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Monday, January 31, 2011

A Case Study of Five Classic Hardball Strategies

Any strategy that provides a decisive competitive advantage is a hardball strategy. Although there are countless ways to play hardball however, there are five classic hardball strategies that have proved, over the decades, to be particularly effective in generating competitive advantage.
Unleash massive and overwhelming force.
Hardball players prefer the indirect attack; however, sometimes to overcome their competitors, they launch a full frontal assault. But in such a situation, it must be noted that this strategy should not be adopted until the company is ready to put all its energy behind it. The company must also be sure that the competitive advantage it believes it has is actually available for action. HP, after acquiring Compaq, tried to eat into Dell's share by using its direct to consumer channel, but Dell, aware of the loses that HP was incurring on its PC business, started using its profits from its PC business to fund Dell's low cost printer business in order to hit back at HP as printer business is the most profitable segment of the company.
Threaten your competitor's profit sanctuaries.
Profit sanctuaries are the parts of a business where a company makes the most money. The hardball player can influence a competitor's behavior and gain competitive advantage by attacking a competitor's profit sanctuaries.
However, this strategy is risky; it takes the player deep into the caution zone. Also, the competitor is likely to retaliate by attacking your profit sanctuaries. Classic example here would be that of Toyota, how it overran the profit sanctuaries of GM, Ford and Chrysler - light trucks and SUVs, where they earned between $10 and $15 thousand dollars per vehicle.
Take it and make it your own.
Often companies like to think that their bright ideas are sacred however, hardball players are willing to take any good idea they see (any one that isn't restrained by a patent or other legal protection) and use it to create competitive advantage for themselves. This isn't restricted to borrowing from competitors. Ideas can be picked from one geographic market and transplanted to another. Ideas can also transplant between industries. But the "making it your own" part is more important than "taking it." so that it's not just a me-too copy. An example in Indian context would be that of Priyagold biscuits who are matching almost the entire range of biscuits being offered by Britannia but at a lower price.
Entice your competitor into retreat.
Sometimes, based upon a superior understanding of business and industry, the hardball players can take actions that confuse their competitors and entice them to behave in ways that they believe will be beneficial to them but that actually will weaken them. This opportunity is contingent on the existence of certain customers that are not worth having because they are high cost to serve. These customers may be willing to pay a premium for the concerned offering, but it usually is not enough to be truly worth the effort. These are the customers that the hardball players want their competitors to have.
Enticing your competitors toward business that drives up their costs is one of the most complex strategies of hardball competition. For example, you can set prices so your competitors respond by seeking business that they think will be profitable for them, but that will, in fact, drive up their costs and depress their profits. This is a risky, bet-the-company strategy. It works best in complex businesses where costs may be misallocated.
Deceive the competition.
This strategy revolves around making the competitor to set up or move in a way that puts him off balance and reduces his ability to meet attack. The high technology industry has employed fakes for years - for example - to attract customers and to distract competitors a software company may announce software which isn't ready for prime time. However, this has to be used with caution as this tactic deceives not only the competition but also the investors.
These strategies in Hardball are classics, but "classic" does not mean "static". The game of hardball is dynamic and always evolving. New barriers to achieving competitive advantage emerge, several issues will affect the way hardball must be played in the future and will change the rules for players who wish to be winners, especially on the global field.
To ensure that while playing hard the companies do not ignore business ethics, it is important that every move must be evaluated in the light of the following questions: -
• Will the proposed action break any laws?
• Will the proposed action be bad for the customer?
• Will competitors be directly hurt by an action?
• Will an action hit a nerve with a special interest group in a way that might damage the company?
• Will the action harm the industry or society?
If the answer to any of the questions is "yes", it means the company has ventured too far into the caution zone. The leader must immediately take corrective action.
Hardball companies are great for business. They cleanse markets. They motivate their people to do their best and make them excited about what they do. They set customers' expectations high and meet them. And hardball executives set good examples for other leaders, executives, and managers. Low-cost consumer commodities, bundled financial services, low-cost, no-frills airfares, are some of the byproducts of companies' successful hardball strategies.


Anonymous said...

I found this article the same as I found in the link below, but a little more confusing...

MSKathayat said...

Yes U r right! Its case study done by students in MBA!

Suhas Pai said...

There are not many Indian examples.