Difficult Markets

This type of market segment is characterized as one where progress is erratic and highly competitive. If attempting to make any meaningful market penetration, secure key accounts, or maintain reasonable levels of logistical support, you are likely to be blocked by asset-draining barriers.

Also, if a competitor is fully prepared, takes you off guard, and you subsequently lose your market position, it is difficult to return to your former position. In effect, you are entrapped in an untenable condition and your entire business strategy could be in jeopardy.

Your best course of action is to look for “a single center of gravity” and go forward, just as long as the effort is consistent with your mission and long-term strategic objectives.

The supreme excellence in war is to attack the enemy’s plans.

What is of supreme importance is to attack the enemy’s strategy.

Sun Tzu

Encircled Markets

Encircled segments foretell a potentially risky situation. That is, a market condition in which you control limited resources; and any aggressive action by a stronger, well-positioned competitor can force you to consider pulling out of a market.

Under those threatening conditions, your best approach is to maintain ongoing competitor intelligence. Your aim is to conduct a meaningful comparative analysis that would open opportunities by exposing your opponent’s vulnerabilities so you can “attack the [competitor’s] plans”—or single out a decisive point.

Doing so at least permits you to develop a contingency plan, which could include various options, such as developing a series of product enhancements on a phasing-in time schedule, launching value-added services that favor your strengths and highlight your rival’s weaknesses,

Secure a Competitive Advantage: Concentrate at a Decisive Point • 65

or preempting your competitor’s promotional programs and thereby “attack the [competitor’s] strategy” and his ability to maintain a profitable market position.

The essential aim, of course, is to attempt a turnaround and discourage your opponent from making a monumental effort to push you out. By taking a bold approach, you may even pull off a monumental coup by discouraging your competitor from pursuing an aggressive action against you. If your actions are well positioned, you may even place your competitor in his own encircled position!

The issue, therefore, is not which side has the greater resources. Rather, it is a case of who has the resolute mind-set that can outthink, outmaneuver, and outperform the competitor. Arming yourself with a process to conduct a comparative advantage (Table 3.1 and Table 3.2) offers a means to target a decisive point.

That said, keep in mind the following time-honored advice, which is totally applicable to today’s business environment should a competitive situation turn negative.

In war the result is never final ... merely a transitory evil.

Clausewitz

Table 3.3 summarizes the eight categories of market segments.

To overcome your enemy you must match your effort against his power of resistance, which can be explained as the product of two inseparable factors: the total means at his disposal and the strength of his will. The extent of the means at his disposal is a matter—through not exclusively—of figures, and should be measurable.

But the strength of his will is much less easy to determine and can only be gauged approximately by the strength of the motive animating it.

Clausewitz

Familiarizing yourself with the eight segment categories in Table 3.3 will equip you with additional insights when selecting segments. You will then be in a superior position to “match your effort against his power of resistance.” Then, you can concentrate your resources rather than create an unequal distribution that dissipates your strength. Doing so therefore places you in an excellent position to exploit your opponent’s weaknesses— and reduces his power to resist.

Advanced Techniques for Selecting a Segment’s Decisive Point

TABLE 3.3

Category

Characteristics

Natural market

You and your rivals can operate harmoniously as long as each company sticks to its own dedicated segment. Aggressive confrontations are seldom used.

All companies share a common interest in furthering the long-term growth and prosperity of the market.

Leading-edge market

Market entry means a minor penetration into a competitor’s territory to determine the feasibility for generating a long-term revenue stream.

Key market

Competitors appear evenly matched within key market segments. The general strategy is that you would not openly oppose an equally strong rival. If the competitor attacks your position, then you are forced to launch a counter effort by concentrating as many resources as you can to “attack the enemy’s plans.”

Linked market

You and your competitors are linked with easy access to markets. Your best strategy is to construct strong barriers around those niches from which you can best defend your position.

Central market

You face powerful competitors that threaten your market position. Counter such threats by joint venturing with other firms. You thereby gain greater market advantages and strategy options than you can accomplish independently.

Challenging market

An aggressive competitor dominates the market and thereby could place your company at excessively high risk. If your long-term objective strongly supports maintaining a presence in the market, then find a secure position by locating your competitor’s decisive point.

Difficult market

Competition is pervasive and market behavior is erratic. Gaining and maintaining market penetration is difficult. Overall, your best course of action is to go forward by conducting a comparative analysis and locating your areas of strengths and your competitor’s weaknesses.

Encircled market

This market is risky where any aggressive action by a stronger, well-positioned competitor can force you out of the market.

Maintain ongoing competitive intelligence to accurately assess the vulnerabilities of your opponent.

If you lack a capability to mount a meaningful competitive response, then exiting the market is a prudent strategy.

