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Art of War is a set of teachings that has come from Chinese Antiquity from more than 1000BC. Art of
War is a collection of aphorisms from the teachings of Ancient Chinese sages, which was later
consolidated into the Chinese way of life. This ‘Way’ is much similar to Taoism, which literally means
Way (Tao = Way). Art of War described the collection of aphorisms as it dealt with War and strategies.
Art of War is very much relevant in present day as it was during the era of Sun Tzu, the author and
compiler of these percepts circa 600BC. Art of War is a prescribed teaching course in almost all military
academies and with higher ranking promotions dependent on the person being able to understand,
The concepts of Art of War however are not confined to battlefields alone. Expert can adduce these
percepts into any walk of life, as these were fundamentally meant to be so.
Here we try and describe what Art of War would state for mergers and Acquisitions, the new-age battle
Currently, we do not align to understand all the concepts of Art of War for M&As, as it would be an
Let us chalk out the scope of this booklet. Every entrepreneur and business persons, and not limited by
any size, have to make decisions on what businesses can be pursued and what businesses can be
ignored. This is a highly frustrating decision especially during diversifying ones businesses. Art of War
has some Aphorisms which can effectively help us in understanding how we can deal with this situation.
The main theatre of Art of War is battlefield; hence all our interpretation of Art of War has to be in
conjunction to its equivalent value. Venturing in to new businesses might be regarded in Art of War
language and context and entering and conquering a new territory or country.
Art of War gives aphorisms or percepts on capturing six types of terrains. We can say there are
therefore six types of businesses that we can venture, acquire or diversify into.
Great Sun Tzu (pronounced - Soon Tsu), gives the importance and the strategies to deal with these types
of terrains.
1.
First type of Terrain is called Accessible Ground. In simple words, an accessible ground is a place or
territory that is easily accessible to you as well as your enemy. Therefore the entry barriers in these
types of businesses are very less, and hence you will find yourself quickly grappling with competitors.
Since, these types of businesses are very open, lots of time and energy is taken up in protecting the turf.
Sun Tzu advices us not to concern with the accessible terrains if they are not of strategic importance.
They may constitute some part of our portfolio of businesses but these can never be solely cash flow.
The risks in these types of businesses are very high and hence care should be taken in differentiating
A popular example of this business is that of Social Media Consultant. Over past few years, every body
seems to have become an expert in Social media. Hence for a new entrant capturing the mind space is
very difficult and what ever mind space is captured can be quickly eroded if care is not taken. There are
not clear differentiating factors which separate people competency and hence it is an open ground.
2.
The second type of Terrain Sun Tzu describes is termed Entangling Ground. Though the Chinese
translation of the term is close to the word Entangling, it appears to be a bit of misnomer. The correct
meaning of this term would be close to Ground of Advantage. These types of ground or businesses are
the types, which once established gives you a lasting advantage over the rivals. In other words, these
types of businesses have serious business entry barriers and give the businesses a very good monopoly
or oligopoly situations.
Sun Tzu advices us never to quit these ground, or to quit these ground only under direst of the
circumstances. The reason being, once the hold on these ground/ territory is given up we loose
substantial advantage to the enemies and would have a hard time to recapture, if at all be able to
The classic example of this type of ground can be the war between Microsoft and IBM. Though it was
IBM which popularized the personal computers, Microsoft took very advantageous position of holding
on to its ground. Thus, IBM slowly lost out on the Computer Operating system race. Once Microsoft
was able to entrench itself, any player finds it difficult to dislodge the giant. The same principle can be
applied to Google in Search engines (where Yahoo and Microsoft were rivals) and Twitter in Social
The lesson for us is when we want to enter any space but we have an entrenched competitor which we
may find it to dislodge, we should not try and capture the space unless it is of critical and strategic in
nature. If these new spaces do not offer any strategic or crucial benefits, do not waste your efforts in
taking over the fort. If you do want to, you can do so by employing stratagems (i.e. do not take them on
The third type of ground that Sun Tzu describes is termed as Temporizing Ground. This is a ground,
which unlike an Accessible ground, enables fortifications but at the same time does not offer any first-
In this type of grounds, first mover only has a slight advantage over the rival. This slight advantage is the
only fortification from turning the ground into Open Ground. War trenches are a good example of such
A good example for this may be strategy of price cuts. When all the players have a stable price regime,
it does not benefit one company to upset the cart and reduce the prices. This is because even though
the first-mover has a razor thin advantage, he is easily caught up by the rivals and hence a long term
loss.
