A PRESENTATION ON POWER GAME AMONG COMPETING PLAYERS

SUBMITTED BY KAVITA BARAIYA

Introduction:Successful strategy formulation strategy dose not at all guarantee

successful strategy implementation. It is always more difficult to actually carry out something than to say you are going to do it. Strategy implementation requires support, discipline, motivation and hard work from all managers and employees. Mangers should pay careful attention to a number of key issues while executing the strategies. Chief among them are how the organization should be structured to put its strategy into effect and how such variables as leadership, power and organizational culture should be managed to enable employees to work together while implementing the firms strategic plans. The new environmental changes the answers to the four core decision that all businesses and not-for-profits must face, namely: What activities to focus on; what to own (versus what to control)? How to structure the organization? How to conquer the competitive threats? How to read the dynamics of the marketplace and win?

The new answers and the wining strategies depend on profit power, These wining power strategies are: Know your power nodes and focus ownership on power nodes. Adopt new distributed business models. Fight fiercely in three dimensions. Exploit power law marketplaces.

These are four powering strategies for for-profit and not-for-profit enterprises alike and for guiding investments in transparency. Definition of Powers:Power refers to a capacity that A has to influence the behavior of B, so that B acts in accordance with As wishes. This definition implies a potential that need not be actualized to be effective and a dependency relationship. Probably, the most important aspect of the power is that it is a function of dependency. The greater Bs dependence on A, the greater is As Power in the relationship. Dependence, in turn is based on alternative that B perceives and the

importance that B places on the alternatives that A controls. A person can have power on you only if he or she controls something you desire. Types of Power:Power has different types. The main types of powers are as following

Coercive Power:This is defined by French and Raven as dependent on fear. One

reacts to the power out of the fear of the negative results that might occur if one failed to comply. It is generally exercised by the manager against unproductive or elements and restore discipline in the task environment. Coercive Power is associated with the ability to assign distasteful tasks withhold promotion; harass subordinates by not rewarding performance suitably, etc.

Reward Power:The opposite of coercive power is reward power. This is compliance

achieved based on the ability to distribute rewards that others view as valuable. Top manager can get others to implement the organizations strategies by making changes in formal reward systems. Those who carry out the strategy will receive pay raises, bonuses, promotions etc.

Legitimate Power:In formal groups and organizations, probably the most frequent

occur to one or more of the power bases is ones structural position in the formal hierarchy of an organization.

Expert Power:Expert power is influences as a result of expertise, special skill or

knowledge. Expertise has become one of the most powerful sources of influences as the world has more technologically oriented.

Referent Power (Charisma):Its base is identification with a person who has desirable resources or

personal traits. Referent power develops out of admiration of another and a desire to be like that person. This acceptance helps charismatic leaders to exercise great influence over their followers behaviors. If they set high standards for themselves, subordinates follow their steps religiously.

Empowerment as a Way of Influencing Behavior:A significant recent trend in corporate India is for top executives to empower lower employees. Empowerment usually occurs when employees are adequately trained, provided with all relevant information and the best tools, fully involved in key decisions and fairly rewarded for results. Research surveys have also indicated that most executives, currently, are not interested in hoarding power. They are more participatory, more concerned with consensus building and more open with employees as regards information sharing. Empowerment helps everyone to have a say in decision making and creates an atmosphere where goals are set and implemented in a participative climate. Therefore, in many progressive corporations (such Proctor & Gamble, LG, Hughes Software System, HLL etc.), top executives are not willing to wield power in the traditional way, rather, they prefer to give it away to people who can get jobs done,(Yulk and Taber; McGill and Slocum). The Four Powering Strategies for Maximizing Profits:Once an entrepreneur is aware of power nodes, use these four rules to evaluate his business and investment prospects, his M & A targets, and his not for profit objectives; and to create a strategy for maximizing the long-term. 1. Know Your Power Nodes and Focus, Focus, Focus:To maximize profits, be focused: own only businesses with power nodes. Business leaders and investors now have unprecedented choice about what businesses town. Focused companies those concentrated on providing a single element of the value chain- can operate efficiently and attract capital. A focused company with a strong power node in the middle of a value chain, like Intel, may enjoy leverage over profits, while a company with a famous line of consumer product and a large market share in final packaged consumer goods, like Nestle, may turn out to have little profit power relative to big chains of shops or provider of their ingredients. Whether you are corporate executive or an investor, focus on power nodes can improve your strategic choice, your investment decisions, and your value analyses.

