Interpretation of strategy essay After reading the articles and viewing the video on strategy, provide us with your own interpretation of strategy. In doin

Interpretation of strategy essay After reading the articles and viewing the video on strategy, provide us with your own interpretation of strategy. In doing so, identify areas of weakness and issues that you think are relevant to understanding strategy. Please you need to reed and watch the video first to answer the questions ,plagiarism free Copyright ©2000. All Rights Reserved.
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At the heart of the Netscape-Microsoft
battles are the three elements of judorapid movement, flexibility, and leverage.
by David B. Yoffie and Michael A. Cusumano
ITH THE RISE of Intemet-based competition, David and Goliath battles between companies are becoming more and more common.
Fast, flexible entrants are taking on dominant incumbents, not only in high-tech sectors such as software and networking equipment, but also in traditionally low-tech industries like retail. Well-known
examples include the conflicts between booksellers and Barnes &. Noble; toy retailers
eToys and Toys R Us; and, most notably, Netscape,
an upstart Internet-software maker, and Microsoft,
the most powerful software company in the world.
David B. Yoffie is the Max and Doris Starr Professor of International Business Administration at the Harvard Business School
in Boston, Massachusetts. Michael A. Cusumano is the Sloan
Distinguished Professor of Management at the MIT Sloan
School of Management in Cambridge. This article is adapted
from their book, Competing on Internet Time: Lessons from
Netscape and Its Battle with Microsoft (Free Press, 1998J.
Many of these companies use a competitive
approach that we call judo strategy.’ In the martial
art of judo, a combatant uses the weight and
strength of his opponent to his own advantage
rather than opposing blow directly to blov^’. Similarly, smart Internet start-ups aim to turn their opponents’ resources, strength, and size against them.
Judo strategy is based on three elements-rapid
movement, flexibility, and leverage-each of which
translates into a competitive principle. The first
principle requires judo players to move rapidly to
new markets and uncontested ground, thus avoiding head-to-head combat. The second principle demands that players give way to superior force when
squarely attacked. Finally-and
most important-the third principle calls for players to use the
weight and strength of opponents
against them.
What judo strategists try to
avoid are sumo matches. In a
sumo match, combatants wrestle
each other directly; the goal is to
force the opponent either to the
ground or out of the ring. Agility
and brains matter, but weight and
strength matter far more. If a
small challenger gets into a sumo
match-in other words, if it goes
head-to-head against a large player
with deep pockets – it is generally
bound to lose.
Judo strategy is a useful mindset for any small company competing with a large, better-established one, and it’s especially well suited to
turbulent, technology-driven Internet competition.
However, judo strategy can be a powerful tool for
any company-new or old, high-tech or low-tech,
large or small. In fact, one irony of the NetscapeMicrosoft story is that giant Microsoft has turned
out to be just as skilled a judo player as Netscape and maybe a better one.
In the following pages, we will discuss the principles of judo strategy, as well as some of its limitations, using the battles between Netscape and
Microsoft as an illustration.
still in college, Andreessen had been the driving
force behind the creation of Mosaic, the first massmarket browser for the World Wide Web. Mosaic
had an easy-to-use, button-based interface, and it
integrated images with text; those elements made
information on the Internet as attractive and useful
as a printed page. Mosaic quickly became the
“killer app” that turned the Internet into a consumer medium. Following the browser’s release in
February 1993, the Web exploded virtually overnight. Between June 1993 and June 1994, the number of sites on the Web grew by 2,000%. By the end
of 1994, users had downloaded two million copies
of Mosaic. The browser continued to proliferate at a
rate of 100,000 copies per month.
Clark and Ajidreessen founded
Netscape to capitalize on the explosive growth of the Web. Their
long-term vision was to create a
simple, universal interface that
would allow users of any communications device (including personal computers, personal digital
assistants such as the PalmPilot,
or even cellular phones with displays) to access information all
around the world. In the short
term, they focused on two key
products: a high-quality browser
that would take up where the
buggy, hacked-together Mosaic
left off, and a Web server, the software that allows individuals to
create sites on the Web.