The nature of telecom industry is an apt example for this type of scenarios where one player cutting the
price leads to entire industry do the same, and hence general lower prices and profits for all the players.
The same is the case for computer hardware industry. However, one notable example might be the
industries where the network effect is critical to growth. For example, companies like Twitter, Pay Pal or
The lesson for us is to keep away from aggressive posturing in the markets if such a move is harmful or
does not add much value over a long term. If such a move does not help you capture and substantially
differentiate from your rivals this would be a very bad move to make. For example, as an entrepreneur
do not venture into something that can easily be managed by any others. Therefore, if you do venture,
ensure that you create enough differentiators and always keep the product pipeline coming and
surprising your rivals. Only way to stay in this game is to keep pulling away from your chasers every so
often.
4.
Narrow Passes is the fourth type of Terrain Sun Tzu discusses in Art of War. Narrow passes in contrary
to Temporizing ground, gives strong and significant advantage to the first-mover. The examples of
Twitter, Linkedin, Adobe, Pay Pal, and Ebay may be apt here.
Sun Tzu advises if there is any opportunity which will give you a strong advantage in the battlefield, be
the first to move to such a place. It is hardly surprising all innovative companies start numerous
ventures, even though they are well aware only few would succeed. But strategically, it is significant
that they have presence in as much possible domains as possible, to tap, entrench and gain advantage
of first-movers.
direction for the rest of people to follow. For example, in media space, Google Ad Programs pretty
much defined the entire industry. It is significant to note that Google was not the first player in the
market with the program but captured some significant positions, in this case its search engine based
businesses.
When entering the businesses where advantage can be gained, move first. The valuations of these
companies are much higher in the initial stages and may later dissipate. These are the companies that
5.
Precipitous heights are the next terrain described by Sun Tzu. We can describe this as a combination of
Entangling Ground and Narrow Passes. The army chooses such a position that it gives itself almost
unassailable position and its victory is assured. This is the best position to be in. It is aggressive while
Most of these companies are monopolies and are just impossible to reach by ordinary efforts. For
example, to create a Fortune 50 company would be virtually impossible for the players. Exxon Mobil or
Wal-Mart would not face any serious threat from a new entrepreneur, in the game where Exxon Mobil
Sun Tzu envisions this position as a hill top fort, which is very hard to capture. The attack up the hill is
strictly forbidden by Sun Tzu as a foolish act. To take on Wal-Mart, for instance, in its own game is not
possible. But there would be places and methods by which you may be able to take on Wal-Mart in
instances, as an entrepreneur understand your strengths and match them over the enemies’
weaknesses.
6.
The final terrain described by Sun Tzu is “Positions at great distances.” In Art of War, Sun Tzu repeatedly
chastises attacking places which are great distance away from your fortifications. This is because, when
a great endeavor is taken, the army becomes weak and gets exposed in many ways. There fore as an
entrepreneur, unless, you are able to withstand the “great distances’ and its challenges you will face in
accomplishing these, do not attempt it. Perhaps the best example for such a case is Napoleon’s invasion
of Russia.
A company trying to build a car company overnight would be a good example. It is a great endeavor and
would need sacrifices and new venture may also put pressure on the existing ones, hence avoid it. The
reasoning also being, if the enemy is at great distance, the chances are also that enemy would not attack
your ground.
The valuation of the company that diversifies with ventures that are “positions at great distances” would
undoubtedly go down. And if the nature of the venture succeeds regain its valuation, but the initial
Conclusion:
Sun Tzu’s book of aphorisms, collected quotations from many centuries of wisdom, is essential reading
for our present day world. Whatever be the nature of the business that we engage in be it a social
media, a pro blogger, a web property founder, or application developer, we all can learn effectively from
In the nature of Sun Tzu, this book too is intended to create ideal atmosphere for such a meditation. An
entrepreneur faces lots of challenges in business, but if the business itself is a mistaken venture, no
amount of effort can reliever him or her. Avoid all such pitfalls by reading, understanding and mediating