Many of the strategies in the 36 Stratagems focus on planning, agility, deception, and the importance of timing have been adapted to competitive business strategies considering the business warfare metaphoric. Ordered in 6 categories, the stratagems provides a list of strategies that one/businesses can take depending on the position one is in. The categories are listed below.
- Winning Stratagies
- Enemy Dealing Stratagies
- Attack Stratagies
- Chaos Stratagies
- Gaining Ground Stratagies
- Defeat or Desperate Stratagies
Advantageous and Offensive Strategies
Create Something Out Of Nothing
Alibaba was founded in 1999 by Jack Ma, who saw an opportunity to create an e-commerce platform that would connect Chinese businesses with buyers around the world. Alibaba's platform was a success, and it quickly became the leading e-commerce platform in China. Alibaba has since expanded its operations to other countries, and it is now one of the largest e-commerce companies in the world.
By creating something new and innovative, Alibaba was able to disrupt the Chinese e-commerce industry and establish itself as the leader. Alibaba is not a retailer in the traditional sense. It does not keep stock, and logistic services are handled by third-party providers [1]. Companies can use technological advancements to differentiate themselves from their competitors i.e. create something that does not exist.
Kill With a Borrowed Knife.
In business, this stratagem can be used to gain a competitive advantage by using the resources or strengths of another company. By using the resources or strengths of another company, a company can avoid having to invest in those resources or strengths themselves.
Alibaba does what Amazon, eBay, PayPal, Google, FedEx, all of the wholesalers, and a good portion of manufacturers in the U.S. do, with a healthy helping of financial services for garnish [1]. What Alibaba does differently, is by leveraging the new technologies of network coordination and data intelligence and the efforts of many Chinese businesses to create an ecosystem that is faster, smarter, and more efficient than traditional business infrastructures.
Luring the Tiger out of the Mountain.
The stratagem states that the one who lures the enemy out of their stronghold has the advantage. This is because the one who can lure the enemy out of their stronghold can attack them when they are at their weakest.This strategy can be used to lure suppliers into a more favourable position for the company.
In 2021, Xiaomi, with a 17.1 percent share of global sales, surpassed both Apple and Samsung [2] and became the #1 smartphone brand in the world [3]. And Xiaomi did it without entering the United States market. How? Xiaomi’s phones are designed to address the unmet need of iPhone users. Instead of incremental technology improvements, Xiaomi continues opted for conscious feature choices. The first Mi phone was designed for the dissatisfied Apple customers in China [4].
The Host and Guest Exchange Places.
The stratagem states that the one who can turn the tables on the enemy has the advantage. Compared to Apple and Samsung, Xiaomi understands what it means to be digital and the seismic change that has swept over the market. Apple made the smartphone an essential part of our everyday lives. But Xiaomi understands that smartphone is “central control tower” and played smartly across multiple digital ecosystems[4]. Instead, Xiaomi offered offers devices that support multiple ecosystems in China – WeChat (Tencent), Weibo, Alibaba, etc.
Co-petition or partnership with stronger parties will help to create an ally to increase brand recognition and to mitigate problems associated with unnecessary dependency risks especially when one simply does not have the ability to negotiate or have the resource or infrastructure requirements. A strong relationship from early stage help to build trusted communication that is essential to managing risks.
Deceptive Challenges
These two example strategies can be used positively or negatively to achieve the intended effects. The discussion that follows are of negative nature that one should be aware of.
The Beauty Trap.
The stratagem states that the one who can use beauty to distract the enemy has the advantage. It teaches us that it is important to be aware of our surroundings and to be prepared for the unexpected.The ecosystem is rife with risks, and fertile for deceptive strategies.
By design, any technological ecosystem would allow users to have an identity with personal identifying information, and other unique recordings. Scammers with these datasets will launch impersonation attacks to deceive partners, suppliers, or customers to conduct illicit activities. For example, fake reviews can be created to promote counterfeit goods, or defame competitors. Businesses need to be wary of false impressions of strength or credibility of unknown parties (i.e., the empty fortress strategy) or falling into the beauty trap such as attractive advertising or promotional materials with the malicious intent.
The Theranos [5] controversy blood-testing start-up pitch promises a revolutionary technology, automated, fast and inexpensive. Many lives would have had hopes. The only problem, was the technology didn’t work, thanks to a whistle blowing report from The Wall Street Journal.
The Empty Fortress.
This strategy is based on the idea of making your enemy believe that you are stronger than you actually are. It states that "the one who can make the enemy believe that your fortress is empty has the advantage."
For example, a dark pattern might be used to make it difficult for users to cancel a subscription or to make it difficult for users to find the privacy settings. Dark patterns are user interface elements designed to trick or mislead users into taking actions that they would not otherwise take. A tech company might use a dark pattern to make it difficult for users to opt out of data collection. This data can then be used to target users with ads or to sell to other companies.
France’s CNIL has fined many tech giants (including Amazon, Google, Meta, Microsoft and TikTok) for cookie-related breach, and enforcements over the use of dark patterns [6].
Steal the Beam and Replace them with Rotten Timber.
This stratagem cautions that firms could undermine the opponent's strength and that if our foundation is weak, we could be exploited easily.In the business context, when dealing with companies that may be using the strategy:
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The company may be making unrealistic promises.
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The company may be hiding information from you.
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The company may be trying to pressure you into making a decision quickly.
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The company may be trying to isolate you from others who could offer you advice.
Founded in June 2017, Luckin had one of the most successful U.S. IPOs by a Chinese company last year, attracting interest from prominent U.S. investors, including long-only funds and hedge funds [7]. As much as 2.2 billion yuan or USD310 million in sales were fabricated in order to make it seem like it was more successful than it actually was. During the period of the fraud, Luckin raised more than USD864 million from debt and equity investors. Once the fraud was uncovered, Luckin Coffee's stock price plummeted. The company was forced to delist from the Nasdaq stock exchange and in 2020, agreed to a USD180 million penalty to settle accounting fraud charges for “intentionally and materially” overstating its 2019 revenue and understating a net loss.
Loot a Burning House.
In 2022, Celsius Network froze its customers accounts and filed for bankruptcy [8] after a plunge in crypto prices caused an industrywide liquidity crisis. According to reports, the company had frozen withdrawals after using a myriad of failed decentralized finance (DeFi) strategies[9]. Celsius promises retail customers huge returns, sometimes as much as 18.6% annually. The lure of big profits has led individual investors to pour assets into Celsius and platforms like it [10]. But they had used investor money and customer deposits to prop up its own token, there were claims that it was Ponzi scheme, and they never generated enough profit to pay the high rewards promised to customers, and used new customer deposits to fund customer withdrawal requests [11].
Finally
The 36 stratagems are a military treatise that has been used for centuries to gain an advantage over an opponent. But the fog remains thick. It is important to remember that these stratagems are not always appropriate for use in business or technology. If all else fails, perhaps it is pertinent to consider whether entry is viable for the firm at that point. Of the 36 strategies, retreat is the foremost strategy. This is because it is often better to avoid a conflict altogether than to risk defeat. This means that it is sometimes necessary to retreat in order to regroup and come back stronger.
References
[1] “Everything Alibaba does differently - and better,” Harvard Business Review, Accessed: May 8, 2023 [Online]. Available at: https://hbr.org/2018/09/alibaba-and-the-future-of-business.
[2] V. Mishra, “Xiaomi Becomes #1 Smartphone Brand Globally for First Time Ever,” Counterpoint Research, Aug. 05, 2021. Accessed: May 8, 2023 [Online]. Available at: https://www.counterpointresearch.com/xiaomi-becomes-1-smartphone-brand-globally-first-time-ever/.
[3] S. R. Choudhury, “China’s Xiaomi overtook Samsung and Apple in June smartphones sales,” CNBC, Aug. 06, 2021. Accessed: May 8, 2023 [Online]. Available at: https://www.cnbc.com/2021/08/06/china-xiaomi-overtook-samsung-apple-in-june-smartphones-sales-counterpoint.html
[4] C. Lin, “Five Lessons From Xiaomi’s Path to Smartphone Supremacy,” INSEAD Knowledge, Sep. 08, 2021. Accessed: May 10, 2023 [Online]. Available at: https://knowledge.insead.edu/strategy/five-lessons-xiaomis-path-smartphone-supremacy.
[5] C. Roff, “Everything you need to know about the Theranos scandal,” Pan Macmillan, Mar. 25, 2019. Accessed: May 10, 2023 [Online]. Available at: https://www.panmacmillan.com/blogs/literary/theranos-elizabeth-holmes-john-carreyrou.
[6] N. Lomas, “EU watchdogs agree on how to handle certain cookie consent dark patterns,” TechCrunch, Jan. 20, 2023. Accessed: May 10, 2023 [Online]. Available at: https://techcrunch.com/2023/01/20/cookie-taskforce-report-consent-dark-patterns/.
[7] CNBC, “China’s Luckin Coffee to Pay $180 Million Penalty to Settle Accounting Fraud Charges,” CNBC, Dec. 17, 2020. Accessed: May 12, 2023 [Online]. Available at: https://www.cnbc.com/2020/12/17/chinas-luckin-coffee-to-pay-180-million-penalty-to-settle-fraud-case.html.
[8] K. R. Tortorelli, “Embattled crypto lender Celsius files for bankruptcy protection,” CNBC. Accessed: May 12, 2023 [Online]. Available at: https://www.cnbc.com/2022/07/13/embattled-crypto-lender-celsius-informs-state-regulators-that-its-filing-for-bankruptcy-imminently-source-says-.html
[9] O. Knight, “How Crypto Lender Celsius Overheated,” www.coindesk.com, Jun. 16, 2022. Accessed: May 12, 2023 [Online]. Available at: https://www.coindesk.com/business/2022/06/16/how-crypto-lender-celsius-overheated/
[10] H. Lang, C. Mandl, E. Howcroft, and E. Howcroft, “How crypto lender Celsius stumbled on risky bank-like investments,” Reuters, Jun. 15, 2022. Accessed: May 12, 2023 [Online]. Available: https://www.reuters.com/business/finance/how-crypto-lender-celsius-stumbled-risky-bank-like-investments-2022-06-15/
[11] R. Wee, E. Howcroft, A. John, D. Knauth, and E. Howcroft, “Crypto lender Celsius propped up its token, benefiting insiders -U.S. bankruptcy examiner,” Reuters, Jan. 31, 2023. Accessed: May 12, 2023. [Online]. Available: https://www.reuters.com/technology/celsius-business-model-different-that-advertised-us-bankruptcy-examiner-2023-01-31/