Transforming Chaos Into Opportunities

When negotiating with a trading partner, assess the competitive position of each side. Then, determine who has the advantage of time and resources. Do not rush into the situation. It is recommended to properly build a detailed plan that is based on assessed data. The greater your advantage of time and resources is, the greater your leverage becomes.

Revised content from the wiki page on the 36 Stratagems.

The View of China

Watch the fires burning across the river

(traditional Chinese: 隔岸觀火; simplified Chinese: 隔岸观火; pinyin: Gé àn guān huǒ)

Delay the entering of the field of battle until all the other players have become exhausted fighting amongst themselves. Then go in at full strength and pick up the pieces.

Usage

This "Opportunistic Stratagem" thrive on situations where vulnerabilities can be exploited. The objective is to capitalize on all opportunities so as to gain the advantage.

#

"Looting a house on fire" (趁火打劫 or "Chen Huo Da Jie")
When an organization is beset by internal conflicts, they are not able to deal with an outside threat. This is the time for a superior organization to make a deal that gives them leverage.

Usage
Gather internal information about the opposition. If the opposition is in its weakest state ever, conquer the opposition without mercy.

The View of Russia

Russia possesses no strategic options to gain any leverage in its dealing with China. Their initial objective is to fix their economy first.

#

[ Turning Crisis into Opportunities ]

(From Stratfor.com)

China and Russia struck a deal that will give Russian energy firms Transneft and Rosneft loans to increase East Siberian oil field development and production and to connect the Eastern Siberia-Pacific Ocean pipeline to China. In return, China will receive about 300,000 barrels per day of oil for the next 20 years. Russia might have made the deal out of economic desperation as its state-owned energy firms feel the pain of evaporating credit, economic woes and low oil prices.

China and Russia struck a deal that will give Russian energy firms Transneft and Rosneft loans to increase East Siberian oil field development and production and to connect the Eastern Siberia-Pacific Ocean pipeline to China. In return, China will receive about 300,000 barrels per day of oil for the next 20 years. Russia might have made the deal out of economic desperation as its state-owned energy firms feel the pain of evaporating credit, economic woes and low oil prices.

Analysis

China and Russia reached an agreement under which China will give key Russian energy firms Rosneft and Transneft loans for $15 billion and $10 billion, respectively, Transneft spokesman Igor Dyomin said Feb. 17. Russian state-owned oil pipeline company Transneft will use its loan to connect the long-delayed Eastern Siberia-Pacific Ocean (ESPO) pipeline to China, and Rosneft will use its loan to expand East Siberian oil field development and production. In exchange for the loans, the Chinese will receive about 300,000 barrels per day (bpd) of oil for the next 20 years.

The loans are part of the much longer negotiations circling the idea of the ESPO pipeline. It makes perfect sense for Russia to link its vast Eastern Siberian oil resources (about 10 percent of Russia’s total oil reserves, or 10 billion barrels) to energy-consuming Asian markets like South Korea, Japan and especially China. Moreover, a pipeline that could carry Russian oil to the country’s Pacific coast could supply markets even further abroad, such as the United States. The problem is that building a pipeline across thousands of miles of mountainous Siberian terrain requires enormous capital investments that are not easy to come up with, particularly during a global recession. During Soviet times, the Russians used central government investment to undertake gigantic energy infrastructure projects (such as the pipelines from the Yamal Peninsula to Europe) that served strategic interests. After the Soviet collapse, and especially during Vladimir Putin’s presidency, Russia has been demure about such capital projects, performing only what was absolutely necessary to maintain exports to existing markets and passing up major renovations or expansions. This tight-fistedness enabled Russia to build up massive foreign exchange reserves with its trade surpluses, but it meant that many potential plans remained on the drawing board.

