SUN TZU ART OF WAR INTRODUCTION SERIES( PART 3)
-September 3, 2010
This week we will be examining how one can position into another enemy’s market, or to conquer an enemy withoutincurring any substantial costs. Sun Tzu once said:
“In the practical art of war, the best thing of all is to take the enemy’s country whole and intact; to shatter and destroy it is not so good. So, too, it is better to recapture a regiment, a detachment or a company entire than to destroy them”
In other words, capture the enemy without wasting any of your vital resources. For all wars that require a protracted amount of time to decide who emerges the victor, either party gains no advantage.
If you are going to compete with another company in a another market, or even in the same market, in protracted periods of time, then consider that even if you win, the financial costs on your company, as well as the sap of morale on your employees, will be so costly, that other competitors will come and try to attack you by buying your company, or simply have the chance to gain more of your domestic market share.
Therefore, if you feel that you must enter into another market, and you do not know the market in terms of the players, the financial and legal regulations, and what those customer wants, then consider to buy a company that is already in the market that you wish to enter. It could even be a small company, so at least you will not have to spend additional costs and resources to figure out how to gain a foothold in that market. Through that company, then you can research and understand how that market works, the competitors and the customers.
This option can easily be applicable in the same market. It is better to buy your competitor, than to compete with him for a long period of time. Even if this is an option, this strategy can apply in buying another company in the market where your competitor is weak at, and then compete and destroy him.
Of course this strategy maybe less ideal and even a bit costlier for small business owners or the ones who are just starting their business, but it is a strategy worth considering, especially in countries where the capital market is very liquid, and financing is easy to acquire. Thus, through loans and other means of financing, you can buy a company you perceive as to be a foothold to your desired industry, or even buy your competitor out.
To add a further not, make sure to have a legal agreement that whereby once the company is bought, the former directors will not attempt to leave and take the customers of the former company away for a certain period of time. I have seen many small and medium businesses consistently failing to have these legal agreements made, and in the end they buy nothing but an empty shell. So please beware.
APPLICATION
To illustrate, let us take the decision where HP acquired Palm for US$1.2 billion to gain a foothold in the smartphone market. HP knew that Apple has already established itself as a competent force in this market, and so they acquired Palm, understanding that this company would give them a brand name that has been in the industry for some time, and moreover, Palm’s unique webOS is already a true innovate platform itself, in which it would allow HP to take advantage of features such as multitasking and always up-to-date information sharing across applications. Combined with these two factors, HP is able to compete with Apple in this industry. HP also entered the market without having to incur any lag time and sizeable costs as compared to if they tried to enter the market by themselves.
This is the end of this week’s article, however I would like to thank and appreciate all the kind comments from the readers, and if there are any Sun Tzu strategies, or any other business strategies that you would like me to write on, then please feel free to leave me a comment. I will try my best to explain these strategies to you through the articles.
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