COMPETITION Forms, Facts and Fiction COMPETITION Forms, Facts and Fiction Emilio Cvitkovic M © Emilio Cvitkovic 1993 Softcover reprint of the hardcover 1st edition 1993 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W 1P 9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published 1993 by THE MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 2XS and London Companies and representatives throughout the world ISBN 978-1-349-12859-4 ISBN 978-1-349-12857-0 (eBook) DOI 10.1007/978-1-349-12857-0 A catalogue record for this book is available from the British Library. Copy-edited and typeset by Povey-Edmondson Okehampton and Rochdale, England To my father Contents Acknowledgements xi Introduction 1 What this book is about I Why this book is needed I How this book is different 3 Who needs this book 7 Scope of this book 7 1 A Model of Competition 10 What is a model? 10 Why do we need a model of competition? 10 State of the competition analysis art 11 Competitive analysis is going nowhere 12 What foundations can we use to build a model of competition? 21 My model of competition 24 2 Competitive Positioning 37 The importance of positioning 37 Assessing the importance of positioning: a case study 38 A methodology for positioning analyses 47 Types of competitors 53 3 Competitive Strengths 69 Barriers to entry 70 Factors undermining barriers to entry 71 Success in the attack and the defense of markets is based on skills 79 A methodology to analyze competitors' skills: performance profiles 83 4 Decisions, Decisions 91 'Rational' decision-making 93 Decision trees 93 vu viii Contents Perspectives on the use of rational analyses 96 Corporate irrationality 102 Organizational irrationality 105 Political irrationality model 112 5 Competitive Conflict 118 Nature of contlict 119 Playing games to articulate 'true' contlicts 120 What is a game? 121 How do you design a game? 125 How to play the game 130 Games in theory and practice 138 Negotiating manageable contlicts 140 6 Uncertainty 151 Coping with uncertainty 151 Forecasting 151 Forecasting models 153 Statistical models 154 PhenomenologicaI models 161 Mechanistic models 178 Forecasts as tools for consensus 185 Alternatives to forecasting 187 7 Complexity 193 'Internal' complexity 193 Organizational design 194 Operations research and 'systems' 205 Motivation and organizational first aid remedies 209 'External' complexity 212 An approach to representing external complexity 220 8 Implementation 226 'Scientific-rational' management 227 'Entrepreneurial' management 235 Why is entrepreneurial management needed? 236 How to get things done 246 9 Results 255 Which yardstick to use? 255 'Unconventional' yardsticks 269 Contents ix Alternative yardsticks of performance 273 What matters about a company is not its past, but its potential future performance 277 Lack of candour in the reporting of performance of results 281 Conclusion: Interesting Times 289 The future competitive battlefield 289 Notes and References 299 ~~ ~ Acknowledgements I am grateful for the encouragement I received from friends and family to write this book. Julie Wei, a former colleague, provided the initial support and enthusiasm. Along the way I benefitted from the support and ideas from my friend John Gage and my brother Steve. The final versions were reviewed by Ted Welton and Michael Chu and my uncle professor George Sutija. I owe this book to the staunch support and the help of my wife Suzy. She both edited several draft versions and also helped me by taking a disproportionate load of our mutual child-rearing, house keeping and other social and sanity-maintaining responsibilities. I must also thank all companies cited in this book, which provided the examples needed to make it understandable and relevant. Most examples have been obtained from the public record. For obvious professional reasons, direct sources or personal examples have been kept confidential. However, appreciation to all is in order, particularly to those which provided less than flattering examples. The intention here was not to demonstrate the proper handling or mishandling of competitive situations, but to provide a concrete, understandable basis for discussion and commentary. Criticism in this book is not gratuitous. It is necessary as one needs the dark components of the chiaroscuro to draw the most vivid forms. We all benefit from criticism since, according to Nietzsche, 'That which does not destroy us, makes us stronger'. Finally, I can trace some of the commitment to writing this book to the words of Hippocrates quoted in the introduction and which are often used to highlight the seemingly insurmountable difficulties associated with the practice of the art of medicine. The same could be said of the business of understanding competition. Awareness of the difficulties that lie ahead is a necessary departure point. The destination and the motivation we need to attain it is also well described by the words and the spirit of the Hippocratic oath, which exhorts us to be equal to the challenge and demands that we set the highest standards in the practice of the worthy art. xi xii Acknowledgements I wrote this book while at the employ of SRI International, a research and consulting organization. Its views, conclusions and recommendations do not represent the views of that organization. This is a personal book I wrote to clarify my own thinking about the art of competing in business. In tone and content, it is a personal marker which describes what I believe I know, and what I know I believe in, and for which I assume complete responsibility. Burlingame. California EMILIO CVITKOVIC The author and publishers wish to acknowledge, with thanks, the following illustration sources and to state that they have tried to contact all copyright-holders; in any case where they may have failed, they will be pleased to make the necessary arrangements at the first opportunity. The Akron Beacon Journal. Ohio (p. 150) Business Week (p. 266); US Commerce Department (p. 268); Creator's Syndicate, Inc. (p. 36); The Economist (p. 177); Harvard Business ReviewfHenry Martin (March April 1991 issue of Harvard Business Review) (p. 277); Monthly Energy Review (pp. 156, 160, 180); The New Yorker (pp. 68, 75, 90, 103, 139, 184, 192, 254, 288); North American Electric Reliability Council (p. 168); Recording Industry Association of America (pp. 165, 172); San Francisco Chronicle (pp. 78, 282); Alfred P. Sloan, lr © 1963, reprinted by permission of Harold Matson Company, Inc. (p. 163); Richard Stine, Banbridge, Washington (p. 6); US Department of Education (p. 293); USA Today (p. 105); Universal Press Syndicate: Toles cartoon © 1990 reprinted by permission of Editors' Press Service, Inc. (p. 13); The Wall Street Journal © 1989 Dow lones & Co., Inc., all rights reserved worldwide (pp. 39, 159); The World Bank (p.225).