What judo
try to avoid
are sumo
in which
combatants go
Setting the Stage:
Netscape Versus Microsoft
Netscape Communications Corporation was
formed in April 1994 by Jim Clark, the founder of
Silicon Graphics, and Marc Andreessen, then a recent graduate of the University of Illinois. While
Netscape Navigator 1.0, the
company’s first browser, was a spectacular success.
Less than two months after its release in December
1994, it had already captured more than 60% of the
market. In 1995, Netscape reached $80 million in
sales and launched a triumphant initial public offering. By December 1995 -just 20 months after its
inception – the company was worth more than $7
Netscape initially aimed its products at the Internet but soon became a pioneer in developing products that used Internet protocols as the basis for
business applications. In 1996, Netscape was an
early mover in intranet software, and the next year
it extended its reach into cxtranets, which use the
same underlying technology to connect multiple
businesses together. These moves required Netscape to develop a broad portfolio of increasingly
sophisticated products. They also transformed
Netscape from a consumer-oriented browser company into a corporate software business.
fanuary-February 1999
By i997y however, Netscape was moving into
rough stas. After peaking at close to 90% in early
iyy6, Netscape’s share of the browser market had
begun to decline steadily. The cause was, in a word,
Microsoft. In the first half of 1995, Microsoft remained preoccupied with the challenges of bringing
out Windows 95. The company seemed to have
hnried its head in the sand as far as the Internet
was concerned. But by the end of the year, Bill Gates
not only had recognized the Internet’s importance
but also had inohilized Microsoft
around a new, Internet-based vision. On
Pearl Harhor Day 1995, he announced
that Microsoft was “hard core” about
the Internet and planned to “embrace
and extend” the Internet across its entire product range.
Netscape’s stock promptly fell 28%,
as analysts took positions on the coming battle with Microsoft. (By this time,
Netscape had around 700 employees
and $80 million in sales; Microsoft had
approximately 17,000 employees and
$6 billion in sales.) Netscape continued
to grow in r996 and most of 1997, but
the contest with Microsoft took its toll.
As Microsoft competed aggressively in
the intranet and extranet markets, Netscape found it more difficult to make
corporate sales. By the end of 1997,
Netscape’s share of the hrowser market
had fallen close to 50%, and it was
forced to declare a loss in the last quarter of the year of more than $88 million.
browsers offered a complete stack of Internet tools,
including dial-up Internet access, a hrowser, and
electronic mail. Developers believed that the greatest demand would be for products that would, figuratively speaking, hold consumers’ hands as they
took their first steps onto the Internet. By contrast,
Netscape offered a simple, stand-alone hrowser initially available only over the Internet. This move
allowed Netscape to target early adopters-relatively
sophisticated computer users who already had ex-
Principle #1
Move rapidly to uncontested giound to
avoid head-to-head conflict. Skilled
judo players use rapid movement to
avoid head-to-head confrontations with
potentially superior opponents – moving the battle to terrain where they
A judo combatant uses the weight and strength of his opponent
have an advantage or, at least, where
to his own advantage rather than opposing blow directly to blow.
their opponents do not.
perience with the Internet. At the same time, NetThe early battle for share of the browser market
scape neatly sidestepped its inexperience in huildis a striking example of this principle in action.
ing a full set of Internet products.
Netscape Navigator 1.0 was probably the best
Netscape’s second move was to create an innovabrowser on the market in early 1994, hut not by
tive pricing model that Marc Andreessen laheled
much. It took several judo-inspired moves to cata”free, but not free.” Navigator 1.0 was officially
pult Netscape to the top. Netscape moved the batpriced at $39, but it was free for educational and
tle to unoccupied terrain on three key issues: definnonprofit use, and anyone could download it for a
ing its market; pricing; and testing and distribution.
free trial period of 90 days. Netscape’s management
Netseape’s first move was to target a market that
had no illusions about this policy: some users
competitors all but ignored. Most of the early
laiiuary-February 1999
Principle #1
Move rapidly to uncontested ground to avoid
head-to-head conflict.
• move to new products that redefine the competitive space.
• move to new pricing models that competitors are
unable to emulate.
• move to new testing and distribution models
that avoid competitors’ strengths.
• suppose that constant movement is possible or
• allow excessive movement to destroy your focus
and weaken your credibility.
