New McKinsey Quarterly Article "How Companies can Understand Competitors' Moves"

[Ken Sawka]

Here's a summary of a new article from McKinsey. Interested in people's thoughts. (To download the entire article, go to mckinseyquarterly.com; if you're not already registered, registration is free to access and download their content)

Companies can gain an advantage from anticipating their competitors’ strategic moves. Yet companies change their strategies for a host of reasons, some external, such as broad economic changes or competitors’ moves, and some internal, such as the results of a strategic planning process. This survey asked executives from around the world about the strategic choices they made in the previous year and about a single strategic initiative their company undertook spontaneously for any reason other than responding to competitors’ moves:1 the impetus for the initiative; the initiative’s goal and how the initiative differed from the old strategy; the company’s performance before the change; the amount of time devoted to planning and implementing the new initiative; and the degree to which this initiative was typical of the company’s strategic initiatives.

The results indicate that astute companies have a solid chance to figure out what kinds of strategic initiatives their competitors will undertake spontaneously and when they’ll act. For example, 82 percent of respondents say their company’s largest strategic move in the past year was a logical next step in their existing strategy. Further, when asked about the single biggest strategic initiative their company had undertaken spontaneously in the past five years, 85 percent say their new strategy was undertaken in addition to—not in replacement of—their existing strategy, and 61 percent say the new initiative continued in the same direction as the old one. Only 29 percent say their company actively searched for a new strategy in the past five years, instead of responding to a challenge or opportunity—most of which would be equally visible to their competitors. Finally, when implementing their new strategy, only 23 percent introduced it to the market without warning.

The survey also suggests that there’s one group of competitors to watch closely: executives who say that their companies were beating the competition on meeting financial targets before they undertook a new strategic initiative also say their companies are the likeliest to undertake a search for a new initiative—implying they are the likeliest to move for reasons not necessarily visible to other companies—and say that they are likelier to succeed with their initiative. Among respondents who know the financial outcome of their new initiative, three-quarters at outperforming companies say it met or exceeded financial targets, while only half at underperformers say the same.

[Vivek Raghuvanshi]

Value Chain Analysis gives you flexibility to exercise multiple Strategic Options such as:

1. Low Cost Strategy
2. Broad Differentiation Strategy
3. Best Cost Strategy
4. Focussed Low Cost Strategy
5. Focussed Differentiation Strategy.

To remain Competitive we must remember the mantra:

Strategy Formulation means Continuous Strategy Revision.