tksabarwal Page 1 8/11/2009

Sun Tzu: war and management

Sun Tzu’s Art of war is the oldest military classic known to Chinese literature. It is also the most
revered and well-known military text outside China.

It’s achievement transcends the military context and offers the basis for an insight into the nature
of modern business practices. Perhaps this similarity is acknowledged in no small way by the
common Chinese saying. “the business world is like a battlefield.”

The Sun Tzu art of war model presented here is a “how to” model, a tool to assist managerial
decision making in the choice, development, and application of strategy. The model consists of
five major components; situation appraisal, formulation of goals and strategies, evaluation of
strategies and strategic controls.

Situation appraisal.

The principle of detailed planning. The strategic decision making process begins with assessing
the desirability of engaging in combat. This involves detailed planning.

“With careful and detailed planning, one can win, with careless and less detailed
planning, one can not win. How much more certain is defeat if one does not plan at all.
From the way planning is done before hand, we can predict victory or defeat”.
“For this reason, to win hundred in a hundred battles is not the hallmark of skill. The acme
of skill is to subdue the enemy without even fighting”

Detailed planning involves an assessment of your strengths and weaknesses vis-à-vis those of
your enemies.

“He who has a thorough knowledge of himself and the enemy is bound to win all battles.
He who knows himself but not the enemy has only an even chance of winning. He who
knows not himself and the enemy is bound to parish in all battles.”
“Know your enemy, know yourself, and your victory will not be threatened. Know the
terrain, know the weather, and your victory will be complete”.

Many researchers and scholars have developed various kinds of planning tools, for example,
competitive analysis through SWOT approach. The essence of SWOT analysis is to determine
the company’s strengths relative to those off its competitors and to identify possible areas in
which the company has distinct advantages or is likely to be threatened. The ultimate purpose is
to exploit any market opportunities.

Generalship or command

A capable general must posses five important qualities; wisdom, sincerity, benevolence, courage,
and strictness. Sun Tzu also pointed out five common weaknesses, which can affect a general:
 If reckless, he can be killed.
 If cowardly, he can be captured.
 If quick-tempered, he can be easily provoked.
 If sensitive to honor, he can easily be insulted.
 If over compassionate to the people, he can easily be harassed
The above qualities of the capable general mirror the ideal attributes that a CEO should have.
Any CEO who can demonstrate such qualities is likely to be successful because:
1. He is quick and decisive but not reckless

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 2. He is able to trust his subordinates and let them know that their performance will be
rewarded (or penalized) accordingly.
3. He is human relations oriented. However, he is not overly compassionate.
4. He is exemplary, strict lifestyle will instill discipline within the company. At the same time,
he willing to learn and is not afraid of losing face when people point out his mistakes.

Doctrine or law. The way the army is structured often affects the combat readiness and
capabilities of the forces.
“if the army is confused and suspicious, the neighboring states will surely create trouble”
“the management of a large force is similar to that of a small force. It is a matter of
organization and structure.”

The organization and structure of a firm is one area that must be considered in strategic planning.
What should be the best way to organize the company to face the future?

Formulation and evaluation of strategies.

Choice of battleground
While terrain is fixed and not alterable, a general can decide on the type of battleground on which
to engage the enemy. Similarly, in business, a company can choose the area in which to
compete.

In war, it is very important to fight in areas where you enjoy superiority.

“Generally, those who reach and occupy the battleground early will have time to rest and wait for
the enemy. Those who arrive at the battleground late will have to rush into action when they are
already tired and exhausted.”
“Therefore those who are skilled in warfare will always bring the enemy to where they want to
fight, and not brought there by the enemy.”

Many Japanese successes can be attributed to there being early entrants in these markets. While
the western world is still hesitant about doing business in China, the Japanese are already
operating in China on a large scale. They have also quietly entered the Vietnamese market.
When these two countries finally open up, the main beneficiary will be the Japanese
When a firm decides to go into overseas operations, joint ventures may be a better initial choice
than wholly owned subsidiaries.
“One can not have advantage of topography without the use of local guides.”
In the business world, we can find many examples of avoidance strategy-choosing areas ignored
by the enemy- as well as niching strategy.
“To succeed ….is to attack a place where the enemy does not defend or where its
defense is weak.”

“the strength of an army does not depend on large forces.”

Japanese success in world markets is perhaps the best manifestation of choosing the areas
ignored by enemies. In the words of Kenichi Ohmae, “choosing the battleground so that they
would not have to fight head on against the large western enterprise has been the key to their
success. They have sought out markets…where they could initially avoid head-to-head
competition.

The need to attack. If confrontation is inevitable, the only way to win is through attacking.” those
who can not win must defend ; those who can win must attack. Defend when one’s forces are
inadequate; attack when one’s forces are abundant.”

In business, when you have to compete openly, you cannot win by defending your market share.
You can not rely on your competitors to fail so that you will succeed. In computer industry, the

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Japanese have invested heavily over the years to establish their market dominance- they have
out-invested the Americans since 1981. Japanese now dominates the key technologies in this
industry.

The need to adhere to relative advantage in numbers based on one’s strengths, relative to the
enemy’s, one needs to devise the appropriate course of action. Sun Tzu suggested six
alternatives.
1. When outnumbering the enemy ten to one, surround him;
2. When five to enemy’s one attack him;
3. When double his strength, divide him;
4. When evenly matched, you may choose to fight;
5. When slightly weaker than the enemy, be capable of withdrawing;
6. When greatly inferior to the enemy, avoid engaging him.