A new opportunity emerged when the Chinese and the Russians began negotiating the deal that has just been settled. The Chinese would loan the money, and a 44-mile spur off the ESPO pipeline would be jointly built and operated, linking Skovorodino in Russia’s Amur region to Daqing in China’s Heilongjiang province. When Transneft offered to build the spur, negotiations began. Despite hard-bargaining tactics and inherent distrust between the two geopolitical rivals, the proposal always seemed promising, since it marked such a close alignment of interests. Without Chinese capital, the Russians were unlikely to realize their strategic goal of transporting resources to new markets in the East at a time when their main market — Europe — is turning away. Without Russian oil, the Chinese would not be able to diversify their oil supply and enhance their energy security.

But the proposal ignited a conflict between the two major Russian players, Transneft and Rosneft, over the fact that a pipeline leading directly to China limits Russia to one customer, whereas building the pipeline to the Pacific coast would allow supplies to be shipped to any number of buyers. Rosneft wanted to secure China as a customer first, and then go on to bigger and better things; Transneft wanted to run a line straight for the coasts (to prevent China from taking advantage of a direct line by re-exporting Russian oil or by unilaterally demanding price reductions), or to refine the oil at home and continue shipping products by rail to the Pacific.

Rosneft is one of Moscow’s energy champions, and also has the support of one of two major political factions in the Kremlin, led by Deputy Prime Minister Igor Sechin. Ever since Rosneft assimilated the broken pieces of former Russian energy company Yukos (with help from a $6 billion loan from China in 2004), it has depended on developing its Siberian potential in order to rise above its many competitors. ESPO is therefore crucial to Rosneft’s survival and success. Therefore, Rosneft wanted to secure the deal with China first so as to have a stepping stone to a broader Far East strategy.

Negotiations on the Chinese deal were delayed. The Chinese were reluctant to sign an agreement while they had doubts about whether the Russian oil producer and pipeline builder could get along — specifically, China was waiting to see whether Rosneft would have the Kremlin’s support. Beijing also knew it had control of the purse strings; and given its inherent distrust of the Russians, it wanted to be sure that the agreement was fully to its liking — for instance, by insisting, against Putin’s demands, that the loan be made in U.S. dollars and not Russian rubles. China also wanted to make sure it did not need the cash to address any immediate problems at home due to the financial crisis.

Ultimately, the Kremlin intervened in the spat between Rosneft and Transneft, approving of Rosneft’s strategy and enabling the deal to move forward — by endorsing a slew of tax reforms and incentives for oil development and export in key East Siberian sites such as Sakha, Irkutsk, Krasnoyarsk, and eventually Taymyr, Sakhalin, Lena-Tunguska and Lake Baikal. The Chinese then came forward with the $25 billion, with a 6 percent yearly interest rate (moved down from 7 percent), which means that Russia gets the cash up front while China receives about 2.2 billion barrels of oil.

The deal reveals several things about the way regional geopolitics are unfolding as the world economy contracts. Russia and its state firms are in need of a lifesaver now that the combination of low oil prices, the absence of outside credit, and domestic financial troubles has rapidly depleted their reserves. The Chinese loan will provide an infusion of cash at just the right time to stave off financial pressures, allowing the Russians to undertake otherwise unfeasible projects that will pay off when Chinese energy demand revives. Moscow will see its Far East strategy advance another rung up the ladder, while Sechin’s clan, having scored a major victory in winning Kremlin approval for the Chinese deal, will gain an economic and political advantage over rivals.

China, meanwhile, will receive a steady stream of oil for the next 20 years. Rosneft’s facilities are ready to produce about 313,000 bpd (slightly more than the agreed-upon amount to repay the loan) at Vankor, the key Siberian site for the ESPO project. This amount of oil to be paid to China is roughly the same as the amount imported from Russia in 2007 (mostly by rail), and about half as much as the 600,000 bpd rail capacity in the region. This is significant, especially for a country so dependent on manufacturing and sensitive to energy shocks. China needs a reliable energy supply and does not want to be overly dependent on energy from one source. Moreover, most of its oil is shipped via ocean from the Middle East, and this leaves China at the mercy of U.S. naval power. However remote the possibility of an interdiction, it is enough to make a landlocked oil supply route attractive to Beijing.

