The words ‘how wrong can you be?’ come to mind, yet the future with regard to computing is no clearer; witness the debate between Microsoft and Oracle in 1995 at the Paris Conference, at which Bill Gates and Larry Ellison vociferously defended their visions of the future of computing through PCs versus Networks. There is always a need for a vision of the future, otherwise how can a business think ahead? There was a theme of ‘chaos’ popular in between the last two recessions which claimed that the world was changing too rapidly for strategies to be much use. Well, an objective of being ‘flexible, adaptive and responsive so as to exploit rapid change’ seems a perfectly acceptable plank of a strategy. Where the strategic approach can be criticised is when it is assumed that events are etched in stone once a strategy has been defined. Firms put their heads over the parapet and survey the surroundings, only to sink back down again and subsequently ignore what the enemy (= competitors) are doing.
Environmental analysis is open to all, so that many players can anticipate the same demographic trend, for example. When Sainsbury identified Homebase, roughly speaking, Ladbroke Group identified Texas Homecare, W H Smith started Do It All, and Ward White (subsequently acquired by Boots) Payless-DIY; Kingfisher (aka Woolworth) expanded B & Q, and so on. All these firms appeared to pursue the same generic strategy, of creating market share in a growing sector by building out-of-town superstores. Defining market share by capacity – ie floor selling area – favoured large-scale developments, even though sites were difficult to come by and the pace of store openings slow. The players avoided head-on competition by differentiating their consumer propositions somewhat, and for a long time they withstood the temptation to compete on price. Probably the splendid margins on which they operated kept them all going through the 1980s, but they all ignored the basic problem – that there were too many of them. Not only that, but demand was not going to grow for ever; a major chunk of it was generated by the demographic phenomenon of the post-war baby boom, which found people obliged to undertake DIY at certain, finite, stages of their lives which have now passed. Not one of these firms each successful in other respects – was able to take stock of what the others were doing and respond by switching to a programme of say, rapid acquisition of small neighbourhood hardware stores which could be rapidly packaged into some corporate formula and steal the lion’s share of the market from under the others’ noses.
However, this observation is made with the benefit of hindsight, a tool not available to corporate planners. There is no guarantee that a firm will choose its strategy correctly; what is fairly certain, is that once it has chosen, it will ’stick to its guns’. This is a tremendous opportunity for firms who undertake continual competitor analysis.
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