Chapter 3 Sun Tzu

7/27/2019 Chapter 3 Sun Tzu

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Once the situation appraisal is completed

and a decision is taken for war, the nextstep is getting for combat. Preparation forwar involves formulation along two aspects.

Goals

Strategies ( including choice ofbattleground)


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Formulation of goals

In war, the ultimate goal or objective mustto be win. Nobody enters a war to loseterritories! Similarly, nobody enters

business to lose money. The finalobjective must be to make as muchmoney as possible, with the ultimate goalof capturing the entire market! The

paramount purpose in war, according toSun Tzu, is victory. Thus, those who areskillful in the art of warfare:


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subdue the enemys army without direct battle;capture the enemys cities without fierce assaults;and destroy the enemys nation without protractedoperations.

In other words:

your aim is to capture all states intact. Thus, your

forces are not worn out and your victory can becomplete. This is the crux of offensive strategy.


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The aim in war is to win and to winprofitably. The parallel in business is to

achieve maximum gains with minimumeffort. In order to win profitably, goalsmust:

Be prioritized.

Be achievable.

Represent some net positive gains.


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Prioritizing goals

It is necessary to prioritize goals because theunderlying principle of war is to win profitably. Hence,the general must decide what kind of war objectivesare most desirable and beneficial to his state and hisforces. The following goals for offensive strategy werestated by Sun Tzu in the following priorities:

The highest form of generalship is to attack theenemys strategy.

The next best policy is to disrupt his alliances.

The next best is to attack his army.

The worst policy of all is to besiege walled cities.

Besiege cities only when there are no otheralternatives.


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Attacking the enemys strategy

Sun Tzu considered this as the highestform of generalship. Foremost in the mindof every general in war should be toattack the enemys strategy. This should

be the main goal or objective of anymilitary combat.


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In business world, to attack theenemys strategy is like using pre-emptive measures to upset thecompetitors plan. For examples, pre-emptive strategies would include

1. Introducing a superior product into the

market earlier than any other competitor.

2. Entering new segments of the marketbefore any of the competitors

3. Choosing to enter foreign markets longbefore any other companies.


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Disrupting the enemys alliances

The next best thing to do after attacking theenemys strategy is to disrupt his alliances.

In business world, disrupting the alliances ofthe competitors may seem quite unthinkable,but alliances do exist. At the macro level,common markets, economic unions, and freetrade areas are examples of alliances.


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Attacking the army of the enemy

In war, going after the army of the enemy can take one of thefollowing:

1. Capturing or assassinating key officers or

personnel.

2. Upsetting the morale of the enemystroops.

3. Burning or cutting off supplies to theenemy.

4. Ambushing the enemy forces and/orconducting periodic raids.


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In business world, it is a very commonpractice to attack the competitorsdirectly by employing similar tactics as

in war, such as the following:

1. Luring and attracting key personnel away from thecompetitors firm

2. Spreading rumors about the poor performance ofcompetitors firms so as to lower the morale of theiremployees.

3. Preventing the access of technology or technicalknowledge to competitors.

4. Attracting rank and file employees from competitors byusing either higher salaries, fringe benefits, or both.


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Besieging walled cities

According to Sun Tzu, this is the worstpolicy, and should be avoided unless thereare no other alternatives. This is because in

attacking walled cities, victory is likely to belong delayed and the ardor(passion/enthusiasm) and morale of thearmy will be depressed. The troops will be

exhausted and the resource of the state maynot be sufficient to support a protractedcampaign.


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In the same way, a company shouldavoid competing in the open formarket share, especially if:

1. The product is no differentiated.

2. The market is not growing.


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Achievable goals

Not only must war goals be prioritized, they

must be also be achievable. Goals can onlybe achievable when the general has made athorough and careful assessment of thebattle situation and knows the chances of

success and defeat.


