6. Session. Dynamic Competitive Strategy . What’s it all about?. Game theory – theory of interdependent decision making the logic of decision making in social interactions: Two or more decision makers (players)
The concept of Nash Equilibrium was first introduced by John F. Nash, one of the most renown Princeton mathematicians and one of the founding father of Game Theory who received the Nobel Prize in economics in 1994. Nash claims that
“the strategy that would lead to the most beneficial outcome to both side that plays the game is the strategy that would bring the highest benefit not only to the party that uses the strategy, but is the one that would also benefit all the parties that participate in the competition.”
Hence, to figure out the strategy of other competitors, we should make the best effort to assess the strategy of the competitor that would best response to our strategy. Once the competitor’s strategy is assessed, we should then implement a tactic that would induce the competitor to respond in a way that suits our plan. The outcome of this would finally lead to a competitive equilibrium where both sides will be temporarily satisfy and thereby stop the competition.
Given that his army is at a major disadvantage, what should Kong-Beng do to prevent his town from being taken away by Suma-EE?
Based on the concept of Non-Cooperative Game with Incomplete Information, what can we learn from Kong-Beng’s strategy? What did he do to 1) reduce Suma-EE’s confidence to attack? and 2) cause Suma-EE’s Army to churn away?
“When capable of attack, you must seem incapable; when ready to attack, you must seem unready. When your target is near, give the impression that it is far away; when your target is far away, give the impression that it is near. Offer the enemy a bait to lure him; maneuver the enemy into confusion and crush him. When he has secured his position, prepare against him; where he has superior strength, avoid encounters with him. Anger the enemy general, that he may become irritable. Pretend to be inferior, that he may grow arrogant. When the enemy troops rest easy, rob them of their rest. When the enemy forces are united, disunite them. Attack where the enemy is unprepared; act when he does not suspect it. This is the wisdom of warfare. You cannot be predictable”.
Sun Wu, Art of War, Chapter 1, “Sun Zi”
(14 Laws of Deception)
Façade of Normalcy
“The perception of perfect preparation leads to relaxed vigilance. Familiar sights lead to slackened suspicion. Therefore, secret machinations are better concealed in the open than in the dark, and extreme public exposure often contains extreme secrecy”
“It is wiser to launch an attack against the enemy force when they are dispersed than to fight them when they are concentrated, He who strikes first fails and he who strike later prevails”
“Your enemy’s situation is clear but your ally’s stand is uncertain. At this time, induce your ally to attack your enemy in order to preserve your strength. In dialectic terms, another man’s loss is your gain”
“To weaken the enemy, it is not necessary to attack him directly. Tire him by carrying out an active defense and in so doing his strength will be reduced and your side will gain the upper hand”
“When the enemy falls into severe crisis, exploit his adversity and attack by direct confrontation. This is the strong defeating the weak”
Your real attack
Your false attack
“When the enemy command is in confusion, it will be unprepared for contingencies. The situation is like flood waters rising higher and higher; likely to burst the dam at any moment. When the enemy loses internal control, take the chance and destroy him”
“Design a counterfeit front to put the enemy off guard. When the tricks works, the front is changed into something real so that the enemy will be thrown into a state of double confusion. In short, deceptive appearances often conceal forthcoming danger”
“To pin down the enemy, expose part of your action deliberately, so that you can make a surprise attach somewhere else”
Observing the Conflict
& Refraining from Actionดูไฟชายฝั่ง
“When a serious conflict breaks out within the enemy alliance, wait quietly for the chaos to build. Because once its internal conflict intensifies, the alliance will bring destruction upon itself. As for you, observe closely and make preparation for any advantage that may come from it”
“One way or another, make the enemies trust you and thereby slacken their vigilance. Meanwhile, plot secretly, making preparations for your future action to ensure its success”
“When loss is inevitable, sacrifice the part for the benefit of the whole”
“Exploit any minor lapse on the enemy side, and seize every advantage to your side. Any negligence of the enemy must be turned into a benefit for you”
Strength & Weakness
“Any suspicion about the enemy’s circumstances must be investigated. Before any military action, be sure to ascertain the enemy’s situation; repeated reconnaissance is an effective way to discover the hidden enemy”
“The powerful is beyond exploitation, but the weak needs help. Exploit and manipulate the weak for they need you more than you need them”
“Unfavorable natural conditions to trap the enemy in a difficult position. Use deception to lure him out. In an offensive that involves great risk, lure the enemy to come out against you”
“Press the enemy force too hard and they will strike back fiercely. Let them go and their morale will sink. Follow them closely, but do not push them too hard. Tire them and sap their morale. Then you will be able to capture them without shedding blood. In short, a careful delay in attack will help bring victory”
