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Yet, by focusing on building mutually beneficial, loyal relationships, Vanguard is doing to its industry precisely what Enterprise has done to car rentals. With over $550 billion in assets and annual growth of nearly 30 percent, Vanguard has sailed past some stiff competition, including Merrill Lynch. Founded in 1975, fifty years after the first mutual funds were created, the firm has proceeded to lap the field. In the process, Vanguard consistently delivers superior service to customers, awards above-market compensation to crew members, and operates at costs about 75 percent lower than competitor levels.

The high road is about more than profits for you and your partners. It is about building a win/win strategy in which the entire chain of relationships with employees, dealers, vendors, and investors creates superior value for the ultimate consumer. Only the continuous creation of customer value superior to that of any competitive alternative can sufficiently fund the aspirations of a worthy organization and its network of partners. Never Stop Climbing Few companies have logged as many miles on the high road as has State Farm Insurance.

Communication also plays an important role in the successful relationships Dell Computer has forged with its vendors. Early on, the company 35 Loyalty Leadership made an important strategic decision to avoid manufacturing at Dell anything that could be made better and cheaper by another company. This policy not only reinforces the firm’s ability to focus on what it does best, but also removes the cost of holding inventory. Considering the rapid price decline and obsolescence of many computer components, a large inventory places an enormous drag on most competitors’ earnings.

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Business and Commerce by Wood N.

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