Reading Response: Good Strategy, Bad Strategy
In my opinion, Good Strategy/Bad Strategy is a must read for business leaders seeking to excel in the modern day competitive business environment. This book is thought-provoking as it explores numerous non-functional strategies embraced by business leaders today. In the book, Rumelt accepts the use of simple examples, anecdotes, and stories to differentiate between good and bad strategies. For instance, Chapter 5 presents a modest kernel of a strategy developed by Rumelt. This kernel encourages company managers to develop good strategies by embracing a three-step approach. First, they need to diagnose the problems within the company; then develop policies to guide action, and finally, act basing on the developed policy. Rumelts book largely differs from modern day strategy books as it provides leaders with powerful tools fundamental in tackling business challenges. The author encourages them to aim to identify challenges in their companies, and then, develop and implement actions necessary to mitigate these challenges (Rumelt, 2011). Thus, companies may be able to withstand the competitive market environment.
Nowadays, many companies simply lack good strategies. Rumelt attributes this lack of effective strategies to dysfunctional leadership as many business leaders rely on mission statements, vision statement, organization values, goals, and objectives to steer their companies in the modern day competitive business environment (Rumelt, 2011). These are not strategies. In his opinion, strategies diagnose the key challenges an organization faces and suggest ways to mitigate them. This statement clearly indicates the fact that strategies are actions. Hence, for a company to survive a competitive market environment, the management must not rely on the companys mission, vision, and objectives. Instead, the management should aim to understand the nature of the business challenges their organizations face. Thus, the management will be able to design guiding policies developed to mitigate this particular challenge. Additionally, the management will also be able to create coordinate actions to implement these policies. This compound efforts will enable the management optimally to use their companys potential, hence, increasing their survival in the market place (Brown, 2010).
One main argument presented by Rumelt is: what is proximate for a company may be far out of reach for another company (Rumelt, 2011). To enunciate this argument, Rumelt compares a helicopter and an airplane. He explains that he used to believe that helicopters are safer than airplane. For example, if a helicopters engine fails, the helicopter can auto rotate and maneuver its way up to the ground. Rumelt explains that when he shared this line of thought with a veteran helicopter pilot, the pilot sharply critiqued his thinking. The pilot proceeded to explain that when a helicopter engine fails, a pilot has a single second to construe a strategy necessary for a safe landing. This is highly unlikely as it is practically impossible to focus in a crisis (Rumelt, 2011). The helicopter pilots must in a split second determine a safe place to land. Furthermore, they also have little time to create a smooth sliding path for the helicopter to follow down to the ground. Mastering this technique takes years of practice. This elucidates that landing a helicopter in a crisis is just as complex as landing an airplane.
A second main argument stated by Rumelt is that a company cannot attain immense wealth by simply owning a competitive advantage. To enunciate this argument, Rumelt straightforwardly gives the broad meaning of competitive advantages. He explains that they occur when a business can produce at a cost lower than its competition or, can deliver more value than its competition or incorporate a mix of the two (Rumelt, 2011). The author compares Whole Foods Supermarkets to Albertsons Supermarkets. He states that Whole Foods Supermarkets have a competitive advantage over Albertsons Supermarkets since they offer organic and natural food product options to high-end customers (Rumelt, 2011). He cautions that for Whole Foods Supermarkets to sustain their competitive advantage, the management may need to acknowledge the fact that the Supermarkets competitive advantage only extends to high-end customers who have substantial knowledge of organic and natural food products. Additionally, the Supermarkets competitive advantage can only be sustained if Albertsons Supermarkets are unable to duplicate their resources and produce similar food products. Therefore, Whole Foods Supermarkets may need to acquire product isolation mechanisms such as patents and brand reputation to protect their products from duplication.