But for Russia the deal is not a win-win. Moscow is getting pounded by the recession, and the decision to go forward on a pipeline that goes directly to China, forgoing the possibilities offered by a more versatile sea port destination, is a major concession. Obviously, now the Russian firms have to go through with the infrastructure developments, which will be technically demanding and fraught with unforeseen expenses and delays (sending Siberian oil eastward is said to cost twice as much per barrel as sending it westward). And the Chinese got a steal: Although not all of the contract’s subtleties are likely out in the open right now, reimbursement for the loan means that the Chinese have purchased Rosneft crude for only about $11.40 a barrel once interest is figured in — about one-third of what Russia’s crude fetches on the open market right now. The Russians have essentially locked the fate of their Far East strategy to the whims of Chinese energy policy, and this is a compromise that could reveal how financially desperate Russia is.

China and Russia reached an agreement under which China will give key Russian energy firms Rosneft and Transneft loans for $15 billion and $10 billion, respectively, Transneft spokesman Igor Dyomin said Feb. 17. Russian state-owned oil pipeline company Transneft will use its loan to connect the long-delayed Eastern Siberia-Pacific Ocean (ESPO) pipeline to China, and Rosneft will use its loan to expand East Siberian oil field development and production. In exchange for the loans, the Chinese will receive about 300,000 barrels per day (bpd) of oil for the next 20 years.

The loans are part of the much longer negotiations circling the idea of the ESPO pipeline. It makes perfect sense for Russia to link its vast Eastern Siberian oil resources (about 10 percent of Russia’s total oil reserves, or 10 billion barrels) to energy-consuming Asian markets like South Korea, Japan and especially China. Moreover, a pipeline that could carry Russian oil to the country’s Pacific coast could supply markets even further abroad, such as the United States. The problem is that building a pipeline across thousands of miles of mountainous Siberian terrain requires enormous capital investments that are not easy to come up with, particularly during a global recession. During Soviet times, the Russians used central government investment to undertake gigantic energy infrastructure projects (such as the pipelines from the Yamal Peninsula to Europe) that served strategic interests. After the Soviet collapse, and especially during Vladimir Putin’s presidency, Russia has been demure about such capital projects, performing only what was absolutely necessary to maintain exports to existing markets and passing up major renovations or expansions. This tight-fistedness enabled Russia to build up massive foreign exchange reserves with its trade surpluses, but it meant that many potential plans remained on the drawing board.

(click image to enlarge)

A new opportunity emerged when the Chinese and the Russians began negotiating the deal that has just been settled. The Chinese would loan the money, and a 44-mile spur off the ESPO pipeline would be jointly built and operated, linking Skovorodino in Russia’s Amur region to Daqing in China’s Heilongjiang province. When Transneft offered to build the spur, negotiations began. Despite hard-bargaining tactics and inherent distrust between the two geopolitical rivals, the proposal always seemed promising, since it marked such a close alignment of interests. Without Chinese capital, the Russians were unlikely to realize their strategic goal of transporting resources to new markets in the East at a time when their main market — Europe — is turning away. Without Russian oil, the Chinese would not be able to diversify their oil supply and enhance their energy security.

But the proposal ignited a conflict between the two major Russian players, Transneft and Rosneft, over the fact that a pipeline leading directly to China limits Russia to one customer, whereas building the pipeline to the Pacific coast would allow supplies to be shipped to any number of buyers. Rosneft wanted to secure China as a customer first, and then go on to bigger and better things; Transneft wanted to run a line straight for the coasts (to prevent China from taking advantage of a direct line by re-exporting Russian oil or by unilaterally demanding price reductions), or to refine the oil at home and continue shipping products by rail to the Pacific.

Rosneft is one of Moscow’s energy champions, and also has the support of one of two major political factions in the Kremlin, led by Deputy Prime Minister Igor Sechin. Ever since Rosneft assimilated the broken pieces of former Russian energy company Yukos (with help from a $6 billion loan from China in 2004), it has depended on developing its Siberian potential in order to rise above its many competitors. ESPO is therefore crucial to Rosneft’s survival and success. Therefore, Rosneft wanted to secure the deal with China first so as to have a stepping stone to a broader Far East strategy.