As you develop your strategy of concentration at a decisive point, here are questions you should address—ideally, using a team approach:

Should you change the allocation of your resources after you have gained a favorable market position?

If you gained a dominant position, then you should move partially from the offensive to the defensive, making certain that you have an active defense against expansion-minded competitors.

You saw the effect of a somewhat lethargic response by the management of Xerox when Japanese copier companies first showed interest in the North American market and then moved energetically to concentrate in the small business segment as its initial point of entry.

Consequently, how you deploy your resources and, in particular, how you shape your marketing mix should change with the situation. That also means adding as much flexibility to your organization as feasible, which includes holding reserves. You thereby ready yourself to respond rapidly to counter competitors’ moves.

Also, one of the essential activities related to properly allocating resources is to acquire as much competitor intelligence as possible. Armed with reliable information, you can budget funds for products that could challenge competitors’ entries. What follows is that you are in an informed position to effectively deploy salespeople, motivate middlemen, and fund promotions.

The bottom line is that as you concentrate your resources, you thereby secure an advantage by forcing a competitor to spread his efforts and weaken his overall market position.

How will your personnel react under diverse market conditionsspecifically, during actual competitive confrontations?

Unless you have observed your staff’s behavior under strained situations, you are not likely to know the precise answer. Instead, it is safe to rely on the premise that only the skilled will survive competitive confrontations.

Therefore, as indicated earlier, the experience, training, and morale of your personnel are far superior to quantity. Consequently, do not sacrifice quality. If you do, there is a greater chance of failure—unless the quality of the competition’s personnel is far inferior to yours.

Although no situation offers certain results, it is clear that those with the skills and high-level training to do so can turn shortcomings to an advantage. Conversely, those who lack skills are in jeopardy. The ultimate responsibility for the condition of your personnel remains with you.

As such, it deserves your highest priority and is an essential factor in leadership and managerial competence. Therefore, it should be your primary concern to monitor the actions of your personnel under a variety of circumstances.

Are you prepared if the competitive situation shifts from success to failure?

As an extension of the above, think about the behavior of your supervisory personnel. Could you count on them to resume control of a losing situation and regain the confidence of their staff should the business plan start to crumble? How are the senior and junior managers perceived by those they supervise? Is there an adequate level of trust and confidence in their ability to make effective decisions?

Consider times where rapid decisions are needed to alter a threatening situation. Are communication channels intact? Do they lead to understanding or confusion? Are there undercurrents of unspoken or disguised messages filtering through to the group that generate encouragement or discouragement, elation or fear?

How do you assess your personal performance?

Objectivity is the issue here. All too often, when gauging personal performance, there is a tendency to place blame solely on others. Yet, it is not the underlings who are always at fault. Rather, managers must take their share of blame in such areas as incompetent leadership, poor or nonexistent market and competitive intelligence, inadequate or unclear communications, ignorance of fundamental strategy rules, and an inability to motivate employees to implement plans with speed and enthusiasm. Under these circumstances, truth and impartiality would be the prudent paths to correct lagging performance.

For to win one hundred victories in one hundred battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill. Thus, what is of supreme importance is to attack the enemy’s strategy.

Sun Tzu

In summary, use the following guidelines to concentrate at a decisive point:

Make use of competitive analysis (Tables 3.1 and 3.2) to identify your competitor’s weaknesses or market gaps.

Search out unserved, poorly served, or emerging market segments that represent growth and permit you to establish a foothold.

Secure your primary segment by using such strategies as strengthening your own brand, developing product enhancements, adding specialized applications, offering creative packaging, and offering value-added services. You thereby create a barrier by blocking a competitor’s entry or by using them as part of an offensive strategy to expand.

Recognize that every market segment you enter is actually the starting point of a new operation and a new sales cycle, which opens up a whole set of fresh possibilities.

No campaign is complete without first determining where to concentrate your efforts. Your aim is to apply maximum effort at a decisive point. That point means positioning your resources to satisfy customer demands, concurrent with preempting your competitor from taking similar action against you.

Consequently, a dominant rule of strategy is to keep one’s forces concentrated: first in general and then at the decisive point. The immediate application is that a numerically inferior organization can win by concentrating resources at a decisive point. Yet to accomplish this feat takes outstanding leadership and strategy skills by employing boldness, indirect approach, surprise, and competitive intelligence.

To the extent that you can, the aim is to avoid costly confrontations that drain resources and often accomplish little. Rather, “to subdue the enemy without fighting is the acme of skill.”

The greatest talent of a general, and the surest hope of success, lies in some

degree in the good choice of these points—objective points and decisive

strategic points.

Jomini

 
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