• treat rapid movement as a substitute for longterm vision.
• assume that speed and time-to-market reduce
the importance of quality to enterprise customers.
Principle #2
Beflexibleand give way when attacked directly hy
superior force.
• avoid sumo matches unless you’re bigger and
stronger than your opponent.
• embrace and extend rivals’ smart moves.
• mesb flexibility and tactical adjustments with
long-term strategic plans.
• escalate unwinnable wars.
• be afraid to cannibalize your own products.
Principle #3
Exploit leverage that uses the weight and strength
of opponents against them.
• turn your opponent’s strategic commitments and
investments to your advantage.
• cooperate with others who are threatened by
your opponent’s success.
• forget that the greater your success, the more
likely it is that leverage can be used against you.
would pay after the trial period, but most would
not. However, “free, but not free” would allow Netscape to build market share fast and, the company
hoped, set the market standard. “Free, but not free”
would also get Netscape’s foot in the door at many
corporations, which would end up buying the software once they saw how well it worked. And in
the meantime, Netscape’s Web servers, priced at
$i,5ooand$5,ooo, would pay the bills.
Netscape’s third judo ploy was to find new approaches to product testing and distribution. As a
start-up, Netscape lacked the resources to hire battalions of quality assurance engineers or to build a
beta-testing pool one company or one site at a time.
Without a large, experienced sales force and co-op
marketing funds, it was also handicapped in the
battle to secure conventional distribution channels. Consequently, Netscape sought out new terrain by taking testing and distribution to the Web.
In October 1994, Netscape posted a beta version
of Navigator on its home page. By downloading the
beta, trying it out, and filing their complaints, customers served-sometimes unwittingly-as Netscape’s virtual quality-assurance team. By the middle of November, users had downloaded 1.5 million
copies of Navigator from Netscape’s site. Moreover,
once the final version of Navigator 1.0 was ready to
ship, Netscape continued to use the Web as a major
vehicle for distribution. By March 1998, users had
downloaded 94 million copies of Navigator over the
Web. Web-based testing and distribution are now
commonplace, but Netscape was the first company
to take full advantage of the Web in this way.
Netscape’s competitors found it difficult to match
these moves. Many companies had business models that relied heavily on revenue from browsers.
These businesses believed that they could only justify high retail prices by bundling their browsers
into multiproduct suites. These products required
larger upfront investments, which made it even
less likely that they would be free, or even “free/
but not free.” In addition, most of Netscape’s competitors were paying a licensing fee to use the Mosaic code in every browser they shipped. Netscape,
by contrast, had pushed its marginal cost down to
zero by writing its browser from scratch.
A handful of companies tried to match Netscape
by offering free browsers over the Web. But due to
fears over conflict with the retail chain, these efforts were halfhearted at best. By the time most
competitors recognized the power of Netscape’s approach, it was too late to stall Netscape’s meteoric
rise. As one former competitor recalls: “[We were]
smart enough to see the browser as an incredible
tool, get on hoard very early, and figure out a very
lanuary-February 1999
leveraged way to get into the market. But we conld
not conceive of giving it away, making it a free
download on the Net. In hindsight, I chastise myself for not having the vision to say, ‘We really have
to break the model here.”‘
Netscape’s judo approach successfully immobilized most of the company’s competition in the first
round of the browser wars. However, the next round,
which began in late 1995, pitted Netscape against a
mucb tougber opponent: Microsoft. Microsoft was
able to match each of Netscape’s key moves. Internet Explorer (IE), the browser Microsoft released in
August 1995, was a free product that was bundled
with Windows 95 and could be downloaded over
tbe Web. In fact, Microsoft saw and raised Netscape’s bet by making IE free for
all users, including corporations.
Microsoft’s aggressive response
intensified a problem Netscape
already faced: the policy of “free,
but not free” meant that Netscape could expect little revenue
on tbe consumer front. Netscape
needed to move aggressively into
tbe corporate market. Its approach, once again, was to move
tbe battle to weakly defended terrain wbere the adversary’s advantage seemed relatively small.
