Proposed by Michael Porter, a professor at Harvard Business School
The most effective defense is to fundamentally prevent combat from happening.
Unique positioning will lead to unique success.
One of the most effective ways to prevent perfect competition is to fundamentally prevent the occurrence of fighting. To do this, you must have a unique positioning of your products. When this positioning includes strategic decisions, it may also have sustained power. In terms of strategy, decision-making is like a fork in the road. If you choose one road, it means that you cannot choose another road at the same time. The American Endeavour Car Rental Company (Enterprise Rent-A-Car) provides a simple example of how they work.
Walking into any airport car rental area of a certain scale in the United States, you will surely see the counters of Avis Car Rental Company, Hess Car Rental Company, and many small car rental companies. However, you can't see the counter of Endeavour Car Rental, which always makes more profits than other more famous competitors, even though its rent is about 30% lower than its rivals. How to explain this difference? Why don't Elvis Car Rental Company and Hess Car Rental Company do what Endeavour Car Rental Company does? If you use one word, it means that their decisions are different.
Unlike Aivis Car Rental Company and Hess Car Rental Company, which target their customers as flying tourists, Endeavour Car Rental Company serves people who have not yet bought their own cars. For these customers, if they need to pay rent by themselves, price is an important consideration, and they must also consider whether the insurance company will settle claims. Therefore, Endeavour Car Rental Company has consciously reduced various items that may increase costs, but customers are unwilling to pay. For example, they set up their stores in many suburbs where rent is cheap, rather than in expensive airports. They also allow their cars to last longer than other competitors, and they rarely advertise because their customers are mostly recommended by insurance assessors and auto repair shops.
Endeavour Car Rental's good performance is the result of a variety of choices. Although their customers pay less, their savings greatly exceed the losses caused by low fees. Although Alves Car Rental Company and Hess Car Rental Company can theoretically imitate the practice of Endeavour Car Rental Company, their doing so is likely to affect the creation of value for target customers.
Dell Computer provides another very good example of making decisions that make it difficult for competitors with different positioning to imitate their own practices. Positioning decisions have allowed Dell Computer to perform well for more than a decade, and it can still make money even when other PC companies are losing money. Dell Computer’s direct sales model eventually spread to the entire computer industry, but why didn’t Dell Computer’s competitors react faster? Why can other computer manufacturers allow Dell to occupy so much market share for a long time?
Simply answer the above question, that is, Dell Computer's competitors are bound by their own strategy. If they adopt the direct sales model like Dell did, they will destroy existing sales channels and alienate the sales agents they have long relied on. Therefore, for many years, Dell's competitors have been stuck in a dilemma whether to learn Dell's direct sales model. If part of Dell’s experience is used for reference, the direct sales model is adopted, and the part of the traditional marketing model is adopted, it may be more difficult to manage this mixed system and the cost may also be higher. The actual situation is also the same. The manufacturers of "riding the fence" tried to adopt two models, but the end result was more inventory and higher costs.
One of the basic laws of competitive strategy is: If there are real decisions, you cannot choose two paths at the same time. In 1989, Dell Computer Co. realized this. At that time, they felt that their direct sales model was not developing fast enough, so they tried to sell through agents. However, when they discovered that this change was causing damage to the company's performance, they immediately cancelled it. The problem is that if you choose two paths at the same time, others will do the same. Therefore, you have to choose a way that you are best at and have a unique positioning and stick to it. In this way, your path of differentiation will have sustained power so that your opponent cannot beat you. Otherwise, you will only be mediocre.
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