What principles of competitive strategy are the most useful for competing in this industry? How are these capabilities developed and maintained? Which companies appear to have

Principles of Competitive Strategy

Now that we know how to evaluate the competition and to analyze the dynamics between competitors, let’s turn to identifying competitive moves that are most likely to be effective. Four general principles of competitive strategy should be followed as a company looks for successful competitive moves.12These principles, when applied, strengthen a company’s ability to compete:

  • 1.Know your strengths and weaknesses
  • 2.Bring strength against weakness
  • 3.Protect and neutralize vulnerabilities
  • 4.Develop strategies that cannot be easily imitated or copied (go where the competitor is not)

Know Your Strengths and Weaknesses

The first principle is to know your strengths and weaknesses. A company’s strengths are the resources and capabilities that deliver unique value (see Chapter 3 for a detailed discussion about resources and capabilities). A company must work to develop these strengths through focus, investment, and effort. A key strength of Apple is product design. But it is the relentless focus on developing and investing in that strength that turns it into a strong and enduring source of competitive advantage.

A company’s weaknesses are the resources and capabilities that are subject to rapid obsolescence, easy imitation, or high cost not recouped by value. Apple has strengths in product design, but its products are subject to rapid obsolescence because of the rapid pace of technological change. Similarly, Starbuck’s atmosphere is easily imitated so the company cannot rely on this as a source of competitive advantage.

A company must make a careful and accurate assessment of its strengths and weaknesses because these form the foundation of competitive strategy as the next two principles illustrate.

Bring Strength against Weakness

Second, bring strength against weakness. After a company’s key strengths are identified, they should be targeted to competitor weaknesses. Bringing strength against weakness can have devastating effects on the competition. When Google launched Android in 2007 as a mobile operating system for smartphones, Microsoft was already limping along in mobile phones, having suffered rapid market share declines because of products from Apple and Research in Motion (RIM). Google leveraged its formidable strength in software engineering innovation and then built a coalition of manufacturers who would adopt Android (the open handset alliance) to deliver a strong body blow to Microsoft, whose rapidly decaying resource investments and declining market share made the company vulnerable in this area.

Sometimes competitor weaknesses may be masquerading as strengths, so any apparent competitor strength that can be undermined or eroded through direct competitive action can be considered a weakness. Therefore, in their hunt for competitor weaknesses, companies should not be afraid of attacking competitive strengths. As Kmart struggled to stay afloat amidst bankruptcy, Walmart attacked what was considered one of Kmart’s few areas of success by introducing a knockoff of Kmart’s Martha Stewart product line.13 This strong blow contributed to Kmart’s downfall.

Protect and Neutralize Vulnerabilities

Third, protect and neutralize vulnerabilities. A company’s own weaknesses, once identified, must either be strengthened or truly neutralized; that is, made irrelevant so that they don’t become targets of competitors. Starbucks neutralizes the effect of an easily imitable atmosphere by also introducing a large variety of great tasting coffee blends, food items, store convenience, and brand positioning.

In the last story, Microsoft might have assessed its weakness in mobile earlier than Google did and made moves to strengthen this vulnerability by investing much earlier in a new mobile operating system. As another example, some regard Apple’s closed, proprietary mobile operating system, iOS, as a competitive vulnerability since other companies are not allowed to deploy it on their devices. This could limit its market potential. In fact, Google attacked this weakness by making Android an open platform. However, Apple has been highly effective at neutralizing this weakness through strong design of its products and development of an extensive developer network in which developers of applications share in the value of the proprietary system.

Develop Strategies That Cannot Be Easily Copied

Lastly, develop strategies that cannot be easily imitated or copied. This seems obvious, but often companies are so busy copying competitor’s moves that they fail to see how they could do something altogether different. The principle might be best captured in the idea of going to where the competitor is not. Sun Tzu, the great Chinese strategist, once said, “To be certain to take what you attack is to attack a place the enemy does not protect.”14 Whether a company is pursuing special market niches, reconfiguring the sequence of its activities along the value chain, or recombining and leveraging resources of themselves and partners in ways that deliver value, competitive strategy flourishes when companies are doing something unique.15

In fact, most long-time competitors have found a way to occupy distinctive positions in their markets so that they can coexist with other companies profitably. Returning to the airline industry, even though American, Delta, and United compete in the same strategic group in the United States, each has carved out distinctive hubs within their nationwide hub and spoke system so that they don’t completely overlap as they compete. Delta has hubs in Salt Lake City and Atlanta. United has hubs in Chicago and Denver. American has hubs in Dallas and Chicago. So although there is some overlap between the cities to which they fly, each of the major competitors has staked out a somewhat distinctive position relative to rivals.

In summary, these four competitive principles may be used to develop strong and unique competitive positions that improve the likelihood of long-term competitive success.