The major points of this chapter are:
- Types of Markets
- Calamities caused by the CEO
- Six Ways to Court Defeat
Types of Markets
There are six types of markets:
- Narrow Passes
- Precipitous Heights
- Positions at a Great Distance
A market which can be entered with equal ease by either you or your competitors. The first to enter the market can obtain a dominant market share from which it will be difficult to dislodge.
Entangling / Entrapping
This is a market which is easy to exit, but difficult to return to.
- Consumer electronics. Difficulty of U.S. firms in trying to reenter the market.
Temporizing / Indecisive
This is a market in which it is difficult for any one competitor to remain competitive.
- Steel industry. To whomever has the lowest labor, capital, and access to raw materials. Note how moving from U.S. to Japan to Korea.
Narrow Passes / Constricted Ground
This is a market in which it is possible to block the entry of other competitors into the market.
- Example of Armor-All car wax.
This is a market having considerable complexity. In such a market, it is desirable to occupy profitable niches, and wait for your competitors to appear.
Positions at a Great Distance
It is difficult to compete with a foreign competitor of equal size when selling products in its own home country. It will be unprofitable to compete directly against it.
U.S. firms selling in Japan. Contrast with Japanese firms selling automobiles in U.S.
Six Calamities Due to CEOs
There are six types of calamities that are due to failures of the CEO:
Flight occurs when one attempts to directly compete with a competitor that has ten times the resources that you possess.
If the personnel of the company are more competent than their managers, the result will be insubordination.
If you have competent managers, but incompetent employees, the result will be collapse.
If the managers of a company are angry or insubordinate, and make a decision independent of the CEO, the result is ruin.
Disorganization occurs when:
- Weak CEO, no authority
- Unclear orders
- Constant reorganizations
If you have inaccurate market intelligence and enter a market with insufficient resources against the competition, you will be routed.
If you do not select the correct key individuals to implement your strategy, you will be routed.
Six Ways to Court Defeat
There are six ways to encourage your own defeat:
- Inaccurate market intelligence
- Want of authority
- Insufficient training
- Unjustifiable anger
- Nonobservance of discipline
- Failure to use picked men
Inaccurate Market Intelligence
By market intelligence we must know:
- Condition of our competitors
- State of our company
- Overall conditions of the market
Want of Authority
If the decisions made by a CEO are ignored and cannot be enforced, then the personnel of the company are useless from the view of implementing any strategy.
If a sales force has not been properly trained on how to sell a product, they will not be as effective as those of a competitor who has trained there sales force.
- IBM used to tell its salespeople, “There is no excuse for ever losing a sale on technical grounds.”
Reacting to a competitor in anger without thinking can easily lead to disaster.
Consider a hostile takeovers. Is resisting a takeover offer in the best interests of the stockholders or is it a personal reaction by the management of the company?
Nonobservance of Discipline
When a company does not have good management or direction, the company will be in disorder.
- Apple Computer under Spindler in 1995 is an example of a company that suffered a tremendous loss of market momentum.
Failure to Use Picked Men
The best laid plans are doomed to failure unless qualified personnel are selected to implement them. The result will be a rout.
Cite various franchises that have gone under because the concept was not properly implemented due to insufficiently trained personnel.
Fight Only When You Can Win
The chances of success in the market can be assured if you understand the vulnerabilities of your competitors, have made sure that you are not subject to actions of your competitors, and that market conditions are favorable. Success requires making fewer mistakes than your competition. Complete success means that you make no mistakes.
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