2. Adopt New Business Models and Mind Your Power Relationships:Companies can perform well as focused entities; long term relationships (rather than arms length transactions) can be beneficial in dealing with vagaries in markets, motley crews, etc. Perfect information allows wide latitude for establishing, monitoring and coordinating ongoing relationships. Therefore, focused companies have an unparalleled degree of freedom in deciding how to organize. Hindustan Lever is a great example of a company making the most of this. We can accept the many innovative arrangements that wont involve full ownership. In particulars, companies with profit power can use structure to further increase returns. Focused companies with power node can be at the centre of long term distributed business arrangements, orchestrating to relationship to provide positive sum benefits to all, while seizing the bulk of returns and allocating the risk most advantageous manner. This can allow emerging global companies, for instance, to grow rapidly without destroying their returns. 3. Compete Fiercely in Three Dimensions:In transparency, expect to compete in multiple dimensions: vertically (in the same value of chain), horizontally in the same sector or market, and horizontally across traditional industry boundaries. Competition is no longer one dimensional

horizontal. New competition is no longer over horizontal market share either; it is over risk adjusted returns. In many cases, the key determinant of long term value is now the ability to defend extract returns from vertical competitors in the same value chain. 4. Get Ready for Power-Law Marketplaces:Perfect information and high level of connectivity cause new dynamics in groups and in marketplaces because they fundamentally change way people make economic decision. This new style of decision making interdependent decision making. The dynamics of interdependence explains and can be utilized to create success on a phenomenal scale- the kind of scale we have observed in social networks like You Tube, face book, Harry Potter, and iPods- interdependent decision making makes large groups (of buyers, or of voters, for instance) behave like a special kind of network, one that is characterized by power law distributions. Power law is

mathematicians term for type of distribution that, in everyday parlance, is often called the 80-20 principle. The 80-20 principle is operating when, for example, 20 percent of a companys products are responsible for 80 percent of its sales. Profit Power: The Concept:Profit power is the ability to hold on to the value from your own activities as well as to extract value from activities of others with whom you interact in your commercial dealings, to increase the value available to the entire group, and to optimize the risk for yourself and allocate to others the risks that you do not want. This concept can be expressed as followsExcellence + Profit power => extraordinary economic profit The Sources of Profit Power:A power node is a source of profit power- that is a thing, position, skill, dynamic or process that a company can reliably use to influence the financial outcomes for itself and for other commercial enterprises in either appositive or negative way. Power nodes provide companies with the ability to help or hinder the cash flows, risks, and investments that is, the inputs to returns- of other players over an extended period of time. The Power Nodes:The power nodes will be the most important sources of profit in the decades to come. Many of the older nodes are already established sources of leverage, but in the new environment they acquire new functionalities. For example1. Brands:Think of the leverage wielded by not only Coca Cola but also by companies like McDonalds, Cock, and Cartier over their suppliers, customers and partners. 2. Secret, Special or Proprietary Ingredients:Special ingredients generally are all those products or ingredients that are indispensible for the final product. They include key compounds such as rare earths, that are source of international controversy recently, as well as specially components that are essential for larger pieces of machinery or engines.

3. Regulatory Protections:This includes privileges granted by regulatory regimes to run businesses like banks and nuclear plants; rights to use air frequencies or offshore drilling sites among many other things. 4. Focused Financial Resources:Often, this means innovative forms of access to capital that other enterprises cannot be duplicate, which can be displayed to exert control over the business environment. 5. A Customer Base Switching Cost:An example of this power node is the leverage a drug store chain has over customers who regularly need to feel their prescriptions or the grasp of software or telecom service providers over customers with large trading floor. 6. Proprietary Processes or Modus Operand:These are the unique method and procedures that guide the people, equipments or systems in a company. FedExs delivery process is a good example. 7. Distribution Gateway:The Industrial and Commercial Bank of China (ICBC) relies on its vast distributed network of over 18000 branches and 150 million customers for depositswhich has helped to make ICBCs IPO one of the worlds largest ever at that time. Other Power Nodes: The Dominant Position in a Layer Increasing Mutual Utility Filters and Brokers

Power Strategy in Action:Let us look at example to illustrate what I mean by power nodes powering strategy. The first tale about Pepsi Cola and Coca Cola will illustrate what a power node is, how it can be displayed in powering strategy, how to maximize a companys return by orchestrating a distributed business arrangements, and how this is related with multidimensional competition.

