Push and Pull Corporate Strategies

"Push Strategy and Pull Strategy"
Push Strategy and Pull Strategy

Push and pull corporate strategies identify two solutions, which tend to be presented as alternatives1, and are applied to the different logic’s that underpin the relationship between a business and its final demand.

A push strategy refers to the development of processes that emanate from the company and go towards the market: the company invents, develops and proposes a product that is destined to find purchasers. Supply is therefore sustained by the company.

A pull strategy is the opposite, because it refers to processes that start from the market and go towards the company: demand requests supply and ‘pulls’ it out of the company. We could say that the market stimulates the needs that prompt the company to develop a particular product, which emerges as a response to the pull action of demand.

In this sense, the two strategies are alternatives, because they are founded on very different market assumptions (the characteristics of demand, of competition, of the financial system, of the supplier system, etc.) that require very different capabilities and resources from companies. Push strategies presuppose comprehensive knowledge of the market, of the needs of its major players (demand and competition) and of their dynamics. This then makes it possible to plan in advance the corporate activities necessary to perform all the processes oriented to the realisation of a product that allows a company to strive to achieve good commercial results.

The premise for application is therefore a stable context, in which corporate processes (for example manufacturing, communications, etc.) can be reiterated successfully. Push strategies base their competitiveness on accumulated experience, which is built up by repeating the same actions in time, and on a wide range of activities which a stable context makes it possible to organise and exploit. In a push situation, economies of scale and of experience can be achieved, developing rigid but very competitive cost structures, when competitors are not in a position to do the same.

Pull strategies are based on the opposite premise. The company is not able to develop comprehensive knowledge of the market and its players, which are characterised by the changeability and dynamism of their actions and needs. Planning corporate activities is therefore a very risky business and cannot be performed for very long periods of time. The premise for application of pull strategies is therefore an unstable context, in which the same corporate processes cannot be reiterated successfully. Corporate competitiveness is not founded on the development of rigid cost structures that are gradually reduced over time: the competitive force of pull strategies therefore lies in their ability to respond to the market and in rapid action. Experience in manufacturing and communications is not built up, but experience is developed in flexible responses, both with regard to manufacturing processes, and to information and communications. The competitiveness of pull solutions lies in the ability to respond before the competition to the changing needs of demand, and this applies both to material flows and to flows of information and communications.

It is therefore clear that push and pull strategies are not exactly alternatives for corporate management, because they are founded on entirely different competitive premises: each corporate process may be developed according to a push or pull solution, according to the conditions and the corporate skills that characterise the application context.

From the above, it would appear that for the sectors that experience very high levels of competitive intensity (for example, as we see today all over the world, in the case of clothing or cars), only pull-type strategies should be applied, in view of the impossibility of long-term planning and the accentuated dynamism of competitors and demand. But this does not happen because, as we stated earlier, the type of push or pull strategy must be identified on the basis of the specifics of each corporate process. The result is that, in a single company, two opposing logics can be applied to adjacent processes: a push strategy to some, and a pull strategy to other, directly connected processes.

The combination of push and pull strategies allows the advantages of the two approaches to be combined, with different degrees of rigidity and flexibility (structures, costs and relationships), in order to respond to demand sooner and better than competitors, in other words orienting corporate management to the
market (Market-Driven Management).

In fact the competitive tension typical of today’s global markets, which translates into a search for ways of minimising the cost of corporate activities, while maximising the competitive advantage of each activity, postulates that companies should know how to combine the advantages of management strategies founded on scale and experience (fundamentally of the push type, planned well in advance and aimed at minimising all the characteristic costs) with strategies based on flexibility and reactiveness (like pull strategies, which cannot be planned in advance and are characterised by the continuous selection of activities with a high competitive value). Push strategies are therefore applied for activities that can be reiterated, and pull strategies for activities that must make the company reactive and flexible, as a modern Market-Driven approach to corporate management demands.

But a Market-Driven approach is not limited to summing the two strategies by combining the two on the basis of individual processes, but imposes a form of integration that can take into account the competitive value of the various corporate processes, trying to optimise their implementation in relation to costs (fixed and/or
variable), timeframe (time-based management) and method (rigidity and flexibility). This is how we should interpret a decision to merge or demerge companies, the creation of more or less long-term partnerships with third parties, and the development of networks that may have changeable conformations, establishing both stable relationships and others that are very dynamic and variable, in terms of the subjects and processes involved.

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