Rumelts main arguments are very relevant to the operations of Under Armour. According to his first argument, it is clear why Under Armour is yet to expand its market share successfully beyond the United States. The companys North American accounts for 89.3 percent although it is making inroads into regions such as Asia and Europe (Miloch et al, 2012). This fact makes Under Armour tail behind market rivals such as Nike and Adidas. Rassman (2013) observed that Nike and Adidas have a superior brand recognition that transcends the borders of the United States. The share of the international apparel and footwear market for the two companies are 57 percent and 73 percent respectively. The author further noted that the two giants have the advantage of long periods of existence as well as remarkable experience in dealing with global markets. Furthermore, Nike and Adidas are better placed to confront the challenges of a complex global business environment. Hence, it would be peculiar to compare Under Armours sales performance with both Nikes and Adidas. Under Armour is still relatively new in the sporting and apparel business. Consequently, its portfolio couldnt possibly be as huge as Nikes or Adidas.
The second argument is also relevant to the management of Under Armour. It states that a company cannot attain immense wealth by simply owning a competitive advantage (Rumelt, 2011). The companys antiperspirant clothing design strategy enabled it to establish successfully in North America (Under Armour, 2015). These antiperspirant garments offered customers an alternative to traditional natural fibers such as cotton, used by industry rivals. Under Armour designed these garments to whisk perspiration off the skin, rather than absorb it (Rassman et al, 2013). Thus, the garments regulated the body temperatures of athletes, thereby allowing them to perform better. The success of this design strategy made Nike and Adidas copy the antiperspirant technology. In addition, Nike and Adidas proceeded to distribute these antiperspirant garments to customers across the globe. The decision of the rivals to sell the strategy beyond the United States jeopardized the competitive position of Under Armour. It inhibited the ability of the company to expand internationally and prompted the need for new innovative ways of challenging the dominance of its traditional rivals.
I recommend that my boss mentions Under Armours internal gaps during her meeting. She can tell about the fact that Under Armour faces fierce competition from industry rivals including Nike and Adidas.
Fierce competition in the international market has made it difficult for Under Armour to tap that potential. The company needs to embrace innovative solutions such as product line expansion. Additionally, it must consider the extent of brand equity for Nike and Adidas to strategically enable its reposition. Currently, the weakness of Under Armour is the lack of patents to offer safeguards to its innovation and a vibrant global strategy to enable customers to prefer the company over rivals.
Hence, she can suggest that Under Armours management increases efforts to use the international market and obtains patents to protect their products. Due to this strategy, Under Armour can gain a large market base and compete favorably in the global market.
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The third argument depicted in Good Strategy, Bad Strategy is Create it for $1.5 and sell it for $8 (Rumelt, 2011). Unfortunately, this argument may fail to work for Under Armour. The company is a new industry player in the sporting and apparel business. Consequently, it is forced to compete against industry rivals through product innovation and competitive pricing. The companys market entry strategy was to introduce synthetic material to rival the traditional fibers that the competitors used (Rassman et al., 2012). As for a new player, embracing originality was one way of attracting the market and winning customers. However, Nike and Adidas were quick to imitate this antiperspirant technology. Since Nike and Adidas have greater marketing, distribution, and financial resources than Under Armour, they managed to sell the same products at relatively low prices. This action necessitated Under Armour to set a price for their products similar to Nikes and Adidas despite production costs.
To respond to unfair competition and sustain its originality, Under Armour began to protect its innovation through patenting. The company utilizes existing patent laws to protect its intellectual property rights. These laws encompass unfair competition laws, trade dress laws, licensing agreements, and confidentiality procedures (Under Armour, 2015). However, these measures have not been sufficient because they are prone to be ignored by competitors (Miloch, 2012). Therefore, Under Armour should consider adding patent laws that protect their wide range of products from imitation. Thus, the company will be able to manage its innovative strategies which enable it to compete favorably with Nike and Adidas in the sporting and apparel business.
Under Armour deals in sporting apparel and has a wide customer base throughout The United States. The company has revolutionized the sporting apparel industry since inception through innovative sports garments made from synthetics. Consequently, Under Armour attained a competitive advantage over its rivals Nike and Adidas. Despite this advantage, Under Armour still faces fierce competition as it lacks patents to safeguard its innovation. Hence, it is very important that the management considers Rumelts Good Strategy, Bad Strategy. This book provides leaders with powerful tools fundamental in tackling business challenges. Rumelt encourages business leaders to aim to identify challenges in their companies, and then, develop and implement actions necessary to mitigate these hardships (Rumelt, 2011). Thus, companies may be able to withstand the competitive market environment.