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Achievable goals in war also imply

understanding the following

1. Who to engage (choosing the rightenemy for attack)

2. How to accomplish them within areasonable period of time.


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Goals must result in net positivegains

In war, goals are set with the intention of gainingterritories or some other tangible benefits. As warcan have dire consequences, it must be assessedvery carefully:

War is a matter of vital importance to the state. Itconcerns the lives and deaths of the people, and

affects the survival or demise of the state. It must bethoroughly studied.


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Formulation of strategies: Choiceof battleground

There are few principles governing the formulationof strategies.

These include:

The principle of choice of battleground

The principle of concentration of forces

The principle of attack

The principles of Zheng (direct) and qi (indirect)forces


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Choice of battleground

The choice of a battleground is a variableand controllable factor. While terrain isfixed and not alterable, a general can

decide on the type of battleground onwhich to engage the enemy. However,once a certain type of battleground isdecided upon, he will still have to contendwith the characteristics conferred by the

terrain. Similarly, in business, a companycan choose the areas in which it would liketo compete.


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There are three factors that relate to

the principle of choice of battleground.

Areas that have distinctive advantages.

Areas ignored by the enemy.

Characteristics of the battleground.


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Areas that have distinctiveadvantages

In war, it is very important to fight in areaswhere you enjoy a relative superiority overthe enemy. There are two ways to explain

this:

By being the first to occupy key grounds.

By choosing a battleground that is moreadvantageous to oneself than to theenemy.


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There are few principles governing the

formulation of strategies. These include:

The principle of choice of battleground

The principle of concentration forces

The principle of attackThe principle of zheng (direct) and

qi (indirect) forces


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CHOICE OF BATTLEGROUND

As mentioned in chapter2 in thediscussion of terrain, the choice of abattle ground is a variable andcontrollable factor. While terrain is fixed

and not alterable, a general can decideon the type of battleground on which toengage the enemy. However, once acertain type of battleground is decidedupon, he will still have to contend withthe characteristics conferred by theterrain.


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In business, a companycan choose areas in whichit would like to compete.


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Three factors that can relate to

the principle of choice ofbattleground:

Areas that have distinctadvantages

Areas ignored by the enemy

Characteristics of thebattleground


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AREAS THATHAVE

DISTINCT

ADVANTAGES


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Areas that have distinctadvantages:

By being the first to occupykey grounds

By choosing a battlegroundthat is more advantageous tooneself than to the enemy


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By being the first to occupy keygrounds

Being the first to occupy thekey ground allows one to obtain

the advantages accorded by theterrain. It also permits one toconsolidate ones resources

before the arrival of the enemy,and hence be better preparedfor battle than the enemy.


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By being the first to occupy keygrounds

There are distinctadvantages to being an early

entrant into market. ManyJapanese successes in thevarious markets of the world,

especially in Asia, can beattributed to their being earlyentrants in these markets.

B h i b ttl d th t i


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By choosing a battleground that ismore advantageous to oneself than tothe enemy

A battleground more advantageousto oneself is one which the terrainfits the nature of ones resources

more than those of the enemy. Sucha ground amplifies ones strengthswhile it also shields ones

weaknesses. Hence, by bringing theenemy to such ground for battle, oneobtains a stronger assurance of

victory.


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By choosing a battleground that ismore advantageous to oneself than to

the enemy

In business, it istherefore very importantto compete in area where

one has distinctadvantages.


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Strategy for foreign market entry:

Stage I Exporting Lowest

Stage II Licensing

CONTROL &RISKS Stage III Joint-ventures

Stage IV Wholly-Owned Highest

Subsidiaries


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The use of baits to lure the

enemy to where you want to fightis therefore a very important wayto ensure that you contend in an

area where you can have distinctadvantages. At the same time, itis important to inflict damages on

the enemy when necessary so asto prevent him from occupyingplaces that are important to you.


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AREASIGNORED BY

THE ENEMY


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Choosing areas ignored by

the enemy, does notnecessarily mean that you

have strengths in those areasthat you have chosen to fightin. You may not have any

strengths at all and may evenhave to build them up.


