Seven reasons why firms carry out tactical withdrawal?

Like in military, business also does tactical withdrawal either from a particular market or from a specific product once in a way. The central purpose is to improve the future prospects of the firm in contrast with the current position that may be untenable. There are seven reasons intertwined with this purpose:

1. As part of the planned withdrawal, retreat as business tactics is made so that the firm can be in comfort zone where it has good knowledge of the terrain and ready availability of resources in the form of men & methods that it can deploy to withstand intense competition

2. Done in order to improve the quality and features of a specific product either by innovating or improving in such manner that the product can be re-launched with gusto to beat competitor’s products.

3. Buying time so that firm can study the market leisurely to observe how market dynamics work in the absence of the withdrawn product. Secondly re-assess the future market position to facilitate a fresh foray into the market place armed with an improved product or an improved distribution method or both.

4. Fool the competitors to think that the firm is finished with it so that they relax and take no further action. This provides the firm with breathing space

5. Make a feigned withdrawal to lure the enemy to move forward and be ambushed by the marketing staff of the firm ending in a merciless massacre of the enemy

6. Relocate the battle to another territory or terrain that is much more advantageous to the firm than the present one

7.  Elude the attacking competitor so that current level of resources can be saved for future action against the competitor at the time and place chosen by the firm.

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

In business, strategic withdrawal means simply quitting

Often press tells stories of companies effecting strategic withdrawal. It is simply a euphemism for quitting, conveyed in a business-like manner. Strategic withdrawal is a permanent affair as there is no going back on it. How does a firm carry out strategic withdrawal and with what purpose is the theme of this blog post.

Rationalizing is the driving force behind making decisions on withdrawing strategically. It basically means cost cutting or cutting the loss so that the firm can preserve whatever that can be salvaged. Strategic withdrawal is carried out by firms in three areas: product, segment and market:

Product

Firms can either close down a specific product line or series of inter-connected products. The following are key reasons cited for this type of strategic withdrawal:

1. Product has become obsolescent in terms of technology or the perceived uses of the specific product are no longer valid

2. Market trends have moved out of this product as either customer needs have changed or their tastes got shifted

3. Issues related to production such as snags, glitches that make the product faulty.

4. Severe market competition bedevils the firm such that the product becomes a laggard with high cost incurred in manufacturing it.

National Electric Vehicle Sweden (NEVS) closing down SAAB vehicle line in 2011 is an apt example.

Segmentation

Strategic withdrawal from particular segment takes place when demand is skidding and profitability is hitting the ground. Brand acceptance and/or customer loyalty declining along with and availability of similar products at affordable prices are other causes. The French Luxury brand Louis Vuitton closed several stores in China lately.

Market

Withdrawing strategically from specific market is caused by one or more of the following reasons:

1. Customer base remains stagnant or narrowing down

2. Customer default on the increase

3. Overall profitability is on the red

4. Survivability is under threat due to aggressive competitor posture.

Colgate abandoning domestic market to go international is a good illustration.

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

How to counter attack when your business is encircled?

Panic on one side tension on the other, you go through most testy time when your business is encircled by a much stronger competitor or sometimes two or three competitors acting in an unholy alliance to finish your business forever. Obviously you cannot surrender. Counter attack, is the only way out.  

In a military classic titled “Military Misfortunes” Eliot Cohen & John Gooch writes a succinct statement:  “There are three types of failure – failure to learn, failure to anticipate and failure to adapt”. Similarly a business can suffer one or more of these failures that make it subject to offensive business strategy known as encirclement. This can bring pandemonium in its ranks and a possible catastrophe to the business as a whole.

Anticipating encirclement rather than reacting to it is best policy but when the market intelligence fails to predict such encirclement the business must commence counter attack on the following lines:

1. Close all loopholes or points of entry where the attacker can attempt a breakthrough leading him to the centre of business activity causing major collapse

2.  If the encirclement is partial the escape points must be explored to get necessary support from friendly or sympathetic firms who would readily rally around fearing that one day they may be also subjected to such encirclement

3. Explore the possibility of forming new alliance with supporting firms in order to take the fight elsewhere where the attacking firm is weak

4. Boost morale of your men in the front and give them financial and non-financial inducements to keep the tempo of counter attack

5. Provide logistical support in the form of men &money to the frontlines that are seriously affected by this encirclement

6. Sabotage the marketing campaign of the enemy using unconventional, guerrilla tactics including spotlighting any nefarious activity that is being carried out by the attacker unknown to the market place

7. When the encirclement is full and all-round never keep a stone un-turned in attacking enemy with such vigour and ferocity that encircling competitor gets cold feet

8. Undertake diversionary business tactics such as relieving pressure by enemy in your backward by fighting the enemy elsewhere. Examples include legal battle or lodging complaint with authorities regarding unfair business practice

9. Every underdog has his day. So your final trump card must be to isolate your enemy, break his alliance partners, break his morale and make him run short of his supplies of men & money.

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

How to make encirclement business strategy a success?

In general parlance encirclement is an offensive strategy made by one strong party against another equally strong opponent. In the field of business, the logic remains same but with a twist. At the beginning of encirclement the challenger must have at least 5X power projection vis-à-vis his defender. Here are the rest of items needed to make encirclement a successful business strategy.

Assessing strengths and weaknesses of the competitor begins the foray into encirclement. By the same token challenger is to target both the strength and weaknesses at one and the same time. What he does is netting of the surplus and deficit and blitzkrieg through one or two important loopholes or saliences.

The central idea driving encirclement is to force the defendant to either make strategic withdrawal or to throw all the resources, human physical and financial at his disposal into the battleground. By this way, challenger puts him on unenviable position.

Major aims of the challenger are two-fold: One is to make opponent lose his courage and composure amounting to breaking of psychological grand standing. Second by launching shock and awe the defender is put on a difficult situation of choosing the rock and the hard place, that is, to fight a losing battle courageously or lose the goodwill of his customers and the market place.

Challenging firm can either opt for using product, market or both as weapons of mass destruction. In the product arena challenger must introduce same product sold by the enemy with improved qualities and user-friendly features. He must also apply product differentiation in terms of quality, utility and fix the pricing accordingly.

If the encirclement is to be concentrated on the market side then challenger must focus on the part of the market that is un-tapped or the part of the segment that is not catered to by the enemy.

Applying few business tactics to mount additional pressure on the competitor is strongly recommended. One is to go for big turnover even at the point of having negative returns so that large customer segment is won over from the enemy. Another tactic that can rattle the competitor is to flood the market with the same product in different styles and models.

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist