▲ ‘The essence of the Lanchester Strategy’ is that small differences in competitiveness appear as large differences in market share. The photo is'Light+Building 2018' held in March    © World Lighting News.

 

Written by : Jung-Bae Kim. Publisher & Editor. Lighting Critic.

 

The business conditions of global lighting companies are getting worse. The reason is the decline in sales and profitability due to the sluggish domestic market. To overcome this

situation, it is absolutely necessary to expand the market.

However, in order to expand sales channels, first, a “brand” must be established so that

consumers can trust and purchase products. It is very difficult to achieve these two goals. So, how can lighting companies around the world achieve these goals at the same time? <Editor's words>
 
Consumers don't buy products from small companies, no matter how good the quality

and price are. Small and medium-sized companies will be difficult to survive if they are

swept away by the “identification strategy” of large companies. It is a realistic survival

strategy for small businesses to be #1 in the niche market.
 
The constant concern of SMEs around the world these days is, "If the current situation

continues, can we continue to maintain the company in the future?" Is to do. The reason

small and medium-sized enterprises worry and worry is simple. This is because the

business environment is deteriorating last year to the extent that SMEs cannot handle it.

For example, increasing government regulations, increasing the burden of environmental

improvement costs on businesses, rapidly rising wages and real estate rents, increasing

demands for workers to increase welfare, and increasing various taxes are trending day by day.

On the other hand, domestic and overseas markets are increasingly shrinking. As export

competition intensifies, governments in each country are building trade barriers through

various taxes and regulations. The price of the product is also on the decline. As a result,

rising costs each year outpace growing profits.

The way SMEs survive in this situation is to keep existing customers well, open up new

markets, and reduce production costs by improving productivity. That's why we need to

increase our operating profit. To do this, companies need'weapons'. The'weapons' can

be summarized as product competitiveness, price competitiveness, marketing

competitiveness, and brand competitiveness.

 

However, in any market, companies' product competitiveness and price competitiveness

have been leveled to some extent. All that remains is marketing competitiveness and

brand competitiveness. In the end, it is said that it is possible to expand sales channels

and sales only if you are ahead of competitors with marketing and brand competitiveness while having product competitiveness and price competitiveness.

 

However, there is nothing as cruel as telling SMEs to increase their marketing c

ompetitiveness or increase their brand competitiveness. This is because it takes time,

manpower, and cost to increase marketing competitiveness and brand competitiveness.

 

What appears here is the problem of “financial power”. For example, a company that has

the funds necessary to increase marketing and brand competitiveness can grow ahead in market competition by increasing marketing and brand power.

 

On the other hand, it is

said that companies without such “financial power” cannot even get an opportunity to

increase their marketing power and brand power. In extreme terms, it means that if you

don't have the money, you have no choice but to sit down and die.

◆ What is the “Lanchester Strategy”?

Therefore, small and medium-sized enterprises with weak financial power must find a way to expand sales channels and increase sales even without financial power. So, what is the

ice technique? The management strategy that attracts attention in that way is the

Lanchester Strategy.

 

“The Lanchester Strategy” is the “law of mechanical relations” created by F. W. Lanchester, a British aeronautical engineer during World War II. This strategy was created by

Lanchester's analysis of the results of the air wars that took place during World War I and World War II. The point is that the'weak company' presented a way to beat the'strong

company'.

 

The 'Lanchester Strategy' is divided into'The First Law' and'The Second Law'. The “first law” is that if soldiers fight one-on-one with swords or spears, the army with a large number of soldiers wins.

On the other hand, the'second law' is a law applied in modern warfare in which multiple

enemies can be killed with one weapon from a distance, such as a gun. In this case, even

if the two armies have the same strength or skill, the one with the better weapon

performance will eventually win.

 

The important thing is that the probability of winning in this case is the "square" of the

difference in weapon performance. For example, suppose that the performance of the

weapon of Unit A is twice the performance of the weapon of Unit B. In this case, the

difference in weapon performance between Unit A and Unit B is 2:1.

However, according to the second law of the Lanchester strategy, the difference between

the combat power of the two armies is 2×2=4: 1×1=1. The difference in weapon

performance is 2: 1, which is doubled, but the difference in combat power is 4: 1, which is 4 times.

 

Therefore, if Unit B is to exhibit the same combat power as Unit A, the number of soldiers must be four times more than Unit A, which is the core content of the second law of the

Lanchester Strategy.

 

◆ “The Lanchester Strategy” and Marketing

When this “Lanchester strategy” is applied to management or marketing, the difference in the number of soldiers in both units becomes the difference in market share. In addition,

the difference in weapon performance can be said to be the difference in better products, product quality, efficacy, and effectiveness.

 

For example, suppose that Company A and Company B have the same product quality,

but Company A's market share is 7, and Company B's market share is 3 (7: 3). The

influence of Company A = 7 × 7 = 49: Company B = 3 × 3 = 9. The market share is 7: 3, which is only 2.3 times (7 ÷ 3 = 2.3), but the market influence is 49: 9, which is 5 times

(49 ÷ 9 = 5).

 

This small difference in market share results in a large difference in influence. Therefore, it becomes difficult for a company with a small market share to beat a company with a large market share. This is why small companies, small and medium-sized businesses, and c

ompanies with low market share rarely sell, no matter how high-quality products they

offer at cheaper prices.

