There are nine basic principles to keep in mind when devising your tatical strategy:
- There are markets that must be avoided because you will not be able to retain your marketshare against the competition.
- When doing business in countries which are easily accessible by your competitors, form alliances with your allies.
- Portions of the market which have no strategic value. These portions of the market can be gained after the strategic portions of the market are penetrated.
- You must be resourceful when your competition is competing with you from all directions, both at the high end and low end of your product line.
- When your survival of a company is at stake, you have no choice but to compete with your competitors.
- There are marketing strategies that you must not implement.
- There are products that you must not bring to the market.
- There are companies with which you must not compete with.
- There are markets which you should not enter.
If an executive does not understand how the above nine tactical variables can be used to his best advantage, his knowledge of the market will be of little use, because he will not be able to act upon it effectively.
There are times when the people in a company need not wait for an order to do something, they recognize the correction action to be taken and act upon it.
An executive must rely on his ability to control a situation to his advantage as opportunity presents itself. Do not be bound by established procedures.
There are five variations:
- The most direct implementation of plans should not be used if you know it is dangerous, and it makes your company vulnerable to your competitors.
Assume that you have an existing product line, and that you intend to replace it with a new product line. Simply stopping production of the old product line and starting production of the new product line would be the most direct implementation tactic. But in doing this, you would run the risk of your competition having learned of this, to capitalize on any problems that you had, and to aggressively sell against you.
- Even though you could be very aggressive in competing with a company that is on the edge of bankrupcy or disaster, don’t if there is a possibility that it will do anything to survive.
Assume that a competitor has a tremendous inventory of unsold product. Servicing the interest is using all of their money. Don’t decide to start competing on price with them. They might in desperation start selling product at a cost that will bankrupt you in trying to match it.
- Even though the competitors in a market in a particular country may appear to be particularly vulnerable, choose not to enter the market if these companies have large cash reserves, good management, well trained employees, and you do not understand their plans.
Many American companies have had extreme difficulty in doing business in India.
- Even though it may be possible to enter a market, don’t make the effort if it will be difficult to remain in the market against new competition, or if it offers no long term competitive advantage.
Sony believes that if it had stayed in the calculator market, the technology that it would have developed, would have allowed it to better participate in the personal computer industry that followed.
- While orders should be followed, they should not be followed if they are contary to the laws of the nation, or are harmful to the company.
Consider both Positive and Negative Factors
In evaluating different tactics, consider both the positive and negative factors associated with each tactic. The feasibility of a plan will lie in the positive factors. By considering how to deal with the negative factors, you will be able to resolve the difficulties in your plans.
It is not enough to examine the advantages of taking a course of action, you must also carefully consider the ways in which your competitors can take advantage of you by this course of action.
- Sun Microsystems in licensing NFS (network file server) to its competitors obtained considerable revenues, at the cost of improving the functionality of its competitors equipment. But it also had the net effect of increasing the overall growth of the Unix market which was even more to its benefit.
Create Dissent and Confusion
The way in which you intimidate your competitors is by impacting them negatively. Ways in which this can be done are:
- Hire his best managers and workers.
- Encourage him to hire incompetent people.
- Help alienate the top managers in the company against each other.
- Send him experts who will encourage him to spend large amounts of money developing products that will exhaust his cash reserves, yet provide little return on his investment.
- Divert him with wine, woman, dance, and other creature indulgences, that his mind will not be on business.
Keep your competitors exhausted by keeping them constantly occupied by rushing to take opportunity of apparent advantages in the market.
Delay or prevent a decision by a customer to use a competitors equipment by creating dissent and confusion.
- IBM and DEC in the Unix market with OSF. IBM with the classic FUD (fear, uncertainty, doubt).
Five Dangerous Faults
When a company is defeated in the market, and its leader removed, the cause will be found among the following faults:
- Delicacy of Honor
- Quick Temper
- Compassionate Nature
An executive suffering from any one of these faults will cause the much grief for both a company and its employees.
A stupid and courageous executive is a calamity. This leads to destruction, for the executive will not be able to appreciate opportuntities when they present themselves.
There is nothing like hesitation to cause a company to be lost in the marketplace.
- Bay Networks (the result of merging Synoptics with Wellfleet) reacts to whatever action Cisco takes. In 1994, 3Com passed Bay Networks in revenues.
- Apollo Computers, who created the workstation market, ignored changes in its market, hesitated to change its direction, was passed in revenues by its competitors, and finally was acquired by Hewlett Packard.
Delicacy of Honor
Being sensitive to shame. One anxious to defend his reputation pays no regard to anything else.
If you can provoke the temper of an executive, he will become hasty in his decisions, be obstinate when presented with information contrary to his beliefs. He will not consider how difficult an undertaking may be.
A executive of a compassionate nature can be easily harassed. Fearing short term pain from layoffs, he will be unwilling to take the short term measures that are necessary to insure long term success.
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