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to be certain to succeed in what

you attack a place where theenemy does not defend or whereits defence is weak. To be certain

of holding what you defend is todefend a place the enemy doesnot attack or where the defenceis invulnerable to attacks.

the strength of an army does notdepend on large forces.


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In the business world, we canfind many examples ofavoidance

strategy choosing areasignored by the enemy as well asniching strategy not relying on

large forces. The Japanesesuccesses in the various productsin the world markets today are

perhaps the best manifestation ofchoosing areas ignored by theenemies.


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The irony about the present state of theworld economic balance power between the

Japanese and the West is that when theychose the areas in which to compete, theJapanese had no strengths in any of thoseareas! Everything, including technology andmaterials had to be imported from theWestern world. The Japanese had only onething to their favor the areas they chose

to concentrate on where areas ignored bytheir enemies, and for reasons best knownto their competitors, were continuouslyignored until it was too late.


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CHARACTERISTICS

OFBATTLEGROUND


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The third factor that relates to

the principle of choice ofbattleground involves a clearunderstanding of the

characteristics of thebattleground itself. Forexample, the movement oftroops and supplies, the types of

weapons to be used and thenature of offensive and defensivestrategies.


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13 Battlegrounds:I. Dispersive Ground VIII. Indifferent

Ground

II. Accessible Ground IX. TreacherousGround

III. Frontier Ground X. Desolate GroundIV. Entrapping Ground XI. Distant Ground

V. Constricted Ground XII. Serious ground

VI. Key Ground XIII. Death GroundVII. Focal Ground


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DISPERSIVE GROUND

This is a battle situation inwhich the army is fighting in itsown territory.

As such, it is not onlydispersive, but also divisive,

disruptive and dissentious.According to Sun Tzu, Indispersive ground, do not fight.


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In business, the lesson to be

learned from Sun Tzus exposition thedispersive ground is that firm shouldnot compete in the same market withtoo many of its own products and

brands. Unfortunately, such acompetitive situation is quite typicalof many consumer products likedetergents, soaps and soft drinks

where there are many brands of thesame product competing for thesame market.


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a firm should try to minimize

the number of brands in eachmarket segment in which it iscompeting. If a new brand is to

be introduced, it should becarefully targeted and focused ona new and/or different segmentso as to avoid cannibalizationwith the existing brand(s).


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However, if a company hadto compete in the same with

several of its own brands, thenthere is a need to ensure thatthere is unity of purpose

among the various personnelinvolved.


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ACCESSIBLEGROUND

It is a ground that is open,highly communicative and

equally accessible to theenemy and yourself. There isliberty of movement and the

enemy can traverse theground as your forces.


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Sun Tzus Strategies:

Do not allow your formations tobecome separated.

Pay strict attention to thedefence.

Be the first to occupy the higher

and sunny positions that areconvenient to your supply routesso as to gain advantage in battle.


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in the business world, there are alsoaccessible grounds. In fact, this istypical situations where the marketentry and exit easy. In many smallbusinesses such as the retail food

industry, t is very easy to get into themarket as the barriers in terms ofcapital and technology are both low. At

the same time, because of the highlycompetitive nature of the industry,market exit is also common.


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for such an industry, there is a littleproduct differentiation andconsumers can easily substitute onesupplier with another. Under suchcircumstances, it becomes veryimportant to pay attention to goodlocation and the distribution

system (the need to occupy sunnypositions to gain advantage in battles).


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to survive in such a

competitive environment, costsof production must be broughtdown as low as possible and

this can only be achieved whenall parties within the companywork in unison. Thus, onesformations will not becomeseparated.


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FRONTIER GROUNDWhen the army has made only a

very swallow penetration into theenemys territory, the ground isconsidered frontier ground.

In war, this is similar to capturing abeach-head, which is an area inhostile territory that is occupied withthe intention of securing further

landings of troops and supplies. Thisinitial gain of a foothold is crucial forany further penetration into enemyterritory.


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Sun Tzu recommended that :

do not stop in frontierground.

Keep the forces closelylinked.