Negotiations on the Chinese deal were delayed. The Chinese were reluctant to sign an agreement while they had doubts about whether the Russian oil producer and pipeline builder could get along — specifically, China was waiting to see whether Rosneft would have the Kremlin’s support. Beijing also knew it had control of the purse strings; and given its inherent distrust of the Russians, it wanted to be sure that the agreement was fully to its liking — for instance, by insisting, against Putin’s demands, that the loan be made in U.S. dollars and not Russian rubles. China also wanted to make sure it did not need the cash to address any immediate problems at home due to the financial crisis.

Ultimately, the Kremlin intervened in the spat between Rosneft and Transneft, approving of Rosneft’s strategy and enabling the deal to move forward — by endorsing a slew of tax reforms and incentives for oil development and export in key East Siberian sites such as Sakha, Irkutsk, Krasnoyarsk, and eventually Taymyr, Sakhalin, Lena-Tunguska and Lake Baikal. The Chinese then came forward with the $25 billion, with a 6 percent yearly interest rate (moved down from 7 percent), which means that Russia gets the cash up front while China receives about 2.2 billion barrels of oil.

The deal reveals several things about the way regional geopolitics are unfolding as the world economy contracts. Russia and its state firms are in need of a lifesaver now that the combination of low oil prices, the absence of outside credit, and domestic financial troubles has rapidly depleted their reserves. The Chinese loan will provide an infusion of cash at just the right time to stave off financial pressures, allowing the Russians to undertake otherwise unfeasible projects that will pay off when Chinese energy demand revives. Moscow will see its Far East strategy advance another rung up the ladder, while Sechin’s clan, having scored a major victory in winning Kremlin approval for the Chinese deal, will gain an economic and political advantage over rivals.

China, meanwhile, will receive a steady stream of oil for the next 20 years. Rosneft’s facilities are ready to produce about 313,000 bpd (slightly more than the agreed-upon amount to repay the loan) at Vankor, the key Siberian site for the ESPO project. This amount of oil to be paid to China is roughly the same as the amount imported from Russia in 2007 (mostly by rail), and about half as much as the 600,000 bpd rail capacity in the region. This is significant, especially for a country so dependent on manufacturing and sensitive to energy shocks. China needs a reliable energy supply and does not want to be overly dependent on energy from one source. Moreover, most of its oil is shipped via ocean from the Middle East, and this leaves China at the mercy of U.S. naval power. However remote the possibility of an interdiction, it is enough to make a landlocked oil supply route attractive to Beijing.

But for Russia the deal is not a win-win. Moscow is getting pounded by the recession, and the decision to go forward on a pipeline that goes directly to China, forgoing the possibilities offered by a more versatile sea port destination, is a major concession. Obviously, now the Russian firms have to go through with the infrastructure developments, which will be technically demanding and fraught with unforeseen expenses and delays (sending Siberian oil eastward is said to cost twice as much per barrel as sending it westward). And the Chinese got a steal: Although not all of the contract’s subtleties are likely out in the open right now, reimbursement for the loan means that the Chinese have purchased Rosneft crude for only about $11.40 a barrel once interest is figured in — about one-third of what Russia’s crude fetches on the open market right now. The Russians have essentially locked the fate of their Far East strategy to the whims of Chinese energy policy, and this is a compromise that could reveal how financially desperate Russia is.

--- eof

Strategizing from a Superior Position

One trademarked move of the Chinese Strategies approach is creating misdirection at one point while attacking from another.

This following article is from Stratfor.com (an astute group dedicated to analyzing geopolitics)

#
Last Wednesday evening, a group of Islamist operatives carried out a complex terror operation in the Indian city of Mumbai. The attack was not complex because of the weapons used or its size, but in the apparent training, multiple methods of approaching the city and excellent operational security and discipline in the final phases of the operation, when the last remaining attackers held out in the Taj Mahal hotel for several days. The operational goal of the attack clearly was to cause as many casualties as possible, particularly among Jews and well-to-do guests of five-star hotels. But attacks on various other targets, from railroad stations to hospitals, indicate that the more general purpose was to spread terror in a major Indian city.

