduction, growth, maturity, and decline that typically occur over the life of an industry. *Introduction stage = the first stage of the industry life cycle, characterized by (1) new products that are not known to customers, (2) poorly defined market segments, (3) unspecified product features, (4) low sales growth, (5) rapid technological change, (6) operating losses, and (7) a need for financial support. Since there are few players and not much growth, competition tends to be limited. Success requires an emphasis on research and development and marketing activities to enhance awareness. The challenge becomes one of developing the product and finding a way to get users to try it, and generating enough exposure so the product emerges as the standard by which all other rivals products are evaluated. Theres an advantage to being the first mover in a market.*Growth stage = the second stage of the product life cycle, characterized by (1) strong increases in sales; (2) growing competition; (3) developing brand recognition; and (4) a need for financing complementary value-chain activities such as marketing, sales, customer service, and research and development. In the growth stage, the primary key to success is to build consumer preferences for specific brands. This requires strong brand recognition, differentiated products, and the financial resources to support a variety of value chain activities such as marketing and sales, and research and development. Efforts in the growth stage are directed towards stimulating selective demand in which a firms products offerings are chosen instead of a rivals. Revenues can increase at an accelerating rate because new consumers are trying the product and a growing proportion of satisfied consumers are making repeat purchases.*Maturity stage = the third stage of the product life cycle, characterized by (1) slowing demand growth, (2) saturated markets, (3) direct competition, (4) price competition, and (5) strategic emphasis on efficient operations. As markets become saturated, there are few new adopters. Rivalry among existing rivals intensifies because of fierce price competition at the same time that expenses associated with attracting new buyers are rising. Advantages based on efficient manufacturing operations and process engineering become more important for keeping costs low as customers become more price sensitive. It also becomes more difficult for firms to differentiate their offerings, because users have a greater understanding of products and services. Firms can affect consumers mental shifts through (A) reverse positioning = a break in industry tendency to continuously augment products, characteristics of the product life cycle, by offering products with fewer product attributes and lower prices; or (B) breakaway positioning = a break in industry tendency to incrementally improve products along specific dimensions, characteristic of the product life cycle, by offering products that are still in the industry but that are perceived by customers as being different.*Decline stage = the fourth stage of the product life cycle, characterized by (1) falling sales and profits, (2) increasing price competition, and (3) industry consolidation. Firms must face up to the fundamental strategic choices of either exiting or staying and attempting to consolidate their position in the industry. In the decline stage, a firms strategic options become dependent on the actions of rivals. If many competitors leave the market, sales and profit opportunities increase. On the other hand, prospects are limited if all competitors remain. Maintaining refers to keeping a product going without significantly reducing marketing support, technological development, or other investments, in the hope that competitors will eventually exit the market. A harvesting strategy = a strategy of bringing as much profit as possible out of the business in the short to medium term by reducing costs. Exiting the market involves dropping the product from the firms portfolio. A consolidation strategy = a firms acquiring or merging with other firms in an industry in order to enhance market power and gain valuable assets. Firms can also resurrect old technologies by retreating to more defensible ground, using the new to improve the old, or improving the price-performance trade-off.*Answer: D. See stages in the maturity cycle.*Turnaround strategy = a strategy that reverses a firms decline in performance and returns it to growth and profitability. The need for turnaround may occur at any stage in the life cycle but is more likely to occur during maturity or decline. Most turnarounds require a firm to carefully analyze the external and internal environments. The external analysis leads to identification of market segments and customer groups that may still find the product attractive. Internal analysis results in actions aimed at reduced costs and higher efficiency. See Case 32: Ford, and Strategy Spotlight 5.7 for how Alan Mulally lead Fords turnaround. See Case 8: Jamba Juice for how CEO James White revamped the product line and put the company on the path to profitability. *