Good Strategy/Bad Strategy: The difference and why it matters

by Richard P. Rumelt

I could see that Stewart’s approach to the nut business was a complex coordinated maneuver over a decade of time. His original large-scale holdings enabled him to capture the lion’s share of benefits from investments in research, market development, advertising, and promotion. The seven-to-ten-year lag in competitive response provided both the financing and a window of opportunity to build large-scale nut-processing facilities. The economies of scale in processing have so far prevented smaller competitors from achieving equivalent costs. It must have taken iron nerve to wait years for the strategy to work. “You are still looking five to ten years ahead?” I query. “It is one of the big benefits of being a private company. When I first bought these lands from major oil companies, they were looking ahead one quarter or one year. They wanted to get the assets ‘off their books’ to make their financial ratios look better. We can do more with these businesses because we don’t suffer the crazy pressures that are put on a public company.”