Stratagem 5:Befriend the Distant Enemy to Attack One Nearby.
“It is more advantageous to conquer nearby enemies, because of geographical reasons, than those far away. So ally yourself temporarily with your distant enemies in spite of political differences.”
—From The Thirty-Six Stratagems
|You can increasingly find allies among competitors, and competitors among seemingly unrelated companies. This creates opportunities. Try looking for—even creating—“distant” enemies with whom to achieve common goals (attacking “nearby” enemies). By avoiding knee-jerk reactions to friend and foe, new opportunities will emerge.|
It is more comfortable to draw clear lines between supporters and competitors, but it is becoming difficult to do so. This stratagem shows that by selecting the right supporters and targeting the right competitors, you can play one off the other and become more powerful.
When companies defined themselves by industry, identifying competitors was straightforward: If a company played in your industry it was a competitor; otherwise, it was not. Now lines are blurring. Companies increasingly define their businesses along dimensions that cross industries. Few thought Microsoft would threaten Sony’s PlayStation, for example, or that Virgin, a record company, would threaten British Airways. While companies in unrelated industries are finding themselves unexpected rivals, other companies in the same industry increasingly find themselves allies. Identifying the right competitors and the right allies is becoming more complicated and a more important determinant of success.
The Thirty-Six Stratagems was born in a similarly fluid environment. This fifth stratagem offers some advice for navigating the web of alliances: Ally with competitors that are more “distant” from you and attack competitors that are “nearer” to you.
You ally with a distant enemy.
You attack a nearby enemy.
Honda Befriends a Bicycle Company
Looking from the sidewalk of any major Western city into the street, you would assume that the largest motorcycle manufacturer in the world must be Honda, Suzuki, or Kawasaki. You would be wrong. The world’s largest motorcycle manufacturer is not BMW, Ducati, or Harley-Davidson either. Almost no one in the United States or Europe has heard of the world’s largest manufacturer of two-wheel vehicles, even though it produces more than 3 million bikes a year, including the world’s most popular motorcycle, the Splendor. The largest two-wheel motor vehicle manufacturer in the world is India’s Hero Honda. It owes its success to an unlikely paring of two distant enemies: a motor company and a bicycle distributor.
Honda had been waiting for years to sell motorcycles in India. Its motorcycle business is extremely profitable. It produces just 15 percent of the company’s revenue yet generates 50 percent of the firm’s operating profit. India, with nearly one billion people, in which 70 percent of motor vehicles are two-wheelers, promised an extraordinary opportunity to expand this profitable business. However, Indian government protection did not allow foreign
firms in the market.
In the early 1980s, the rules changed. India’s domestic firms, who were enjoying a near-monopoly, could not meet demand. The leading motor scooter producer, Bajaj, was struggling under demand many times its annual output. Its customers put up with a six-month waiting list for new scooters. The Indian government responded by allowing foreign companies to enter India through minority joint ventures with local Indian companies. Honda finally had its chance.
To begin selling in India, Honda had to choose a business partner. It had many well-suited partners to choose from because several domestic motor-scooter companies had established themselves under India’s protective laws. The logical choice would be a company with experience building motors, assembling motorcycles or scooters, and a network established to sell them. Honda could easily plug its brand and motor design expertise into such a partner.
One of the Indian companies that courted Honda was a familyowned bicycle firm. Founded by two brothers in the 1950s, Hero had built a network of independent bicycle dealers and had established
one of India’s leading bicycle brands.
While Hero did not hit the top of Honda’s potential partner list initially, Honda was intrigued by two factors. First, Hero had already begun adopting “just in time” (JIT) inventory practices. Pioneered by Honda and other Japanese manufacturers, this practice of minimizing inventory by ensuring parts are delivered only at the time needed was beginning to revolutionize the designs of manufacturing floors throughout the developed world. Honda executives were surprised to see an Indian bicycle company embracing such an innovative practice so early. This signaled that Hero and Honda shared a culture of operating discipline.
Second, through forty years of selling bicycles, Hero had blanketed India with a large network of independent bicycle dealers. It had organized hundreds of suppliers who delivered just in time. By partnering with Hero, Honda could potentially convert bicycle dealers into motorcycle dealers and could source materials through Hero’s vast distributor network.
While Honda’s competition partnered primarily with Indian motor companies to create TV S Suzuki, Bajaj Kawasaki, and other joint ventures, Honda aligned with a bicycle company to create Hero Honda.
Hero Honda launched several innovations over the years that established its dominance. It was the first to introduce a four-stroke engine in India. This technology, for which Honda is famous, dramatically increases fuel efficiency and reduces maintenance costs, making Hero’s motorcycles attractive options for price-sensitive Indian riders.
While its competition preferred to run their own dealerships, Hero Honda used Hero’s experience managing independent dealers to establish a powerful network of 5,000 outlets. Hero Honda sales agents traverse the country to visit dealers and every day send postcards to headquarters with information on stock position, turnover, new purchases, projected demand as well as recent competitor action in the region.
On the back end, Hero Honda coordinates over 300 suppliers who supply parts and materials just in time. Where it makes sense, the company has backward integration: It rolls is own steel, produces its own casting, and owns its own auto components companies.
The innovative strategies needed to build a bicycle business proved an ideal complement to Honda’s motor design and manufacturing capabilities. Had the company partnered with a “nearby”
enemy, it might have remained in a crowded pack of good motorcycle companies including Suzuki and Yamaha. Instead, by partnering with a distant enemy, Honda became outstanding. It helped create the largest motorcycle company in the world.
Unifying China by Befriending Distant Enemies
During the Warring States period, China consisted of seven kingdoms, each pursuing dominance over the known world. Their contentious balance lasted for 250 years until Qin, one of the largest
states, upset it. Qin ultimately enveloped the other kingdoms and unified China by acting on the principle Befriend the distant enemy to attack one nearby.
An advisor of the Qin emperor encouraged him to attack a state that, while quite distant, was weak and therefore easy prey. The emperor found this advice sound and was ready to act when another advisor warned he should do the opposite. The advisor argued that Qin should not attack the smaller state because other large states,
threatened by Qin’s expansion, would come to the target state’s defense. Indeed, the states near to Qin had already entered an alliance to defend themselves. The advisor also noted that attacking and ruling a distant state would require more resources and introduce more logistical problems than would attacking and ruling a neighbor.
Instead, the advisor suggested seeking alliances with distant states to attack neighboring ones.
This strategy had two key benefits: Qin would be the primary benefactor of these alliances because each nearby state, once taken, would naturally fall under Qin control. And such alliances would put outlying states off their guard by calming their fears of being future Qin targets (which, of course, they were). This would make conquering neighboring states easier, because outlying states would
not come to their defense. It also would allow Qin to take the outlying states by surprise later.
The king followed this advice. He befriended distant states and attacked the ones nearby. This disrupted the natural alliance Qin might have otherwise encountered and paved the way for the Qin kingdom to take over the entire country. For the first time in history, China was unified. Qin was its ruler.