Origin of Strategy

Marketing Strategy Paper # 1 - Origin of Strategy | Nagendra Murthy

Introduction

Strategy is a general framework that provides guidance for actions to be taken and, at the same time, is shaped by the actions taken. The use of strategy has literally changed the map of the world and caused the rise and fall of many a nation and its people. In this paper, the author Bruce D. Henderson draws comparison between natural and business competition from an evolutionary point of view and explains the key role played by imagination and logic to create shifts in competitive equilibrium. He believes business strategists can accelerate the effects of competition and that biologists are more adept at business strategies than economists. Bruce employs Gause’s principle of competitive exclusion and Darwinian principle on origin of species to explain his thoughts on the origin of strategy, a concept that can be applied to any business settings.

What is Strategy?

The term “strategy” is derived indirectly from the Byzantine (330 A.D.) Greek “strategos,” which means “general.” The beginnings of strategy can be traced back to ‘The Art of War’ by Sun Tzu written in 400 B.C which provides abundant amounts of strategic and philosophical advice still being used as a source of inspiration for business leaders. In simple words, strategy is at once the course we chart, the journey we imagine and, at the same time, it is the course we steer, the trip we actually make. Like George Steiner, Henry Mintzberg, Michael Porter and others who have defined strategy, Bruce Henderson based on his study defines strategy as "a deliberate search for a plan of action that will develop a business competitive advantage and compound it". To elaborate on his definition, Henderson states that competitors with no differentiating factors cannot co-exist, each must be unique in a way that it has an advantage over the other. He explains his position by considering Sears, K mart, Wal-Mart and Radio Shack who differentiate themselves in terms of the customers they serve, values and services they offer. The author also associates a lot of importance to price, function, place and customers' perception which can be developed into the business’s competitive advantage utilizing the right strategy.

Market share is malarkey

Market share is a hugely popular metric and 67% of the managers find it very useful. One explanation for why managers

value market share so highly probably has to do with well-known research from the 1970s that suggested a link between market share and ROI. But the author utilizing multiple examples such as TI and Grape Nut, explains that unless it defines the boundaries separating the firm from its rival’s market share is a meaningless number. Every business owns 100% of its market and its goal must be to expand the market size rather than market share. As mentioned earlier competitors with no differentiating factors cannot co-exist unless a business has a unique advantage over its rivals. I agree with the author on this point as the ultimate goal of any business is profitability and sustainability. Companies can be forced to run out of business while chasing after market share, it is almost as productive as chasing the pot of gold at the end of the rainbow.

Strategy competition vs. Natural competition

Although strategic competition can be traced back to 400 B.C, strategic competition in business is relatively new and can have a profound impact on business productivity. Henderson lists out the five basic elements of strategic competition and is of the opinion that strategy is all encompassing and calls on the dedication of and commitment of the whole organization. The author explains the significant differences between strategic and natural competition such as, the failure of an organization to react and counter the strategic move of its rival creates disturbance and sweeping changes in the competitive equilibrium thereby compressing time whereas natural competition has no such characteristics.