... More important than the question of the exact group that carried out the attack, however, is the attackers' strategic end. There is a tendency to regard terror attacks as ends in themselves, carried out simply for the sake of spreading terror. In the highly politicized atmosphere of Pakistan's radical Islamist factions, however, terror frequently has a more sophisticated and strategic purpose. Whoever invested the time and took the risk in organizing this attack had a reason to do so. Let's work backward to that reason by examining the logical outcomes following this attack.

An End to New Delhi's Restraint
The most striking aspect of the Mumbai attack is the challenge it presents to the Indian government — a challenge almost impossible for New Delhi to ignore. A December 2001 Islamist attack on the Indian parliament triggered an intense confrontation between India and Pakistan. Since then, New Delhi has not responded in a dramatic fashion to numerous Islamist attacks against India that were traceable to Pakistan. The Mumbai attack, by contrast, aimed to force a response from New Delhi by being so grievous that any Indian government showing only a muted reaction to it would fall.

... This time, however, the attackers struck in such a way that New Delhi couldn't allow the incident to pass. As one might expect, public opinion in India is shifting from stunned to furious. India's Congress party-led government is politically weak and nearing the end of its life span. It lacks the political power to ignore the attack, even if it were inclined to do so. If it ignored the attack, it would fall, and a more intensely nationalist government would take its place. It is therefore very difficult to imagine circumstances under which the Indians could respond to this attack in the same manner they have to recent Islamist attacks.

What the Indians actually will do is not clear. In 2001-2002, New Delhi responded to the attack on the Indian parliament by moving forces close to the Pakistani border and the Line of Control that separates Indian- and Pakistani-controlled Kashmir, engaging in artillery duels along the front, and bringing its nuclear forces to a high level of alert. The Pakistanis made a similar response. Whether India ever actually intended to attack Pakistan remains unclear, but either way, New Delhi created an intense crisis in Pakistan.

The U.S. and the Indo-Pakistani Crisis
... The crisis with India produced an opening for the United States. Eager to get India to stand down from the crisis, the Pakistanis looked to the Americans to mediate. And the price for U.S. mediation was increased cooperation from Pakistan with the United States. The Indians, not eager for war, backed down from the crisis after guarantees that Islamabad would impose stronger controls on Islamist groups in Kashmir.

In 2001-2002, the Indo-Pakistani crisis played into American hands. In 2008, the new Indo-Pakistani crisis might play differently. The United States recently has demanded increased Pakistani cooperation along the Afghan border. Meanwhile, President-elect Barack Obama has stated his intention to focus on Afghanistan and pressure the Pakistanis.

Therefore, one of Islamabad's first responses to the new Indo-Pakistani crisis was to announce that if the Indians increased their forces along Pakistan's eastern border, Pakistan would be forced to withdraw 100,000 troops from its western border with Afghanistan. In other words, threats from India would cause Pakistan to dramatically reduce its cooperation with the United States in the Afghan war. ...

We expect the United States to pressure India not to create a crisis, in order to avoid this outcome. As we have said, the problem is that it is unclear whether politically the Indians can afford restraint. At the very least, New Delhi must demand that the Pakistani government take steps to make the ISI and Pakistan's other internal security apparatus more effective. Even if the Indians concede that there was no ISI involvement in the attack, they will argue that the ISI is incapable of stopping such attacks. They will demand a purge and reform of the ISI as a sign of Pakistani commitment. Barring that, New Delhi will move troops to the Indo-Pakistani frontier to intimidate Pakistan and placate Indian public opinion.

Setting the Stage for a New Indo-Pakistani Confrontation
That will set the stage for another Indo-Pakistani confrontation. India will push forces forward all along the Indo-Pakistani frontier, move its nuclear forces to an alert level, begin shelling Pakistan, and perhaps — given the seriousness of the situation — attack short distances into Pakistan and even carry out airstrikes deep in Pakistan. India will demand greater transparency for New Delhi in Pakistani intelligence operations. The Indians will not want to occupy Pakistan; they will want to occupy Pakistan's security apparatus.

