| Most companies don’t have any strategy. They talk about it idly a great deal, as they talk idly about the weather.
Bruce Henderson, Boston Consulting Group
Until recently these words by Bruce Henderson might have been said about almost all Russian companies, at least about those of a small and medium-scale. Why should a Russian company have a strategy? A clearer realization of this first came to me a few years ago when I was trying to find an answer to the question asked by Michael Porter, the author of a well-known strategic model. We were on our way to Pulkovo-2 and, quite naturally, started a conversation about strategy when Michael Porter asked me about how Russian companies carry out their strategy.
The unpredictable development of the Russian economy caused instability in most markets. The situation in Russian business, when legislative regulations changed like a shot, reminded one very much of the Queen’s croquet match in Wonderland. Most managers, who had considerable gaps in their knowledge of management and who were not helped by the lack of reliable information, had no option but to base their business decisions purely on intuition.
That state of affairs, in turn, created the development of an “entrepreneurial approach to business”, according to Henry Mintzberg’s classification. In this respect Russian businessmen differ greatly from their European counterparts. The stability of business in Europe makes analysts the winners: not those who act instinctively.
If you look at the data acquired in the NORTHERN DIMENSION project research, which I carried out recently among the managers of small and medium-scale business (figure 1), you may notice a curious thing.
Only 17% of managers consider their situation with competitors as real competition, whereas almost half of them (48%) describe their relations with potential competitors as co-existence, and 28% call it “cooperation”. Here is an interesting question: What sort of cooperation could there be with competitors?
This, mainly “passive”, attitude to competitive struggle makes the development of competition in Russia “evolutionary” or “natural” in character, according to Bruce Henderson. Being of such “natural” character, competition inertly develops of its own accord, (that is, it “evolves”), while companies do not take any active part in developing it in their sectors. As the country’s economy and market saturation grows, managers start to think of ways of competing strategically. That is why, in the concept of the development of competitive relations, a “natural” type of competition must develop into a “strategic” type. This is a relatively new development for the Russian business economy.
The “strategic” type of competition, in Henderson’s opinion, is characterized by the following: managers should perceive competitive interaction as a fully dynamic system which includes interaction between competitors, customers, and staff as well as money and other resources. Managers should also be able to use this understanding in order to predict the results of some interference in the system.
Evidently, the process of such development has already begun in Russian business. For the time being it is true only for some oligopolistic markets, that is, the markets where several very big companies carry out their operations in a particular sector, for example in the mobile communications market. So if we analyze the indexes of the factors that influence the market to the greatest extent (see figure 2), we can see that the magnitude of the competition factor has grown by two points in 2005, compared to 2000, but the factor is still far from being a prevailing one. Nevertheless, I am sure that this factor will increase rapidly with every coming year. That is the answer to the question as to why it is necessary to study the theoretical basis of how to build a company’s strategy. |
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