Many business strategists have proposed there are few new problems in business, only derivations of the same general business situations. The widespread "repurposing" of knowledge assets by top consultancies such as McKinsey and BCG supports this view; however, the situational details and specific actions often drive success or failure in the business arena.
The business cases reviewed in Competitive Strategy in the Marketplace certainly highlight these two concepts. Although these cases chronicle business situations from markets as differentiated as high-end medical device manufacturers and consumer products, we observe clear commonalities in strategic situations, implications, and likely action plans.The most basic division across many strategic engagements is attack / defend. Though it typically takes greater resources to attack, we observe a significant number of cross-parry defense opportunities, which could require resources to support both attack and defense activities. In summary, Wilmington, Colgate-Palmolive Precision Toothbrush (CP), International Systems CT Scanners (IS), are attack cases; Progressive, General Foods (GF), Maxwell House (MH), Cardiac Pacemakers (CP) are defend cases.The cross-parry was observed often as competitors sought to deflect a competitive blow by attacking another related market.
For MH, we see an opportunity for a geographic cross-parry, moving into the eastern region, the core geography of Folgers, the number-two player in the market. As discussed in more detail later in this document, MH's cross-parry could yield a particularly deadly blow to Folgers, a single-product company. Guidant's cross-parry is product oriented - using cash generated from its franchise in Tachy products to attack the Brady market. Similar to Guidant, Progressive sought to deflect the advances of Allstate and GEICO by moving into their standard insurance market, a much larger pool of prospective customers.Late entry to an attractive market can be costly.
This situation most clearly manifests in the IS-CT Scanners and the C-P Precision Toothbrush case, but is also developing for General Foods in the real cream topping segment. For International Systems (IS), failure to enter the CT market early opened an entry opportunity for many smaller players. Although in calendar time IS is not very late, in "strategic time" the company waited an eternity to act. Now, with the CT market growing quickly and encroaching on the x-ray market, there are three strategic factors which adversely impact IS:(1) development of competitive technology is more complex and expensive, (2) market share must be taken from incumbent players, (3) as weaker players are pushed out of the market, their attempts at survival will likely impact segment profitability. Serendipitously, GF is not as late to the market as IS seems to have been. Thanks to failed test marketing attempts by an unnamed competitor, GF may have some time to react to the real cream topping threat.
However, if GF is late to this market by even 6-months the company will experience significant barriers to distribution and ultimately lose much of a new market segment.Mono-line competitors face significant risk. Some of our focus companies benefit from this fact; others suffer. MH's major competitor, Folgers, had a single product supporting its business.
By constraining Folgers' coffee business, MH could effectively control the resources of its competitor entire business. Napoleon said "an army moves on its stomach"; in business, cash feeds initiatives. Single product companies such as Folgers may have their "supply lines" of cash cut by aggressive competitors. Progressive was in the similar situation to Folgers. Progressive was at serious risk in 1993 due to its non-standard auto focus and increasingly aggressive movement of large, diversified players into its space. A cross-parry into the standard insurance market powered by Progressive's industry-leading underwriting accuracy provided ample diversification and growth opportunities.
Cases where brand plays a major role:Focus Firm Owns Segments Most Powerful Brand:Competitor Owns Segments Most Powerful Brand:GF (Cool/Dream Whip)C-P (Colgate)Wilmington (Corning Ware)Progressive (Allstate, State Farm)It has been said a "brand is like a patent which never expires", conversely, Roy Disney was recently quoted saying "branding is something you do to cows... Branding is what you do when there's nothing original about your product." It is clear business is often conflicted when it comes to brands; however it is clear a brand can be a powerful force in business. For GF, the Cool Whip brand allows for a price premium of ~$0.
13/unit, helping the company to remain competitive in the face of cost advantaged competition with similar products. Interestingly, both of the above-cited quotes seem relevant to GF's offering. On the other end of the spectrum, Wilmington was considering entry into a market where the entrenched competitor's "brand defines the category." Wilmington will not only need to under-price its competitor to counteract its brand value, but also either take significant sales away from Corning Ware or expand the market by over 20%.
Many cases chronicled situations which could be called a strategic imperatives or forced hands, in that the future actions of the focus company are largely unavoidable. For example, CP's failure to enter the premium segment would open their oral care segment dominance to a number of competitors. CP's current markets are shrinking and yielding lower profit levels. Not entering this segment is not an option. Also, International Systems must enter the CT scanner market or be relegated to the fast-shrinking x-ray market. Going forward, we expect most growth and profit to stem from innovation in scanning technology in the CT/ nuclear scanning space.
Ultimately, IS would be a small, uneconomic player in a non-strategic segment of the medical supplies industry. In both the CP and IS cases, timing of market entry is critical. For these companies, if entry is not immediate, their businesses would be in serious risk of failure going forward. Furthermore, additional delays will almost certainly be associated with larger entry costs.
In business as in war, innovation often changes the competitive landscape. For centuries military arms races were at least partially based on building stronger walls and developing weapons which could break through such barriers. Today walls in the conventional sense have little meaning in military defense. For CP, maintaining shelf-space and achieving cost efficiencies were the basis of competition for decades. The development of the super-premium segment in toothbrushes changed the basis of competition, leaving CP without an offering in this critical segment for far too long.CP was clearly slow to adjust to the change in the toothbrush market.
Even for GF, the potential introduction of new food technology poses a serious threat to this segment dominating firm. In fact, in the majority of cases product innovation was one of the main drivers of the strategic questions raised by the case. Two cases where conventional innovation was not at the center of the strategic problem were Wilmington and Progressive. However, even these cases are related to the change innovation can bring to a market: Wilmington in the expiration of a technology patent, and Progressive with its innovative pricing processes providing it a foundation from which to compete.Possible permutations of business situations are finite and often composed of elements which lend themselves to structured analysis, at some level. Thus, concepts from The Book of Five Rings, Sun Tzu, and Competitive Strategy are often cited in businesses as diverse as toothbrush marketers and insurance providers.
As expected, we see commonalities across the widely varied set of business cases reviewed in this document. Lastly, strategy is as much an art as it is a science; none of these cases should be considered "cookie-cutter."