... In the meantime, the Pakistanis certainly will withdraw forces from western Pakistan and deploy them in eastern Pakistan. That will mean that one leg of the Petraeus and Obama plans would collapse. Washington's expectation of greater Pakistani cooperation along the Afghan border will disappear along with the troops. This will free the Taliban from whatever limits the Pakistani army had placed on it. The Taliban's ability to fight would increase, while the motivation for any of the Taliban to enter talks — as Afghan President Hamid Karzai has suggested — would decline. U.S. forces, already stretched to the limit, would face an increasingly difficult situation, while pressure on al Qaeda in the tribal areas would decrease.

Now, step back and consider the situation the Mumbai attackers have created. First, the Indian government faces an internal political crisis driving it toward a confrontation it didn't plan on. Second, the minimum Pakistani response to a renewed Indo-Pakistani crisis will be withdrawing forces from western Pakistan, thereby strengthening the Taliban and securing al Qaeda. Third, sufficient pressure on Pakistan's civilian government could cause it to collapse, opening the door to a military-Islamist government — or it could see Pakistan collapse into chaos, giving Islamists security in various regions and an opportunity to reshape Pakistan. Finally, the United States' situation in Afghanistan has now become enormously more complex.

By staging an attack the Indian government can't ignore, the Mumbai attackers have set in motion an existential crisis for Pakistan. The reality of Pakistan cannot be transformed, trapped as the country is between the United States and India. Almost every evolution from this point forward benefits Islamists. Strategically, the attack on Mumbai was a precise blow struck to achieve uncertain but favorable political outcomes for the Islamists.

... So it is up to Rice, in one of her last acts as secretary of state, to come up with a miraculous solution to head off a final, catastrophic crisis for the Bush administration — and a defining first crisis for the new Obama administration. Former U.S. Defense Secretary Donald Rumsfeld once said that the enemy gets a vote. The Islamists cast their ballot in Mumbai.

#

This situation is similar to two classical strategies from the Ancient Chinese 36 Strategies system. The following are from [http://www.chinastrategies.com]

[Strategy #2 of 36 Strategies: Besiege Wei to Rescue Zhao]
When the enemy is too strong to attack directly, then attack something he holds dear. Know that in all things he cannot be superior. Somewhere there is a gap in the armour, a weakness that can be attacked instead.

Warring States Era China
This strategy derives its name from a famous incident that occurred in 354 BC. At this time one of China's most renowned strategists, Sun Bin (A descendent of the even then famous Sun Zi) was an advisor to the king of Qi. Sun had earlier been at the court of Wei but another minister, Pang Juan, became jealous of Sun's cleverness. Through court intrigues he had Sun framed as a spy, sentenced to mutilation, and imprisoned. Sun escaped and fled to Qi. Several years later the king of Wei appointed the same Pang Juan as commander of the army and sent him to attack the capital of Zhao. The king of Zhao immediately appealed to Qi for help. The king of Qi consulted his advisors who all spoke in favour of rushing to aid their ally, only Sun Bin recommended against attacking. Sun advised: " To intervene between two warring armies is like trying to divert a tidal way by standing in its path. It would be better to wait until both armies have worn themselves out." The king agreed to wait.

The siege of Zhao had lasted more than a year when Sun Bin decided the time was ripe to come to Zhao's aid. The king of Qi appointed prince Tian Ji as general and Sun as military advisor. Tian Ji wanted to attack the Wei forces directly to lift the siege of Zhao, but again Sun advised against direct intervention saying: " Since most of Wei's troops are out of the country engaged in the siege, their own defence must be weak. By attacking the capital of Wei, we will force the Wei army to return to defend their own capital thereby lifting the siege of Zhao while destroying the Wei forces in turn." Tian Ji agreed to the plan and divided his army into two parts, one to attack the capital of Wei, and the other to prepare an ambush along the route to the capital.

