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The Balance of Power

July 15, 2004 | Richard A. D'Aveni | Workplace, Teams, & Culture

Like nations, companies build spheres of influence, says the author. Properly conceived, that sphere can be more than simply a platform for a company's offensive and defensive initiatives. It becomes a blueprint for a company's grand strategy and a mechanism for executing that strategy. It can project the company's power outward, maneuver competitors into a corner and shape the future of the industry to the player's advantage. Drawing on examples from the automotive industry (Toyota, General Motors, Ford, Daimler-Chrysler) and the contact lens market (Johnson & ; Johnson, CooperVision, CIBA Vision, Bausch & ; Lomb), the author offers techniques for assessing the relative power of your company's sphere as well as those of rivals and delineates a variety of targeting strategies open to managers who wish to reinforce, or change, the existing balance of power. In addition, he describes a number of tactics for avoiding fatal "overstretch" of resources when pursuing those strategies. Finally, he offers guidelines for assessing and managing threats to one's sphere and demonstrates, through the cases of General Electric and Pfizer, among others, how migrating the core business can be a necessary and successful strategy.

For an extended discussion of the logic behind the sphere of influence model -- including how companies can map, analyze and endeavor to reinforce or change each element of their sphere -- see "Corporate Spheres of Influence," by Richard D'Aveni (MIT Sloan Management Review 45, no. 4 (2004): 38-46.

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