Tuesday, August 31, 2004

B. is an operational tool

According to Philipp Nattermann from Johannesburg, B. is simply an operational tool.

Top Executives all want to occupy the point on the strategic landscape that their most successful competitor has staked out. Soon other competitors can be seen herding around that best-practice company's product, pricing and channel strategies.

Products and services become increasingly commoditised, and margins tumble as more and more incumbent companies compete for smaller and smaller segments of customers.

Clustering around the strategy of the most successful company actually destroys value. Companies that had been making a profit in less-profitable sectors of the market leave them to join the herd. The combination of profit lost through this abandonment and static overall earnings at the herding point forces industry earnings downwards.


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9:48 PM  

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