Business Planning and Comparative Advantage in Hustle as Strategy - Assignment Example

Critical review of an article ‘Hustle as strategy’ Introduction Amar Bhidé has written many books and articles on topics like finance, strategy and economics. Although, he has written 10 Harvard business review articles; but in his article ‘Hustle as strategy’ he introduced ‘Hustle’ as a tactic against the concept of competitive strategy. His article is comprised of 7 pages and was published on Sep 01, 1986. The key argument in his article is that the age of competitive strategy has now been replaced by the new strategy of hustle because the resources of businesses are exchangeable with each other, but that is not entirely true. The writer’s point of view that managers of firms prefer flexibility, quickness and hustle over fixed plans is only right to a certain extent. Hustle is good but not without planning because blind follow is not always a rational attempt in the business world. Summary The writer states in his article that the concepts of comparative advantage and strategy has no longer been powerful; because nothing can remain a secret anymore, every new innovation and invention is easily being imitated by competitors. For example, in response to Pepsi’s new drink, Coca cola also introduced new cock. Thus only those firms are successful, which make fast moves instead of following long plans. Moreover, fast imitation of the original products has also reduced the reward for the new products in the market. Instead of imitation, defective employees also play negative role in leaking company’s secrets. That is why, big financial service firms depend on forging products instead of producing new unique products on their own. The big banks also like to invest in the industries producing goods of multiple uses like facsimile machines, etc. The writer states that conventional strategic companies earn high profits due to barriers against competitors. But he also suggests that high profits are not earned due to competitive barriers alone, but also because of superior execution or forceful opportunism. Thus according to him, an entrepreneur can get much of the business share, just by making a little hustle. The writer further adds that, although the time of competitive strategies and long term planning has passed, yet the reaction of opponent is important to anticipate and get especially in areas like bond and commodity speculation and foreign exchange, because they entail more danger/risk. He says risks should also be measured like profitability. Since, the writer supports execution and hustle instead of competitive strategy, he says that the role of manger is not to read the competitors strategies; but to take actions that would help increase their customers’ satisfaction level. The writer believes that only good execution and sustained hustle can maintain the company’s profit levels while poor execution can result in low profits. Moreover, managers should be deeply involved in recruitment of employees because the firm’s execution directly depends upon the employees’ caliber. And lastly the writer says that the vision of the financial organizations should be well defined. This could be attained only through superior execution. The resulting hustle will then help to keep the product alive in the competition. Critique Little attempt has been made to place the article into any kind of wider context. There has been some additional reading but this is mainly from the internet, for example, he uses the reference of Wanen E. Buffett’s Berkshire Hathaway annual report, 1984, to support his view point that competitive advantage does not exist anymore. Similarly, he also uses the references from other academic journal articles, for instance to support his argument that: “Innovation rarely flags”, he gives the reference of Euromoney stating that "Innovation was the key word.... Every new deal brought with it a new wrinkle. The most innovative bank usually walked away with the mandate." (Euromoney 1984, p.17). There has only been limited comparison and contrast of the review article with other elements of the strategy; literature for instance. Thus in order to support his point that the strategy of superior execution and hustle is applicable to the computer industry as well, he uses the Touche Ross survey: “Senior executives...believed technology had little strategic impact in banking, despite massive investment by the industry.... [They] are disappointed [by the] Inability to use technology to achieve lasting competitive advantages vis-a-vis their principal competitors." (Touche Ross Internatlotial, 1985. p.1) and clear conclusions are drawn from this. Attempts are made to identify the underlying theoretical assumptions, but these are a little cursory and lack in depth. The link between theory and concept is made but it is not fully developed and discussed. For instance, the assumption that success is subjected to superior strategic execution and hustle is right, but only to a certain extent. Furthermore, his belief that the age of comparative advantage, planning, corporate strategy and strategy implementation is gone is not true at all. The importance of business planning cannot be eliminated from literature as Frédéric Delmar and Scott Shane stated in their article: “By helping firm founders to make decisions, to balance resource supply and demand, and to turn abstract goals into concrete operational steps, business planning reduces the likelihood of venture disbanding and accelerates product development and venture organizing activity.” (Delmar and Shane, 2003, p. 1165–1185). There is no real discussion of theory and the review only focuses on the conceptual basis of the paper. Only limited understanding of the relationship between theory and the concept is shown., Despite arguing that the period of competitive strategy is over, the real strength of this article is where the writer accepts the exceptional cases, by giving example of the American Express whose numbers of card members was more than that of its competitor Citibank, just because Amex spent millions of dollars on advertisement and promotion and resultantly gained 15 million US cardholders against just 2 million of Citibank. Another plus point of the article is the use of daily life examples to explain his perspective, for instance, he quotes the examples of Coca cola, Pepsi, Kodak ,IBM ,Citibank and American Express to show how companies get into the competition with a big play or which of them makes good use of business planning. One of the strengths of the article under review is the argument of the writer that today imitation is so much prevalent that it snatches away the reward of the original product. Some of the weaknesses of the article are: 1. The work is mainly descriptive and there is limited critical engagement attached with the article under review. There is no systematic discussion of strengths and weaknesses although the conclusions drawn at the end of an article are half convincing. For example, that part of the conclusion is convincing that says: “There should be a clear vision of financial organizations” but the unconvincing part is that: “Only superior execution is necessary to make a vision”. Undoubtedly executive strategy is important, but only with the blend of business planning to go with it, because planning before starting any business venture gives a detailed outlook of available resources, market type and existing competitors. 2. Another biggest loophole of this article is the lack of references. In order to support his view point, the writer uses very selective references. Moreover, there is very little empirical support present in the article which is highly insufficient to convince the reader that the age of business planning and comparative advantage is over. 3. The work has no real structure and is more like a collection of loosely related issues than anything else. Referencing is haphazard and weak. 4. The work lacks the central narrative that links the issues discussed together, in a coherent manner. 5. Another unconvincing part of this article is that the writer believes that the success of the organization depends solely on the execution skills of the people working for it, whilst its fixed assets does not play any role, which is not true . This is because fixed and variable factors both play an equal role in the production process, for example, no financial venture can be initiated if the required capital/labor is not available. 6. The writer believes that the economics of scale do not exist, which is absolutely wrong. In all types of business/financial activities the presence of economics of scale is inevitable. For example, a company’s average cost can decrease by buying a raw material in bulk. 7. The writer’s point that: “Make hustle to get right” is not true all the time, because sometimes quick and irrational decisions cause loss instead of profit. For instance, if a small budgeted firm tries to allocate huge funds to advertisement instead of improving its product quality, in order to follow a big budgeted firm, then it will have to bear loss or sometimes extra losses. Conclusion In short, the writer has not presented any new idea, but made an attempt to put forward his perspective that concepts like business planning, comparative advantage etc, have lost their importance in business and finance, which is not empirically or factually true. Reference Delmar. F and Shane. S, 2003, ‘Does business planning facilitate the development of new ventures?’ Strategic Management Journal, vol. 24, no. 12, pp. 1165–1185. Available at: http://onlinelibrary.wiley.com/doi/10.1002/smj.349/abstract. Nigel. B, 1984, ‘Novelty Is the Best Policy’, Euromoney, vol.2, no. 2, p. 17. Touche Ross Internatlotial, "The Impact of Technology on Banking," World Summary 1985. p.1 Wanen E. Bufiett, Berkshire Hathaway annual report, 1984, 15. Read More