You can influence the behaviors of a competitor if you can determin where its profit sanctuaries are. Profit sanctuaries are the parts of your competitor’s product, service nd geographic portfolio where it makes the most money. Every company has one or more profit sanctuaries, and they are important not only because they deliver healthy profitsto the bottom lin, but because they usually fund other – weaker or developing – parts of the business.
In certain circumstances, it is possible to entice your competitors into retreat from competing in a business area that is important and highly profitable for you. This can be done by taking actions that are likely to lure your competitors into a different business area where you also may both compete, but that is less important and profitable for you.
One of the best ways to entice a competitor to retreat from your main area of interest into another area is to leverage your superior knowledge of hte costs of your business activities. If you can lure your competior to compete in an area that it beleives (because of its inferior knowledge of its costs) is highly profitable for it, but is not, you might be able to nudge it out of the area of your greatest profitablility, and also cause its cost to go up, its margins to shrink and its share to decline.