logo

Different tactic to compete

By: Tove Rasmussen
Partners Creating Wealth

August 2, 2013

A review of plastics industry reports reveals an emphasis on cost, product innovation and trade measures to achieve competitiveness, and even a competitive advantage. However, there are more ways to acquire advantage than through slow-moving government relations, new products and organizing internal operations beyond ship-shape — all well-worn strategies of your competitors as well. Instead, look at leveraging external conditions by setting company sails to benefit from the shifting winds. Below, we examine three specific possibilities to accomplish this.

Strategic alliance

Few firms have all the capabilities needed to compete effectively in our world of fast-paced change — and strategic alliances are an important source of capabilities a firm may not otherwise possess. Of course, acquisition is an option; however, a strategic alliance involves less investment. Where the capability needed is more distant from the company's core business, strategic alliances are often more suitable than acquisitions.

However, nearly 60 percent of alliances fail, according to a study published in the journal Advances in Management late last year. As a result, the companies that are able to implement successful strategic alliances can gain competitive advantage. The study reveals that the management of the strategic alliance is the cause of most failures, rather than the choice of the strategic alliance itself.

To be successful, management needs to create a climate where the strategic alliance is viewed realistically, rather than as a panacea, the study found. The team needs to be encouraged to realize that strategic alliances have risks and opportunities like any other initiative. In addition, not surprisingly, build-

ing the relationships among the cross-company team members is key: Taking the time for face-to-face visits and a high level of communication are very important here. Accurate and effective communication also assists with more successful responses to change, providing the flexibility integral to success. We operate in a dynamic environment and need to respond quickly and appropriately. Finally, focusing on the long term will help the alliance team through short-term challenges.

Customer clusters

Plenty of research has shown that industries innovate and excel more quickly when located nearby. Similarly, research has also shown that firms located near customer clusters innovate more quickly, according to a 2012 article in the Journal of International Marketing. Proximity allows more face-to-face interaction where more information is exchanged, and trust can be built more effectively. Chance meetings can occur, further solidifying communication and trust. Therefore, companies are in a better position to uncover unknown market needs and develop appropriate, creative solutions. Far-flung customers make it more difficult to assess customer satisfaction, and to maintain it.

Localization in global markets

Implementing simultaneous strategies of localization and globalization in global markets also can offer an excellent advantage. This strategy returned Panasonic Corp. to a profitable growth path earlier this millennium. In 2000, the company suffered its first loss due to Chinese competitors exporting to the U.S., Europe and South Asia. In response, Panasonic shifted from a U.S.-based to a global view of the business, and set up its new Shanghai-based China Lifestyle Research Center. The center's purpose is to understand market needs outside Japan, according to an article in the December 2012 issue of the Harvard Business Review.

The center was trained in globally available Panasonic products and kept informed of those that were also to be available soon. The center's goal was not only to collect market data, but to interpret market data — people were only hired who could demonstrate adeptness at uncovering needs while reviewing raw market data.

In addition to the usual market data collection tools of secondary research and customer interviews, the staff visited consumer homes. As a result, the center uncovered a need for narrower refrigerators, allowing fridge sales to increase tenfold in one year. It also found a need to sterilize laundry. Panasonic was the first major player to bring this capability to market. As a result, the front-loaded washer market share in China increased from 3 percent to 15 percent.

Tove Rasmussen is president of Partners Creating Wealth, offering business advisory services