When the Wei general Pang Juan heard that the capital was being attacked, he rushed his army back to defend the capital. Weakened and exhausted from the year long siege and the forced march, the Wei troops were completely caught by surprise in the ambush and suffered heavy losses. Chao was thus rescued while Pang Juan barely escaped back to Wei to recoup his losses. Sun Pin would later defeat his nemesis Pang Juan using another classic strategy.

[ Strategy #6 of 36 Strategies: Clamor in the East, Attack in the West]
In any battle the element of surprise can provide an overwhelming advantage. Even when face to face with an enemy, surprise can still be employed by attacking where he least expects it. To do this you must create an expectation in the enemy's mind through the use of a feint.

Song Dynasty China
Once there was an official who was transferred to the capital. The front part of the inn where he stayed was a teahouse, and across the street was a shop that sold expensive dyed silks. Whenever he had nothing to do, he would sit at a table watching the people and activity on the street. One day he noticed with surprise that several suspicious looking characters were walking back and forth observing the silk shop with great interest. One of them came up to his table and whispered: "We're in the robbery business and we're here to steal those fine silks. Since you noticed us I came to ask you not to mention it."

"That has nothing to do with me," the official replied. "Why should I say anything about it?"

The fellow thanked him and left him. The official thought to himself: 'the silk shop has its wares openly displayed on a busy street. In broad daylight, with a thousand eyes watching, if they have the skill to steal those silks, then they must be smart thieves indeed.' So he watched carefully to see how they would manage it. But what he saw was only the same people walking back and forth in front of the silk shop. Sometimes they gathered on the left, sometimes on the right. The official sat watching until after sunset when everyone had gone and the shop had closed.

"Those fools." said the official to himself. "They were putting one over on me." When he returned to his room to order some food, he discovered that all his belongings were gone.

# # #

Strategies like these are used in situations when time and resources are to one's advantage, when there is no need to rush, and detailed planning can be carried out.

The attackers had the benefit of formlessness. Therefore they were able to maximize this opportunity to its fullest.

--- eof

Operating from a Position of Strategic Advantage

One of the most popular Chinese Strategy Classics is the 36 Stratagems. This essay focuses on six categories of strategies that are based on the positions of all competitors

When one's has the advantage of time and resources, the professional strategist does not rush into the situation. He builds a detailed plan and uses the approach of "Advantageous Strategems".

"Conserving energy while the enemy tires himself out" (以逸待劳 or "Yi Yi Dai Lao")
It is an advantage to choose the time and place for battle. In this way you know when and where the battle will take place, while your opposition does not. When the opposition has expend their energy in futile quests while you conserve your strength. When he is exhausted and confused, you attack with energy and purpose.

"Looting a house on fire" (趁火打劫 or "Chen Huo Da Jie")
When a company is beset by internal conflicts, they are not able to deal with an outside threat. This is the time for the superior company to attack.

###

Big tech goes bargain hunting
If you're a corporate giant with billions in cash, there's good news in the fear spreading around Silicon Valley. All those startups with technology you coveted? Fire sale!!!
By Michael V. Copeland, senior writer
October 28, 2008: 6:14 AM ET

(Fortune Magazine) -- These are the days that bring out the power shopper in Larry Ellison. With so much chaos in the markets and panic in the boardrooms, the Oracle CEO sees right now as a fine time to stroll through Silicon Valley and buy pretty much whatever he wants.

"We are better positioned than our peers to do well in tough times," Ellison declared at Oracle's annual meeting in October. "Acquisitions we have been looking at for some time are more attractive."

He's not talking about buying anything with stock. Like every tech company's shares, ORCL has been clobbered - it's down 22% since January, compared with -36% for the Nasdaq. No, he's talking about cash. Oracle (ORCL, Fortune 500) has $13 billion - and Ellison is ready to spend. Some of that money will be deployed to repurchase Oracle shares. (The company's board recently approved a stock buyback of up to $9.3 billion.) But Ellison said at the annual meeting that he planned on keeping up his 12-company-a-year buying habit.