Netscape believed that Microsoft’s real strengtbs were in tbe
consumer and corporate desktop
markets: tbe corporate back office, however, was vulnerable, so
Netscape tried to build its corporate base tbere. Netscape began
by targeting tbe intranet market and later expanded
its focus to encompass extranets and electronic
commerce products and services. Most recently,
the company has sougbt to bolster its e-commerce
strategy by building the Netcenter site into one of
the leading destinations on tbe World Wide Web.
(This strategy has put Netscape into competition
witb other major Web “portals,” or traffic-aggregating sites, sucb as Yaboo!)
By repeatedly shifting to new ground, Netscape
sougbt to avoid direct confrontations. Andy Grove,
tbe chairman of Intel, likens Netscape to a guerrilla
force fighting an occupying army: “Their advantage
comes from their ability to live in tbe forest, live off
tbe land, be very mobile, and do things tbat tbe professional army would never dream of doing. In tbis
regard, Netscape bas mounted a very substantial
challenge to Microsoft….The problem is, they’re
running out of space, munitions, and food.” As
Grove points out, rapid movement can take a startup only so far. Eventually, most armies – and companies-are forced to stop and take a stand. However,
for almost tbree years, moving to new, uncontested
markets allowed Netscape to define the terms of
Principle #2
Beflexibleand give way when attacked directly by
superior force. A judo combatant must be prepared
to respond to surprise moves. However, that’s only
one aspect of flexibility. The real challenge is learning bow to give way to an attack before fatal injuries occur. Judo players should never escalate
unwirmable wars, and tbey must
understand wben to carry out a
tactical retreat. By yielding to superior force ratber than resisting
it, a company in a relatively weak
position can enbance its cbances
for survival.
Netscape managers became
skilled at making small, tactical
adjustments in response to market changes and competitors’
moves. As an example Netscape
executives like to cite their response to Microsoft’s announcement tbat Internet content providers, such as the Wall Street
Journal, would offer special access
to users of IE 3.0. Within a week
of the announcement, Netscape’s
marketing chief bad signed up
dozens of content providers for a
new Navigator service called Inbox Direct. Inbox
Direct delivered interactive Web pages directly to
users’ e-mail addresses by leveraging a feature in
Navigator tbat Microsoft bad yet to matcb. This
move allowed Netscape to compete in the content
arena and deflect Microsoft’s attack.
Netscape didn’t measure up quite so well wben it
came to larger adjustments and strategic flexibility – tbe capacity to bend rather tban break in the
face of superior force. Netscape suffered a body blow
in December 1995 wben Bill Gates announced tbat
Microsoft would “embrace and extend” competitors’ Internet successes. The smaller company,
however, was remarkably slow to recognize tbe
seriousness of the blow. Initially, Netscape reacted
not by retreating but by countering eacb Microsoft
attack. Ratber tban look for creative opportunities
to exploit Microsoft’s weaknesses, Netscape executives tbrew tbeir resources into going bead-to-head
Moving to
to define
the terms of
[anuary-Febmary 1999
with Microsoft. (One senior executive at Netscape
even admitted later to “an obsession with beating
Microsoft.”) As the two companies went after common distribution channels such as Internet service
providers and on-line services, Netscape lost deal
after deal. Netscape had numerous opportunities to
craft deep partnerships that Mierosoft would avoid.
For example, America Online (AOL) offered to take
Netscape’s “spaghetti code” and build a customized version of Navigator for AOL’s millions of subscribers-a proposal Netscape rebuffed. If Netscape
had been more flexible in dealing with potential
allies, it eould have built a much stronger defense
against Microsoft’s assault. Instead, Netscape got
into contests where it had no leverage and where Microsoft simply outbid Netscape with more
money, more support, and more
Netscape executives were also
slow to concede that Microsoft’s
market dominance meant that
they could not ignore its standards. Netscape could have demonstrated flexibility by taking a
page from Microsoft’s hook and
“embracing and extending” Microsoft’s Internet technologies
and tools. Instead, it initially promoted a development platform
that was the antithesis of Microsoft’s Windows-based approach;
but the Microsoft juggernaut
was too powerful to withstand.
In October of 1996, Netscape
announced that it would “embrace and integrate”
Microsoft’s technologies and pro…
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