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In business, one can also make shallowpenetration into the enemys territory when:

a. introducing a new product into anexisting market;

b. introducing an existing product into a

new market segment of an existingmarket;

c. introducing an existing product into anew market, like in the case of entering aforeign market through exports or

d. introducing a new product into newmarket.


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Application in Business

the business must not be contentwith just gaining an initial foothold.In other words, it is important not tostop at a small market share after

gaining access into a competitorsmarket or a new market. At thisstage of market penetration, it is alsovery important to keep your forces

closely linked or in close contact withone

another.


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ENTRAPPING

GROUNDIs a ground which it is easy to

get in, but difficult to get out.

it is a type of ground thatresembles a quicksand situationor one which is filled with booby-

traps. Therefore, it is bothenticing and intricate in nature.


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In business, there are many situations

that can be entrapping in nature.Examples:

Business with low technology but high

capital investment, like exploration,mining and construction.

Business with low capital but highoperating costs.

At a macro level, a certain governmentwelfare-related projects.


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Constricted Ground

Is one in which the access routeis narrow and the retreat route istortuous. It is the type of ground

that is difficult to get into and atthe same time difficult to get outof. Its hemmed-in nature allows

a smaller force to strike withease at a much larger forcethrough various ambushes.


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The strategies to be used in sucha ground include the following:


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1st (Devise strategems.)

-Be the first force to occupy thestrategic points and await the enemy.Do not attack if the constricted

positions are occupied by the enemy.

Attack only if the enemys defense atthe occupied points are weak.

*Devise-to put together

*Stratagem-plan


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2nd (Block the points of entrance andexit)

-Constricted grounds remind us ofbusiness situations where the

competitive advantage is very narrow.This can happen in the case of aproduct under an expiring patent orwhere the technological advantageover the competitors is not great.

e.g.

The pharmaceutical business, to someextent, is quite constricted in that it isvery difficult to get in and do well in abig way unless one invests

substantially in R&D(research and


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Entry

Exit

Easy Difficult

Easy

Difficult CONSTRICTEDGROUND

ENTRAPPINGGROUND

FRONTIERGROUND

ACCESSIBLEGROUND


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Key ground

Is one which is equally advantageous to theenemy and yourself

It is also described by Sun Tzu asprecipitous.

*Precipitous=to force (into hasty action)

Sun Tzu


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Sun Tzu

In precipitous ground, I

must be the first to occupythe sunny heights and waitfor the arrival of the enemy.

If the enemy is the first tooccupy such ground, do notfollow him, but retreat and

try to entice him.

*Entice=to attract by offering some pleasure or reward


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Focal ground

Focal ground is mentioned by Sun Tzu

in chapters VIII and XI where thesame Chinese characters are used.When a state is surrounded by tree

other states, its ground is considered

focal.


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In focal ground, the enemy willhesitate to capture it withoutabundant rear support. Also,

unlike a key ground(in whichthere are advantages to both the

enemy and yourself), a focal

grounds advantage for one partywill become the disadvantage of

the other party.


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Sun tzus strategies for the enclosed state center on theuse of diplomacy by

befriending neighboring state

And

Strengthening ties with he allies


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A good example of how such good relationships were manifested inthe case of a business situation was turn-around story of Chrysler.Among other reasons, Lee Iaccoca manages to turn the companyaround because of his ability to build strong allies with thegovernment, the financial community, the labor union, the suppliersand other parties. The strong support received from Chryslers alliesprevented it from going bankrupt or being squeezed out by the muchlarger General motors and Ford.


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Indifferent ground

Is a situation that is disadvantageousto both the enemy and yourself. In

such a battle situation, Sun Tzusadvice was that one should resistbeing drawn out by any bait. Instead,it is important to feign a retreat, and

when the enemys defense is down, itbecomes advantageous to strike.


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1) When China first opened up, manycompanies were hesitant to go in asthey were very uncertain about the

Chinese policy. There appeared notremendous advantages to be thefirst. Instead, many companiessidelined themselves and preferred togain from the experience of the earlyentrants.