What's he feeding on? A diet of "small companies that are fast-growing," though he doesn't rule out big purchases. Two days before his speech, as markets were melting, Ellison put down an estimated $300 million to buy Primavera Software, a privately held project-management technology company.

Ellison, of course, isn't the only tech potentate sitting on a pile of cash. Cisco (CSCO, Fortune 500)'s John Chambers, HP (HPQ, Fortune 500)'s Mark Hurd, Microsoft (MSFT, Fortune 500)'s Steve Ballmer, and Google (GOOG, Fortune 500)'s Eric Schmidt, among others, all have billions at their disposal. Even the normally purchase-resistant Steve Jobs sounded a bit acquisitive during Apple's recent earnings conference call. (Other big tech names may not join in the shopping spree - Sun Microsystems (JAVA, Fortune 500) and Yahoo come to mind, both of which have had serious sales declines. IBM is still growing revenues and has cash, but it's also carrying $34.4 billion in debt.)

So who's going to get bought? For now, the quarry seems to be small private outfits with technology the big guys covet. Recent examples: HP's purchase of storage startup Lefthand Networks for $360 million; Intel's acquisition of networking-gear maker NetEffect for $8 million.

"The deal flow is as busy as I've seen it," says Michael Barker, managing director with Revolution Partners, a boutique investment bank. "Sure, you have some VCs who think their zero-revenue social-networking company is still worth $500 million, but mostly they understand that prices are coming down. If you are a buyer, you have carte blanche."

If you are a seller, you are over a barrel. VCs are loath to sell their best companies now, because they know it's a buyer's market. "In this environment it turns into a fire sale," says Jason Green, a VC with Emergence Capital, based in San Mateo, Calif. But those sales are happening anyway, as VCs comb through portfolios deciding which companies to hang on to and which to let go.

Two types of companies are destined for the sales bin. Type one: startups without revenue that will soon need another round of financing just to get by. Any number of the dozens of Internet video startups that launched in the past two years fall into that category.

Type two: later-stage companies with big burn rates that have been hoping to go public. Just scan the tech companies withdrawing IPOs, such as content-delivery company Synacor and software maker Varolii, for example. With both types of companies, the money they and their VCs were banking on has been squeezed off, so selling for cheap might be the only option.

Even facing that pain, there is no lack of sellers, says Ned Hooper, Cisco's head dealmaker. Hooper led Cisco's purchases of WebEx (online conferencing service) and IronPort (security software). And Cisco, which has a Valley-leading $26.2 billion in cash, is in the market for more.

Before 10 o'clock one recent morning, Hooper already had three eager bankers dial him up. He says recent calls tend to start the same way: "Hey, Ned it's been a while. I've got a great idea I want to run by you." Then they talk about Cisco buying their company. "If it's not nailed down, it's for sale," Hooper says. "It hasn't been like this since 2001."

Cisco has always been a buyer, in good times and bad, but it likes picking up companies during downturns, after they've had to learn some financial discipline. Hooper says that any purchase Cisco makes will have to be strategic (translation: add revenue). That, more than price, will determine Cisco's level of interest. "If you are three months from raising a round of financing and it's clear that is why you are selling, don't come to us," Hooper says. "We are not the buyer of last resort."

What's clear is that after several years of paying up for tech companies - of being forced into bidding wars with massive private equity shops and hedge funds dabbling in venture capital - the Valley's big tech leaders are glad to be back in demand and in control of the deals.

Case in point: Dan Warmenhoven, CEO of data-storage company Network Appliance. Over lunch in San Francisco recently, Warmenhoven clearly enjoys his fish and chips about as much as he relishes his new position of strength. NetApp may not have the massive coffers of Cisco, but Warmenhoven has $2.1 billion in cash at the ready.

He says he wouldn't mind picking up "something that adds to our toolkit." Like what? "Technology that would have cost me $100 million a year ago but might go for $11 million today. Deals like that." He checks a burst of incoming messages on his BlackBerry and says with a grin, "Look, the offers are coming in right now."



http://money.cnn.com/2008/10/28/technology/techbargains_copeland.fortune/index.htm
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