Developing Strategy in a Competitive Environment

Strategy formulation begins with an analysis of the forces that shape competition in the industry in which a company is based. The goal is to understand the opportunities and threats confronting the firm and to use this understanding to identify strategy/strategies that will enable the company to outperform its rivals. Opportunities arise when a company can take advantage of conditions in its environment to formulate and implement strategy/strategies that enable it to become more profitable. Example, the increase in the salaries of policemen prompted many to join the police force and an opportunity for the public safety industry to market their products. Threats arise when conditions in the external environment endanger the integrity and profitability of the company’s business.
In The Art of War, Sun Tzu says: “War is a matter of vital importance to the state; a matter of life and death, the road to survival or to ruin. Hence, it is imperative that it be thoroughly studied.” Just like the treaties on The Art of War, scanning the marketing environment is of vital importance to the company’s survival and growth. There are five factors in a war that must be considered in forming a strategy which is parallel to business and these are:

  1. Moral Influence
  2. Weather
  3. Terrain
  4. Commander
  5. Doctrine
  1. Moral Influence means a “spirit of mission.” The strength of belief that the purpose is morally sound rallies a fighting spirit and generates a firestorm of commitment
  2. Weather equates to “outside forces.” The surge of consolidation that is sweeping through every industry is an outside force, as is the emergence of world competition and the influence of environmentalism.
  3. The terrain is the “marketplace.” As the general must know the terrain, so the strategist must consider the scene of action – people, place, product, promotion, price, etc.
  4. Commander has an equivalent in “leadership.”The names keep changing, but the principles of leadership remain the same.
  5.  Doctrine is comparable to “guiding principles.” Understand and apply the fundamental principles that determine success.

Every assessment must include a thorough analysis of how to increase business with existing customers. In today’s business world, the assessment before the plan is often ignored in the rush to action. When an action is taken without a thorough assessment of the situation, too often people begin working on the wrong things. In these circumstances, the result would be a lot of effort expended with no gain. Assessments are simply methodologies for gathering data in a structured process designed to elicit facts or perceptions. Assessments can be internal or external and they can be conducted by one or more individuals. Assessments can be surveys distributed to everyone or interviews conducted across a vertical slice of the organization. This is the essence of formulating a strategy.

Dealing with the Competition  
Achieving real superiority is fundamental to the concept of strength versus weakness. Your strategy and tactics must be designed with the idea that your competitor will not have anywhere near an equal chance to win. Strategically, the concentration of strength against weaknesses is a mental process. Tactically, this concentration is a physical act.

Here are key methodologies for concentrating strength against weakness:
Flank: Concentrate strength against weakness by launching an end around strong points to a lightly defended or unoccupied position. In your search for weakness, there are two key elements:

  1. Look for weakness at a connection. It can be between geographic locations or product lines. Also, explore going around the extreme low or high end of a product.
  2. Since every strength has a corresponding weakness, look for the weakness of the competitors’ strength.

Segment: This is concentrating strength in a specific area. The small can never equal the big everywhere. The pizza industry is dominated by big players such as Pizza Hut, Shakey’s and Domino’s Pizza. However, there are small players that are strategically positioned near villages, subdivisions, and roads which are accessible to consumers such as Angel’s pizza, fat boys and other smaller sized pizza companies. They took notice of the strengths of their bigger rivals and incorporated it to their own while they have adapted to the peculiarities of their environment, specializing on the distinct taste of their customers. However, this strategy would be hard pressed to mass produce for the general public since the operating costs would increase in differentiating and specializing in the product.

Overwhelm: Any initiative can be achieved if enough strength is concentrated to support it. Conversely, any initiative can be defeated if enough strength is focused on the weakness of that initiative.

Reinforce: The best odds for success are achieved by spending time, money, and energy reinforcing what is working. Then you are leveraging off what you do well.

Maneuver to Gain the Advantage – At the strategic level, maneuvering is a way of thinking about how you are going to act in a manner that puts your opponent at a disadvantage. At the tactical level, maneuvering most frequently involves concentrating or dispersing as you seek the most advantageous route. Without thinking about how to maneuver, the idea of fighting when outnumbered is ludicrous. The way to avoid what is strong is to attack what is weak. Look for lightly defended positions. Engage in a frontal attack only when you have overwhelming superiority.

Achieve the Critical Mass – The critical mass is simply the concentration of energy required to achieve success. What counts is not the strength of resources but the speed with which is delivered. That energy concentration can be in any facet of the organization. For example, purchasing, production, marketing, distribution, etc. Nike is one of the world’s most recognized brand names, and it sells more than $15 million of shoes and other sports apparel and equipment each year, yet it owns no factories. They have concentrated on design and marketing and achieved the decisive advantage in those areas.

 Develop Effective Internal Communication – Effective internal communication happens only as the result of a well-designed plan. This plan is organized around the understanding that all messages are not delivered in the same manner. Good news may need to be delivered only once to be heard. Instructions and changes that disrupt existing paradigms must be communicated in several different ways and often repeated before people will accept the new information.

Gain the Mental Advantage – Opportunities for victory are found in the mental capacity of the leader to integrate strategy (planning) and tactics (execution). The ultimate responsibility for success or failure lies with the leader. Not because he has to do everything but because he must have the mental capacity and provide the means to translate sound strategy into successful tactics. Externally, the mental advantage is achieved through surprise. You must generate a mismatch by getting inside your adversary’s observation-orientation-action time cycle. By the time your adversary thinks he knows what he is doing, it would be too late.

Internally, a positive outlook and a cool head are the foundation of a good attitude.

“The moral is to the physical as three is to one,” The wise general Napoleon said. The word, “moral” refers to a worthwhile cause, a belief that we are fighting for is just and right. It is the “moral cause” that produces high moral. The moral issues in business are both the moral courage to make the right decisions and act upon them and the leadership style that helps make everyone feel good about themselves. That is the essence of strategy.

References:

1. The Art of War for managers – Gerald A Michaelson and Steven Michaelson
2. Strategic Management – Gareth R. Jones

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