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2) In the areas of R&D some companiesprefer to let others take the lead and createthe learning experience for them. In fact, inthe early stages of Japans industrialdevelopment, they allowed American andEuropean firms to take the lead in basic R&Dwhile they concentrated on applied R&D andproduction technology. The Japanese at thattime did not have the necessary skills to do

the basic R&D, and there were noadvantages to being the . Rather a moreviabke strategy was to ride on the inventionsof the pioneers.


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Treacherous ground

According to Sun Tzu, when the army

is traveling in mountain forests,dangerous passes, marshy swamps,

or other difficult terrain, it is intreacherous ground.


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Move swiftly

Do not encamp

Press on over the

roads


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It is important not to stay long inmatured markets(do not encamp).Rather the marketer should actively

look for new and better opportunitiesso as not to fall into a decaying

maturing stage( move swiftly andpress on over the road). This can beaccomplished by market modification

and/ or product modification.


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Desolate ground

In business as in war can finddesolate ground. These are declining

markets, where sales declining due totechnological advantages that bring

about new and better products,consumer shifts in tastes, increaseddomestic and foreign competition.


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Do not stay ondesolate ground.


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Distant ground

In distant ground, both sides areaway from home base and are equally

matched in forces. In such a situation,Sun Tzu advocates that it is to thebest interest of both sides to avoid

direct battles which would confer littleadvantage to either side.


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e.g.

In automobiles Japan used Datsun(now known asNissan) to enter the ASEAN market. In the Unitedstates, Toyota was the first entrant. In motorcycle,it was Yamaha that penetrated the ASEAN market.

After the successful launching and penetration ofHonda into the American market, Yamaha and otherJapanese brands like Kawasaki followed suit.Similar patterns were observed in the ASEANmarket. Indeed, the Japanese foreign market entrystrategy of non-direct confrontation was observedin many product categories.


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Serious ground

Is one in which the army has penetrateddeep into enemy territory and has left

behind them many of the enemys fortifiedcities and towns.

In the case of serious ground, the army isnow deep into enemy territory


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The Japanese companies, forexample, have for many years

resisted moving their production

plants overseas. It was only whentheir local costs of production and theJapanese yen went up substantiallythat they took such a step. Even so,

one often finds reports of frictionbetween the Japanese owners and

their local counterparts.


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Death ground

This is the situation in which the

army can only survive if it fightswith the courage of desperation,where the only way to suvive is

to fight


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In business, a companycan also face death

ground. Perhaps 2internationally well known

examples would illustratethis point.


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Chrysler corporation of the United States

was at the verge of bunkruptcy between1978 and 1982. The company lost more the

US$3.5 billion which was the biggestfinancial loss of any company in the historyof the United States at the time. Despite the

bailout by congress in December 1979under the Chrysler Corporation Loan

Guarantee Act, the company almostcollapsed, it was literally in death ground


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The turnaround came when Lee Iacocca took overthe company. Among many other measures, he

made it abundantly clear to his employees that theonly way to survive was to fight. He was able to

convince the otherwise militant United AutoWorkers Union to take a pay cut that left the

members earning about US$2 less per hour thantheir counterparts at General Motors and Ford. Thetotal of their relinquished amounted to US$1 billion.

His efforts resulted in a drastic change in thebehavior and loyalty of the workers towards

management, an occurrence that is very unusual inAmericas heavily unionized industries.


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Another spectacular turnaround event in theautomobile industry is that the Jaguar cars


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automobile industry is that the Jaguar carsfrom Britain. Again, it was a company at the

brink of collapse that was turned into amulti-million dollar success story. How didJaguar cars Ltd. Do it? In essence, theultimatumto the workers was short, clear

and blunt: break-even in 6 months or foldup. The no-holds-barred message waspassed down to every worker. And the bitterprescription worked. In 6years, the dying

British car manufacturers did a completeturnaround from losses of US$62 million ayear, the company began to make profits ofUS$207 million.


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Documents

Chapter 3 Sun Tzu