Judo and the Art of Entry

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Judo and the Art of Entry
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Assumptions

• Rational economic behavior
• No product differentiation
• Customer loyalty if prices are equal

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12

Q
12
4
12

7
Profit 25
CE 3
CI 2
TC 10
Q
5
12
5
12

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Profit 25
PE 4
CE 3
CI 2
TC 10
Q
5
12
6
12
Entrant limits scale to one. (Puppy Dog Ploy)

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Profit 25
PE 4
CE 3
CI 2
TC 10
Q
5
1
12
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Suppose Entrant gives away coupon at
random? Coupon holder has right to buy one unit
for 4.00. If coupon is transferable, who is
final buyer?
Suppose Entrant sells coupon? What will be the
price? Who will buy it?
Should incumbent honor the coupon?
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Real World Examples

• Kiwi Airlines entering business in 1992
• MCI ATT (1970s)
• Liberty Cable Time Warner Cable in New York
  (1991)

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Real World Example
Eastern Airlines in 1980 was competing with New
York Air for East Coast shuttle routes Eastern
was also competing with American and United on
transcontinental routes. On its shuttle routes,
Eastern offered coupons for discounts on its
transcontinental routes. American and United
immediately honored these coupons, allowing
Eastern to cut back on its transcontinental
routes in favor of shuttle routes
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Judo Strategy Principles
From Yoffie, David B. Cusumano, Michael A. ,
Judo Strategy, Harvard Business Review,
Jan/Feb99, Vol. 77 Issue 1, p70
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Principle 1 Move rapidly to uncontested ground
to avoid head-to-head conflict.

• Do...
• move to new products that redefine the
  competitive space.
• move to new pricing models that competitors are
  unable to emulate.
• move to new testing and distribution models
  that avoid competitors' strengths.

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Principle 1 Move rapidly to uncontested ground
to avoid head-to-head conflict.

• Don't...
• suppose that constant movement is possible or
  desirable.
• allow excessive movement to destroy your focus
  and weaken your credibility.
• treat rapid movement as a substitute for
  longterm vision.
• assume that speed and time-to-market reduce the
  importance of quality to enterprise customers.

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Principle 2 Be flexible and give way when
attacked directly by superior force.

• Do...
• avoid sumo matches unless you're bigger and
  stronger than your opponent.
• embrace and extend rivals' smart moves.
• mesh flexibility and tactical adjustments with
  long-term strategic plans.

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Principle 2 Be flexible and give way when
attacked directly by superior force.

• Don't...
• escalate unwinable wars.
• be afraid to cannibalize your own products.

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Principle 3 Exploit leverage that uses the
weight and strength of opponents against them

• Do...
• turn your opponent's strategic commitments and
  investments to your advantage.
• cooperate with others who are threatened by
  your opponent's success.
• Don't...
• forget that the greater your success, the more
  likely it is that leverage can be used against
  you.

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