THREE MODERN DAVIDS
"Seeth thou a man diligent in his business?
he shall stand before kings."
Proverbs 22: 29
Andrea Garcia's business was failing. After 25 years of selling groceries, her little corner store stood on the verge of closing. A large supermarket chain store had opened around the block and its prices were substantially lower. It advertised in the newspaper, radio and TV everyday. It also kept longer hours. Mrs. Garcia noticed even some of her most loyal customers were going over there. Several times she cut prices to match the chain store, but they always responded by cutting their prices even further.
Now her prices were so low she barely made a profit.
Mrs. Garcia's store was more than a good business it was practically a neighborhood institution. People came there not only to shop, but also to have meaningful conversations about friends and family. She and her husband Ruben knew most of their customers by their first names. Her store was a way of life for her. Now all the work of 25 years was vanishing before her eyes.
Is Mrs. Garcia's story a unique one? Not at all. Before the 1950's most grocery stores were so called "Mom and Pop" operations. Why did this once dominant method of selling foods disappear? Was it simply lower prices
Like Andrea Garcia, Mark Kim also faced competition from a huge corporation. In his situation though, he was working with the corporation. Or at least, that is what he initially thought.
Shortly after graduating from college, Mark had a business opportunity with a major telecommunications firm. The offer seemed too good to be true. The corporation paid two-thirds of his rent, allowed him to use their office equipment, issued a line of credit and sold him supplies well below the normal market value. In return, Mark invested some capital and put his efforts into introducing the new product of cellular phones.
At first everything went well for Mark. With a lot of hard work, he managed to get his business running just before Christmas. The holiday season was good that year and within four months his company showed a profit. Then some rather odd things
happened that didn't make sense.
First, a corporate executive hired away one of Mark's managers. This left him short on skilled personnel. When he phoned the corporation for an explanation, the executive involved replied that he just didn't perceive it as a problem.
Then more strange things occurred. Suddenly, there was always a shortage of cellular phones. Every time there was a great promotion or a good holiday selling weekend, Mark never had enough product in stock.
Mark then noticed competitors buying supplies far below his cost from the same telecommunications firm. This allowed his opposition to sell their mobile phones at a far lower price than Mark's company.
While Mark pursued the corporation about this cost disparity, they turned around and announced they were no longer selling equipment. Now he had to find a new source of supplies and raise the capital to purchase it. When he complained about this to the corporation, their response was to forbid him from using the office equipment anymore.
Furthermore, they restricted his use of the office to the hours of 9 a.m. through 6 p.m. Even though he paid a third of the rent and demonstrated their actions were illegal, the telecommunications firm didn't rescind their decision. Instead they changed the locks on the doors and told Mark to pursue the matter through the courts. In the meantime, Mark's business suffered. When he did seek legal remedies, he discovered all sorts of arbitration clauses in his contract that prevented him from collecting damages. Just a brief while ago everything looked so promising for his business. Now it seemed certain to fail. Is there anything Mark Kim and Andrea Garcia can do in the immediate future to save their businesses?
While taking on the corporate titans of the grocery and telecommunications industries may seem like a formidable task, it is not an impossible one. During the 1920's, an ingenious businessman named Alfred Sloan took on a corporation that had an incredible 50 percent share of its market. Sloan's company in comparison had only a ten-percent share. Yet by the end of the decade his company dominated the industry while the once mighty corporation was floundering. How Alfred Sloan accomplished this is one of the most amazing stories in all of business.
At the beginning of the 1920's, five out of every ten vehicles sold in the United States was a Ford Model T. As production of the "Tin Lizzie" reached its height, Alfred Sloan took over as president of General Motors. He recognized the Model T was a great car, but he knew it wasn't for everybody. Over the advice of his top managers, Ford refused to manufacture any other automobile. This meant Ford wasn't making any effort to appeal to different buyers' tastes and income. It also meant all their factories were assembled to produce just one car.
Sloan took advantage of these factors. He recognized GM, with fewer factories than Ford, would have a much easier job of converting them to manufacture different cars, while Ford would incur a tremendous expense to copy this same procedure. If his plan worked and there was a need for more factories, the implementation would be even simpler. The only way Ford could succeed after this was by increasing sales on the Model T.
To combat this possibility, Sloan aimed at Ford's weakest areas. His new cars targeted the luxury, the semi-luxury, mid-range and lower mid-range buyers that Ford ignored. In the low-end market where Ford was strongest, Sloan chose an innovative method to compete. The Model T was an open vehicle. The automobile GM put against it, the "K Model," was both an opened and closed car. When GM decreased its price on the K Model to the same as the Model T, Ford could no longer contend on quality or price. As a result, Ford shut down production completely to refit its factories to make other automobiles. Since then GM has always been the leading car manufacturer.
What did Alfred Sloan do that Andrea Garcia and Mark Kim didn't do?
For one, he stayed away from his opponent's strengths. Mrs. Garcia 's decision to drop her prices played into her competitor's strong points. As did Mr. Kim's decision to
go to court. Sloan deliberately went after his rivals' weaknesses and kept away from their strengths. Had he just brought out a similar version of the Model T, he too would have played into his opponent's strengths and ended up with a comparable result. But Sloan knew better. He recognized what David demonstrated over 3000 years ago in ancient Israel-giants can be defeated--if you use the right approach. Which is why we shall re-examine this biblical tale.