My lecturer in school used to tell us that strategy formulation need not be an arduous task. He said that the best strategies were formulated without any pressure and were advised by the simplest things in life.

@Ric dees: Although the Porter's five forces are a good analytical tool, they cannot be used in isolation as they have a number of limitations. Neither can any other analytical tool e.g. Ansoff's matrix, SWOT analysis.

I'm more inclined to think that if a company adopts one of Porter's Generic strategies e.g. cost leadership, differentiation or focus strategies, they can kill the competition effectively. You look around and see so many companies 'stuck in the middle' of offering a cheap but unique product!

Like mukiha says, many companies do not want to be market leaders. They are happy to be market players, only with a say in the market dynamics. The example of EAI and Bidco is very appropriate for this case.

@JkMwatha: For your bar, you first need to determine what you want, to beat your competition (i.e. more customers and more profits despite your capacity challenges) or kill the competition! To beat the competition, you need VAS for the consumers e.g prettier waitresses, bigger TVs, free bitings, clean loos etc. To kill competition, do what Bharti Airtel is doing!

@JK

Thats a good perspective because our economy is actually being driven by the SMEs. For small businesses, their main strategies would be what you would call the 'soft strategies" as listed by @sasha.... If you look at some of the big corporate organisations eg equity bank, that's how they penetrated the market. the "big boys" tend to ignore the small players. In your example of the bar, you could also add onto Sasha's list efficient services, personalised services(club like) because you have a small clientele, the sort of music played, clean environment, friendly services etc. You realise that most of the small businesses grow from word of mouth.

Sometimes head-on competition can run you out of business.... or leave you limping. Ask kuguru.... he did not even come close to what keroche is mainly because he went head-on with coca-cola too early.... keroche started in the "bush" and its only when it started nibbling into the giant's territories (brown bottles and malts) that we got to recognize its existence....by this time, EABL had ignored it for quiet a long time until it became a force that needed to be dealt with - same as what happened to emergence of EB vs SCB/BBK.

Sometimes its best to have your business right next to your competitors mainly because of the added advantage. Good example is hardwares and spareshop businesses... you dont want your shop to be on its own even if it seems like the 'better option' to minimize competition. for such businesses you want to be in the middle of the competition. As long as there is no outright market leader, rivalry is low and may be thats why we do not have many examples for SMEs in a topic like this.

Bottomline is, the strategy you intend to employ in your pursuit of higher market share/profits is majorly dictated by your competition.

@McReggae, spot-on!

u want to run a successful business. Do you:

1) study failed businesses and their causes of failure so that you
deliberately avoid the same pitfalls that did them in,

2) study successful businesses and what makes them successful so
that u adopt same?

@Intelligentsia: As much as I agree with muganda, it really depends on the industry you are joining. If the industry has huge underutilised potential e.g. cable TV industry, then you are better of looking at failed businesses. Here you have GTV as a good example.

Where the industry is bustling with competition and diminishing profitability, e.g. outdoor advertising, megastores etc., you would look at successful companies and try to adopt their strategy but at the same time unleashing your own competitive advantage. See Magnate Ventures and Nakumatt-Tuskys-Naivas.