The case of Coca Cola and Pepsi Cola:Coca cola has formed arrangements with or acquired stakes in bottlers around the world rather than choosing to all its operations outright. It has made brilliant use of its global brand and secret formula for its drinks. These are its power nodes, its sources of profit power, and points of leverage. The Coca cola company supplies its bottlers with its syrup and the rights to world famous name; for their part, the bottlers buy the filling equipment and enormous quantity of glass and plastic bottles, manage workers ranging from plant employees to truck drivers, negotiate with unions develop relationship with retailers and handle local government regulations. Coca Colas returns on invested capital (ROIC) in the past decades have typically been over 20 percent on carbonated beverages, while most of the bottlers had ROICs well developed below that. Between 2000 and 2003, Pepsi recognized its bottlers and distributors (even its largest bottlers in the United States) as structurally and financially independent, so that, just like Coca Cola and PepsiCo could control rather than own a global beverage system that delivered to the high returns to the beverage company. These Coca Cola and Pepsi Cola business models that the parents had town only two parts of their business- their outstanding brands and their proprietary recipes for soft drink concentrate. These were sources of profits and power nodes. These power nodes were so potent economically that independent companies were willing to take on all the work involved in producing and selling the products- for a relevantly miner share of the overall profit pool. Central Asia between Competition and Cooperation:Great power competition in Central Asia ebbs and flows in a timeless and tireless fashion. Unlike in Europe and East Asia during the Cold War and after, the fault line for the current jockeying for position in Central Asia between Washington and Beijing is not easily discernible. Instead, fluidity, uncertainty, and even outright reversal of fortunes among the major players have been the norm. Since September 11, the world's sole superpower made a massive strategic return to the region, only to make a partial exit to Iraq for its greater Middle Eastern project.

China, though rising, has no such option to disengage. It tries to cope with a volatile region while dealing with its strategic partner of Russia, the more seasoned player of power games in Central Asia. Under these circumstances, the U.S.-China strategic interaction in Central Asia is bound to be asymmetrical, complex, and open-ended. While competition is somewhat inevitable, compromise and even cooperation are and should be part of the geostrategic equation. In specific terms, the United States pursues its security goals with largely unilateralist and military means. In contrast, China carefully plays its diplomatic, economic, and cultural cards in multilateral and bilateral ways. In other words, Beijing's soft power faces off against Washington's hard power in the heartland of Eurasia. In recent years, the locus of this asymmetrical competition has been the Shanghai Cooperation Organization (SCO), a new institution that Washington fears is a vehicle for Chinese power projection in the region. Petropolitik:China's economic influence permeates the SCO. In recent years, Beijing earmarked $900 million in long-term, low-interest loans and grants for member state infrastructural development and the training of 1,500 technicians from other SCO states. More resources are being poured in from China's public and private sectors. Russia, perhaps more than any other major power, keenly observes China's moves. For Russia, China's economic intrusions into traditionally Russian-dominated areas are part of the realpolitik game, be they in the name of geopolitics, geo-economics, or, more fashionably, Petropolitik. Its economy buoyed by high oil prices, Putin's Russia is ready and able, perhaps more than at any time in the post-Soviet era, to consolidate and perhaps expand its influence in these near abroad regions of Russia. Indeed, the once super military power has now become the super petro-power under Putin, whose mission is to remake Russia as a world power to be respected, if not feared. In this context, the oil czars in the Kremlin may not particularly welcome the newly operational Kazakh-China oil pipeline with its 200,000 barrels-per-day capacity. After all, this pipeline competes with the long-talked-about-but-never-built oil pipeline from Russia's Siberia to China's northeast. For Beijing, this Yeltsin-initiated, Putin-stalled, and Japanese-frustrated eastern pipeline project may eventually be built. China's thirst for

energy, however, cannot wait. The United States was certainly not enthusiastic about the Kazakh pipeline (Dick Cheney made a surprise visit to the oil-rich Central Asian republic in 2006 to cement relations with its autocratic leader and lobby for a new oil pipeline to Europe that would bypass Russia). Beijing's real goal is perhaps to achieve energy independence from constraints imposed by both Washington and Moscow. The Sino-Russian rivalry in Central Asia, however, has its limits. After some 300 years of conflict and mutual suspicion, the two largest Eurasian powers have embarked upon a genuine and mutually beneficial rapprochement. The SCO serves as an interfacing mechanism for Beijing and Moscow to trade off interests and coordinate policies regarding Central Asia. Indeed, certain divisions of labor seem to have developed in dealing with regional issues, with Beijing opting for more of an economic role and Moscow emphasizing its military presence. Under these circumstances, Beijing's growing influence in Central Asia may well be balanced or even checked not by Washington but by Moscow. Given its proximity, Russia is perhaps more concerned than the United States with growing Chinese economic power and political influence. These concerns will persist beyond the Russian presidential elections in 2008 and regardless of whether the current Russian leader builds his legacy as Putin the Great by staying in office or Putin the Ghost by working largely behind the scenes.

References:http://www.iese.edu/research/pdfs/DI-0713-E.pdf http://www.mashable.com/2010/07/13/game-mechanics-businses http://www.fpif.org/articles/central_asia_between_competition_and_cooperation http:// www.econ.iastate.edu/classes/econ322/orazem/Game%20Theory.ppt Business Policy Strategic Planning and Management P. K. Ghosh Politics of Administrative Representation- Mann, Dabe The Politics of Power Haines, Joe The Journal for Decision Makers - Vikalpa October - December 2010