Strategies in declining industries

Abstract

An increasing pace in globalization and technological innovation has changed industry landscapes in different sectors. In fact, a growing number of industries are characterized by rapid decline. While there has been much research conducted about life-cycles and its respective stages, knowledge of industries operating in the decline stage has received less attention. The aim of this research is to discover which types of decline exists, which strategies are available and appropriate to cope with decline, through an investigating of the Norwegian Pulp and Paper Industry. In order to answer these questions, an examination of the theoretical approaches within Strategy is conducted, more specifically the perspectives of Industrial Organization within Strategy and Population Ecology. Applying these two perspectives in the context of the Norwegian Pulp and Paper Industry allows the identification of the most suitable perspective. The research is primarily qualitative in nature, through a case study approach. Information is gathered by conducting twelve in-depth interviews with informants from all major companies representing the Norwegian Pulp and Paper Industry. Our findings suggest that the intuitive perception that the Norwegian Pulp and Paper Industry as a whole faces declining demand is incorrect. More than half of the industry is in fact enjoying growth, and the remaining companies clustered at the mature and decline phase. It appears that companies operating in growing segments appear to be more proactive and fits better to the strategies representing Industrial Organization within Strategy. In contrast, companies operating in mature and declining segments seem to be more reactive, and strategic adjustments on the basis of Population Ecology seem more appropriate.