For no matter how obstinate a small force is, it will succumb to a larger and superior force.
The advantages of size have never been denied in business literature. Many strategic planning
tools operate on the assumption that larger production enjoys greater economies of scale in
production, R&D, and marketing. The quest for size is also one of the reasons companies want to
exploit their markets beyond national boundaries.

Recent history seems to suggest that the Japanese strategy of going after market share and
allowing their companies to grow as large as possible is paying off. In 1988, eight of the ten
largest companies were Japanese. Toady it is known fact that the Japanese dominate the world
in many industries.

Evaluation of strategies. The next stage involves assessing strategic fit.

“Hence the wise general must consider both favorable and unfavorable factors in
deliberations. By taking into account the unfavorable within the favorable factors, he
ensures his plan is feasible. By taking into account the favorable within the unfavorable
factors, he can resolve difficulties.”

To test its strategies, we suggest that a company address the following criteria.
1. Consistency with the environment.
2. The effect of competition.
3. Consistency with corporate practices and culture.
4. Fit with available company resources
5. Acceptable level of risk.
6. Fit with market opportunities.
7. effective and efficient implementation.
8. avoidance of over used strategies and tactics.

Implementation of strategies

THE HUMAN FACTOR. The next stage implies going to war. Implementation consists of two elements;
human and the operational. One overriding principle underlying the human factor is that of unity.
“When the general is weak and lacks discipline, when training and instructions are not
clear, when duties of officers and men are not distinct, and when formations are slovenly,
the result is utter disorganization.”

A GENERAL MUST BE SINCERE TO HIS FEELINGS FOR HIS MEN.

“When the general regards his men as infants, they will be willing to follow him through
thick and thin. When he treats them like his beloved sons, they will be willing to support
him unto death.”

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 AT ALL TIMES, HE MUST HAVE THEIR INTERESTS AT HEART.

“Pay attention to nourishing the troops, and do not tire them unnecessarily.”

However he must guard against over compassion; “ if over compassionate to the people, he may
be harassed.”
There is no doubt that the CEO must value such human assets and adopt a human orientation in
management. One of the ingredients for successful companies highlighted in the book “ IN SEARCH
OF EXCELLENCE.” Is that of adopting a human orientation approach? At the same time, there must
also be disciplinary procedures for those who do not perform to expectations. The CEO must not
be bogged down by feelings of heart to the extent of jeopardizing rationality of the mind.

THE OPERATIONAL FACTOR. Once a plan is decided on, it has to executed expediently….

“Speed is the essence of war. Capitalize on the unpreparedness of the enemy; travel by
the unexpected routes; and attack those places where he does not take precautions.”
….and at the most appropriate and suitable moment.

“When the strike of the falcon breaks the body of its prey, it is because of correct timing.”

In Singapore, the first western fast food restaurant to start operations was A&W. unfortunately, it
was established at a time when the standard of living of the average Singaporean was relatively
low, and western fast food was not yet well-received. In late 1970’s and 1980’s consumer’s
affluence increased tremendously, and McDonald’s, Kentucky fried chicken, and Burger king
marketed aggressively. A&W failed to sense the right time to change and, today, is struggling
against high odds.

Despite all the detailed planning, something can still go wrong, and the commander on the
ground must be smart enough to recognize this and change his plans accordingly.

“just as water shapes itself according to the ground, an army should manage its victory in
accordance with the situation of the enemy. Just as water has no constant shape, so in
warfare there are no fixed rules and regulations.”

The Japanese, while being thorough in the planning, are surprisingly flexible when it comes to
execution. To quote Kotler, Fahey, and Jatusripitak; [the Japanese] have not been so committed
to a specific strategy that they have been blinded by it….They have continually adapted to the
market and the competitive environment and their evolving position in it…in short, the Japanese
learn by doing. They develop and modify products, introduce them, and then watch how the
markets react.”

Another interesting concept advocated by Sun Tzu is innovativeness.

“Do not repeat the tactics that won you a victory, but vary them according to the
circumstances.”
“He must be able to change his methods and schemes so that no one can know his
intentions. He must be able to alter his camp-sites and marching routes so that no one
can predict his movements.”
“thus, those skilled in manipulating the enemy do so by creating a situation to which he
must conform.”

Innovation is also very much desired in business, especially so where high technology is
becoming more important as a competitive edge. Again Japanese firma are adept at this.
However, their innovativeness is not confined to technology development. As Kotler et al
comment: “Japanese firms are adept at using multiplicity of competitive weapons with varying

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degrees of emphasis-price, product features, service , distribution, product line stretching and
proliferation-to penetrate the markets.”

STRATEGIC CONTROLS

Control is an essential part of any strategy. However, to effect control, one must collect, collate,
and analyze information on the enemy and the environment.

The “ reason why the enlightened ruler and the wise general are able to conquer the
enemy whenever they lead the army and can achieve victories that surpass those of
others is because of foreknowledge.”

On a macro level, the success of the Japanese can be attributed to some extent to their market
intelligence systems. Over the years Japan has created massive institutional infrastructure
geared to collecting information on various world markets. The Japanese general trading
companies, ministry of international trade and industry, and the Japan external trade organization
conduct research and gather information for use by the Japanese companies.

Ref. W.E.D. Nov.’91