Sunday, January 15, 2006

Competitor-focused strategies happen

Companies often get into new businesses not because they want to create more value for their customers but because they want to keep up with their more successful competitors. Such competitor-focused strategies (CFS) often fail because they are based on copying what another company has done rather than on positioning the firm to sustain superior profitability by creating competitive advantage.

When publicly-traded companies pursue such CFSs, they create opportunities for investors and for competitors. The stock price of companies that pursue CFSs is more likely to decline because the CFS distracts management attention and resources from its core business. If the distraction is sufficiently large, the core business is likely to see its competitive position decline.

In 1998, Dell decided to start a corporate venture unit, Dell Capital, after envying the corporate venture capital success of Microsoft and Intel. At the time, Microsoft’s venture capital portfolio had $6 billion in unrealized capital gains and Intel’s had turned $2 billion worth of investments into shares worth $10 billion. Moreover, in early 1998 Dell had passed up a chance to invest in Network Appliance – causing it to miss an opportunity to own a substantial chunk of this then $18 billion (market capitalization) maker of network storage equipment. Dell Ventures was born later that year with an unfocused strategy described in terms that captured all the era’s most popular Internet buzzwords. After investing billions in 87 companies over six years, Dell Ventures sold its 20 most valuable portfolio scraps for $100 million – the others had simply folded.

Investors can profit by selling short the shares of the company pursuing the CFS. Competitors of companies pursuing CFSs can profit from the distraction as well. Such competitors should evaluate the potential to take customers of the CFS-pursuing company’s core business.

7 Comments:

Blogger Scott A. Edwards said...

Wow what a cool blog you have here! I am impressed. You really put a lot of time and effort into this. I wish I had your creative writing skills, progressive talent and self- discipline to produce a blog like you did. Your blog really does deserve an honest compliment. If you have some time, stop by my site. It deals with stuff like, click here: Home business and then feel free to e-mail me with your words of wisdom.

P.S. I'll sure put the word out about your site and I would appreciate any business you may send my. way... Later, Scott.

11:43 PM  
Blogger Scott A. Edwards said...

Wow what a cool blog you have here! I am impressed. You really put a lot of time and effort into this. I wish I had your creative writing skills, progressive talent and self- discipline to produce a blog like you did. Your blog really does deserve an honest compliment. If you have some time, stop by my site. It deals with stuff like, click here: sophisticated and then feel free to e-mail me with your words of wisdom.

P.S. I'll sure put the word out about your site and I would appreciate any business you may send my. way... Later, Scott.

12:00 AM  
Blogger Scott A. Edwards said...

Hello I am the traffic man, zip, zip, zip. make a new resolution to get a flood of traffic to your website this year. Let me show you how to get FREE traffic to your site. Yes I said FREE, FREE, FREE!!! Don't delay.

To find out more, visit my contemporary site. It successfully covers FREE information exposing FREE traffic and contemporary related stuff. Don't forget - FREE, FREE, FREE. You have nothing to lose!

1:04 PM  
Blogger Scott A. Edwards said...

Congradulations on a well written, interesting and superb blog! Have you heard about the shocking news?

1000's of real people are earning quiet fortunes from home using the most ingenious automated system ever invented.

Are you curious to find out what this is all about?

Why not? You have nothing to lose.

You can sign up for this system absolutely free of charge and check it all out for yourself.

To start off, we have a video presentation for you to watch. Just turn up the speakers if you can, and click on the link below.

Have fun and open your mind.

It is all right here: mlm It successfully covers mlm related stuff.

Come and check it out now, Scott :-)

2:29 PM  
Blogger Scott A. Edwards said...

Are you tired of getting nice compliments on your blog, when really your not makeng the kind of money that you deserve? Now you can join a completely FREE program. No buying and No selling. FREE to join. All you do is refer customers. To get started fast, click here: make money while you sleep site. It pretty much covers make money while you sleep related stuff and it's FREE to join.

4:04 AM  
Blogger Scott A. Edwards said...

As a special token of my appreciation for all your kind help and the wonderful business you have sent my way---I want to give you a free gift.
It is called the "$25000.00 Idea". It will help you in all your endeavors.
Click here: FREE GIFT

7:48 PM  
Blogger Scott A. Edwards said...

WOW, this is FANTASTIC...!!! Blog your AD to Millions. Post your AD for FREE and get MASSIVE traffic to your site. FREE to join. To get started fast, Click Here: financial freedom site. It pretty much covers financial freedom related stuff and it's FREE to join.

5:31 PM  

Post a Comment

<< Home