If strategy is so important for the very survival of the
company, then why do companies fail to have a sound
strategy? The threat to strategy, more commonly than
not, arises from internal deficiency of the company rather
than the external environment like changes in competition
or technology. Due to the hyper competition existing in
the marketplace, managers today are likely to imitate
any activity of the competitors that will differentiate their
product/service. However, they do not realize that such
pursuits lead to being operationally effective but not
strategically efficient.
In 1934, Professor GF Gauss of Moscow University, popularly known as the “father of mathematical
biology”, expounded a theory which says that no two species who make a living in an identical way
can coexist. To substantiate his theory he put two protozoa of identical genus in a bottle with food.
In a separate experiment, he put two more protozoa of different genus in a bottle also with food. He
found that the two protozoa of the same genus did not survive, while the other two did. What is true
for nature is true for business as well. Two firms with identical products or positioning cannot survive in
the same market for a long time. One has to lose and herein lies the importance of strategy. The firm
with the better strategy survives and the other fails. However, there is one thing that differentiates
strategy from evolution. Business strategists can use their logical thinking and imagination to make the
change happen at an accelerated rate. Imagination and logic makes strategy possible. If every business
could grow infinitely, it would make strategy redundant. However, as such a thing can never happen,
and therefore the importance of strategy will always remain. This point can be better illustrated if we
take the example of the Indian cement industry.
In the Indian cement industry there are two major
players – ACC and Gujarat Ambuja combine and Grasim Cements. Even though there is little you can
do to differentiate a product like cement, these two players together have a 50-60% of the market
share. They sell in the same market, but using different strategies.
According to thinkers like Prahalad, Ghewemat et al, differentiation in products results from the
differences in purchase prices, functions and place utility or the perception of the buyer. It is the
perception of the buyer that has remained the most important to businesses and various strategies are
formulated and implemented to change them. The strategies followed by Japanese companies after
World War II are one of the best examples of how customer’s perceptions were successfully changed.
Japanese companies, which were known as producers of cheap and shoddy products, worked towards
being recognized as produces of technologically advanced products. Strategy is, thus, the search of a
company to gain competitive advantage in the marketplace. After finding a suitable strategy, the next
job is to increase the competitive advantage in order to leave competitors behind. The trick, according
to Michael E Porter, lies in moving the boundary of advantage into the potential competitor’s market
and resisting the competitor from doing so in your market. |