“Capture the chief, and the enemy will collapse. His situation will be as desperate as s sea dragon fighting on land”
“When confronted with a powerful enemy, do not fight them head-on but try to find their weakest spot to initiate their collapse. This is the weak overcoming strong”
“When the enemy falls into internal chaos, exploit his weakened position and lack of direction and win him over to your side. This is as natural as people going to bed at the end of the day”
You Moving the Action
where It cannot be seenจักจั่นลอกคราบ
“Make your front array appear as if you are still holding your position as that the allied force will not suspect your intention and the enemy troops will not dare to attack rashly. The withdraw your main force secretly”
“When dealing with a small and weak enemy, surround and destroy him. If you let him retreat, you will be at a disadvantage in pursuing him”
“It is more advantageous to conquer nearby enemies, because of geographical reasons, than those far away. So ally yourself temporarily with your distant enemies in spite of political differences ”
“When a small state, located between two big states, is being threatened by the enemy state, you should immediately send troops to rescue it, thereby expanding your sphere of influence. Mere talk cannot win trust of a state in a difficult position”
“Make the allies forces change their battle formation frequently so that their main strength will be taken away. When they collapse by themselves, go and swallow them up. This is like pulling back the wheels of a chariot to control its direction”
“When the powerful wants to rule over the weak, he will sound a warning. One’s uncompromising stand will often win loyalty, and one’s resolute action, respect”
Your hidden threat
“At time, it is better to pretend to be foolish and do nothing than to brag about yourself and act recklessly. Be composed and plot secretly, like thunder clouds hiding themselves during winter only to bolt out when the time is right”
“Expose your weak points deliberately to entice the enemy to penetrate into your line, then surround him by cutting off his exit”
“Use deceptive appearances to make your troop formation look more powerful than it is. When wild geese soar high above, the grandness of their formation is greatly enhanced by the display of their outstretched wings”
“When there is a chance, enter into decision-making body of your ally and extend your influence skillfully step-by-step. Eventually, put it under your control”
“When faced with a formidable enemy, try to subdue their leader. When dealing with an able and resourceful commander, exploit his indulgence of sensual pleasure in order to weaken his fighting spirit. When the commander became inept, his soldiers will demoralize, and their combat power will be greatly weakened. This stratagem takes advantage of the enemy’s weakness for the sake of self-protection”
“In spite of the inferiority of your force, deliberately make your defensive line defenseless in order to confuse the enemy. In situations when the enemies are many and you are few, this tactic seems al the more intriguing”
“People rarely inflict injuries on themselves, so when they get injured, it is usually genuine. Exploit this naivety to make the enemy believe your words; then sowing discord within the enemy will work. In this case, one takes advantage of the enemy’s weakness, and makes the enemy look as if he were a naïve child easily taken”
Adversary Accepting you
Because you are injured
“When the enemy possesses a superior force, do not attack recklessly, weaken him by devising plots to bring him into a difficult position of his own doing. Good leadership plays a key role in winning a war. A wise commander gains Heaven’s favor”
“To avoid combat with a powerful enemy, the whole army should retreat and wait for the right time to advance again. This is not inconsistent with normal military principles”
“Competitive intelligence is the process by which companies inform themselves about every aspect of their rivals’ activities and performance”
1.Always put top priority on crafting and executing strategic moves that enhance a firm’s competitive position for the long-term and that serve to establish it as an industry leader.
2.Be prompt in adapting and responding to changing market conditions, unmet customer needs and buyer wishes for something better, emerging technological alternatives, and new initiatives of rivals. Responding late or with too little often puts a firm in the precarious position of playing catch-up.
3. Invest in creating a sustainable competitive advantage, for it is a most dependable contributor to above-average profitability.
4. Avoid strategies capable of succeeding only in the best of circumstances.
5. Don’t underestimate the reactions and the commitment of rival firms.
6. Consider that attacking competitive weakness is usually more profitable than attacking competitive strength.
7.Be judicious in cutting prices without an established cost advantage.
8. Employ bold strategic moves in pursuing differentiation strategies so as to open up very meaningful gaps in quality or service or advertising or other product attributes.
9. Endeavor not to get “stuck back in the pack” with no coherent long-term strategy or distinctive competitive position, and little prospect of climbing into the ranks of the industry leaders.
10. Be aware that aggressive strategic moves to wrest crucial market share away from rivals often provoke aggressive retaliation in the form of a marketing “arms race” and/or price wars.