 

◆ Big company's strategy & Small company's strategy

The reason for this result is that the market strategies used by large companies, large

companies, and companies with high market share are different from those that small

companies, SMEs, and companies with low market share must use.

 

In other words, large companies use the “identification strategy”. 'Identification strategy' is a strategy in which one's own company or product represents the entire market or

product.

 

This is because'Coca-Cola', which has a higher market share than'Pepsi-Cola', when

advertised, "Drink Coca-Cola," rather than emphasizing the company's name and product, "Cola, the pleasure of drinking it!"

 

In this way, the entire item called'Cola' is emphasized. The reason Coca-Cola advertises in this way is because, as more people drink Coke, the sales of Coca-Cola, which has a high market share, will naturally increase.

 

However, if it is Pepsi-Cola, you should not follow Coca-Cola's “identification strategy”.

Instead, "Pepsi-Cola, cola for young people!" In this way, advertisements that emphasize

the company's name and product characteristics should be'discriminatory'.

 

That is why young people who are marketing targets say, “Yeah! If you're young, you

should drink Pepsi!”, and as a result, sales of Pepsi-Cola will increase.

 

◆ How to implement the “Lanchester Strategy”

If so, it seems that lighting companies, mostly small and medium-sized businesses in any

country, have already come up with how to expand their sales channels and strengthen

brand competitiveness.

 

In other words, lighting companies that are small and medium-sized enterprises should t

horoughly pursue a'differentiation strategy'. The concrete practice method of the 'differentiation strategy' (Lanchester's abbreviation law) is summarized as follows.

 

1. Aim for No. 1 in a small market or a segmented market.
2. Differentiate yourself, a weak company, from a strong company, or choose a'different

method' from a strong company.
3. Do not fight against the strongest company, No. 1. Instead, fight against an opponent weaker than you and win.
4. Break down the capabilities of a strong company, find the most likely to win, and

attack.
5. Focus on the strong part and discard the weak part.
6. Sell products directly to consumers.
7. When we do business, we engage in a “approaching war” that directly approaches

consumers.
8. Narrow the scope of the business area and place importance on the nearest place.
9. We narrow down the implementation goals to one and aim to achieve individual goals.
10. Focus on one thing.
11. Try new things without being tied to the past.
12. Use light equipment.
13. Work for a long time.
14. Important management information is not exposed to competitors.
15. Don't get upset with small successes.

 

In addition to this, ▲ we follow the No. 1 strategy. ▲ Capturing new trends in the path of a growth market. ▲ Differentiate and segment. ▲ Surrounding strong companies with

various items. ▲ High-end products ▲ Make the strongest products stale ▲ Increase

product competitiveness with brand power and price competitiveness. ▲ Do not do two

things with one brand name. ▲ Use intangible products. ▲ It is also an important method to engage in side attacks and guerrilla attacks.

 

◆ How much should the market share increase?

The core of the “Lanchester Strategy” is to win battles and wars by maximizing combat

power with superior weapons. The same is true of marketing and market competition. There are two weapons used in marketing and market competition: “money” and “market

share”.

 

In particular, since market share is a key factor that determines the influence of a

company in the market, it should be increased as much as possible. Then, to what extent

should the market share increase? For the answer, it is better to refer to the Lanchester-

Hunai Law of Market Share.

 

Yukio Funai, a Japanese management consultant, combined his thoughts with the

"Lanchester Law" and released the "Lanchester-Funai Law" on market share. In this

“Lanchester-Hunai Law”, meaningful market share is presented as follows.

 

▲Existing share : Minimum share to be recognized in the market : 7%.
▲Impact hare : Share where one's presence begins to affect the entire market :

11%.
▲Top Share : The lowest share to gain profit when pursuing a share-first strategy : 26%.
▲Oligopoly share : Share of starting to gain overwhelming advantage : 42%.
▲Exclusive share : Absolutely safe share regardless of the number of competitors : 74%.

Even small companies, small and medium-sized businesses, and companies with a small market share like this clearly have'opportunities to reverse' and'how to reverse'. However, in order to seize and use the opportunities and methods, you must put more effort than

others.

 

So, in the “Lanchester Strategy,” the emphasis is on “The weak should work harder and

work more than the strong!” Even if you work one or two times more, it is difficult to beat the strong, so you should work at least three times more and harder.

 

But if the weak can beat the strong, what algebra would it be to work three times, four

times or five times more?

 

What I want is that lighting companies around the world will use the “Lanchester Strategy” and the “Lanchester-Hunai Law” to escape the frustrations of small businesses and small

businesses and become a strong company and become the No. 1 company. It is also a

way for lighting companies around the world to survive, prosper, and be happy in the

market competition.

 

 

<Copyright ⓒ World Lighting News>
Unauthorized reproduction and redistribution prohibited.

 

기사 내용과 관련이 없는 글, 욕설을 사용하는 등 타인의 명예를 훼손하는 글은 관리자에 의해 예고없이 임의 삭제될 수 있으므로 주의하시기 바랍니다. 댓글 작성 시 상대방에 대한 배려와 책임을 담아주세요.

• 닉네임
• 비밀번호
• 
• 도배방지 입력