INTRODUCTION
In his book Competitive Strategy, Michael Porter defines a firm stuck in the middle, as a firm that is in an “extremely poor strategic situation”. What are the causes that force a firm to be stuck in the middle? “The firm stuck in the middle […] suffers from a blurred corporate culture and a conflicting set of organizational arrangements and motivation system.” Firms like Circuit City, Blockbuster, IBM and General Motors/Chrysler, among many others, are classic examples of firms that failed to adopt or were outmaneuvered by more focused competitors. Firms that are “stuck in the middle” must make a fundamental strategic decision. Successful strategic decisions require an understanding of the firm’s capabilities and limitations.
IN DEPTH
In 2009, after six decades of business as an electronics retailer, Circuit City went out of business. The firm had simply lost its appeal to customers, who decided to purchase electronics from buyers who would give additional value to their customers service. Several poor business decisions led Circuit City to file for Chapter 11 bankruptcy in 2008 and its closing in 2009. This case highlights the importance of identifying appropriate corporate strategies to obviate the risk of getting caught in the middle of inconsistent and unprofitable strategies. Blockbuster represents another case of being “stuck in the middle”, Blockbuster became a classic case of being “stuck in the middle” by failing to choose between a physical, high-cost retail model and a convenient, low-cost digital model.
By clinging to late fees and in-store, brick-and-mortar operations while attempting half-hearted digital initiatives, it offered inferior, costly service compared to innovators like Netflix and Redbox, leading to its bankruptcy. General Motors (GM), is also a classic, textbook example of a firm “stuck in the middle”, General Motors (GM) is a classic, textbook example of a firm “stuck in the middle,”, where a lack of clear market positioning and uncompetitive pricing (too expensive compared to importers, yet lacking luxury cachet) resulted in a 2009 bankruptcy.
Decades of declining market share, high structural costs, and failure to innovate left them squeezed between low-cost competitors and premium differentiators. GM struggled to differentiate its products against superior foreign competition in quality, reliability, and technology, particularly from the 1980s onwards. Another important case of being “stuck in the middle”, is represented by IBM. By failing to choose between cost leadership and differentiation in the PC market and failing to adapt its mainframe monopoly to the rise of decentralized computing. It lost to low-cost rivals (Dell) and high-value competitors, leading to major losses.
CONCLUSION
Michael Porter has noted that strategy is as much about executives deciding what a firm is not going to do as it is about deciding what the firm is going to do (Porter, 1996).[1]Once stuck in the middle, the firm is in the difficult position to take the necessary steps to extricate itself from this “unenviable position”. It takes aggressive investments to modernize its structure and to achieve superior performance. Successful strategies do not necessarily require expensive investments, but the leadership’s ability to be efficient and to achieve an “above-average return” through focus or differentiation. This choice rests on “picking the strategy best suited to the firm’s strengths and one least replicable by competitors”. [2]
[1] https://pressbooks.usnh.edu/ld823/chapter/13/
[2] Competitive Strategy – Techniques for Analyzing Industries and Competitors – pag.44 – Michael E. Porter
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