The dynamic view of the deep-pocket advantage

This model of the deep-pocket advantage is static, however. It assumes that battles can be won or lost by tallying up the level of resources of each player at a given moment in time. But sometimes a small competitor can neutralize the advantage of the deep-pocketed company. Superior re­sources can sometimes actually be an

The deep-pockets escalation ladder: deep pockets turned inside out

There is no question that deep pockets are a vital strategic weapon. But they do not last forever. As we have just seen, clever competitors can cir­cumvent a deep-pocket advantage. Even the firm with the deepest pockets has limits to how much it can throw its weight around without self- destructing because of customer

Analyzing Competition Using the Four Arenas

1. Two Types of Uses for the Four Arenas This chapter develops two analytical tools based on two radically different views of how competitive escalation moves across these four arenas. The chapter introduces two approaches for using all four arenas to analyze competition and market conditions, approaches that look at dynamic stra­tegic interaction over

Four arena analysis of the soft drink industry

To illustrate the power of viewing competition in each of these four are­nas, this chapter first examines how to use the four arenas to analyze the strategic maneuvering of competitors in a single industry: soft drinks. This first approach—which will be called a Four Arena analysis—is a study of the progression of a single

Four lens analysis

In addition to its use in analyzing the dynamics of strategic interaction between rivals over long periods of time, as in the case of the soft drink industry, the four arena framework can also be used by a company to ana­lyze and interpret a single action by a competitor. By examining the im­pact of

What is hypercompetition?

The four arenas and escalation ladders that were discussed in Part I define the bases of competition. Cost and quality, timing and know-how, strong­holds, and deep pockets—these have not changed for decades. Companies continue to move up these ladders and, upon reaching the top, restart competition in them or jump to dormant arenas that

The extent of hypercompetition

1. Hypercompetition Is Widespread As illustrated by the quotes at the opening of this chapter, there is growing evidence of intensifying competition in a wide range of industries. Hypercompetition is not limited to high-tech industries such as comput­ers, but has left its mark on more mundane operations, such as diapers and auto parts. It

Why hypercompetition persists

1. The Negative Consequences of Hypercompetition Although hypercompetition is not a dead end, as perfect competition is, it is such an intense competitive environment that companies might be ex-pected to avoid it as much as they avoid perfect competition. Hypercompetition forces companies to go through the agonizing process of reinventing themselves, developing new advantages,

The nature of competition has changed in a fundamental way

Some Fundamental Shifts in the Realm of Economic Competition: The New Paradoxes The shift to hypercompetition is so fundamental that it turns some of the intuitive principles of competition on their heads. Success in a hypercompetitive market is based on the following paradoxes, indicating the need for a new approach to strategy: Firms must

The consequences of competing with traditional strategies in a hypercompetitive world

There is growing evidence that companies are at a loss as to how to deal with hypercompetition. There have been recent waves of mergers fol­lowed by waves of divestitures. The failure of effective management strat­egy has led to the dominance of financial strategies, measuring success by quarterly profits because the strategies that lead to

Hypercompetition – The only enduring advantage

As the stories of these companies illustrate, none of the traditional advan­tages of the four arenas offers an enduring way to win. Levi’s experience shows that high quality is not an enduring advantage (first arena), because quality shifted from product quality to fashionability. Hewlett-Packard’s case shows that its know-how (second arena) was not enough

Living with Hypercompetition: The New 7-S’s

Paraphrasing George Bernard Shaw, while the reasonable person adapts himself to the world, the unreasonable one persists in trying to adapt the world to himself. Thus, all progress depends upon the un, reasonable person. In hypercompetition the reasonable strategies that focus on sustaining advantages do not lead to progress. Companies make progress in hypercompetition

A broader definition of strategy: Managing the escalation ladders

Hypercompetition demands a broader approach to strategy. The focus on disruption and the creation of a series of temporary advantages demand a strategic theory with the breadth to support a long series of actions and interactions and to do so with the flexibility to accommodate shifts in direction. In hypercompetition the ability to manage

Goal of The New 7-S’s

While the traditional 7-S’s are concerned with capitalizing on creating a static strategic fit among internal aspects of the organization, the New 7-S’s are concerned with four key goals that are based on understanding dynamic strategic interactions over long periods of time. These four goals are Disrupting the status quo Competitors disrupt the status

Living with Hypercompetition: The source of profits

While neoclassical microeconomic theory and industrial organization the-ory suggest that companies earn profits by gaining a unique advantage and avoiding perfect competition,15 the Austrian school of econgjoates identi-result of a dynamic proceSSWTreative destruction,” or disequilibrium.17 In other words, entrepreneurial discovery creates profits by finding new ways to better serve customers. It is in essence

Using the New 7-S’s: Two forms of disruption

As indicated, this is not a linear process that begins with vision and ends with tactics. Instead, it is a continuous process in which vision contributes to capabilities, which contribute to tactics. Tactics in turn contribute to vision and capabilities. As will be discussed below, strategy is developed by a process of triangulation that

A vision for disruption

A vision for disruption comes from being able to identify ways to satisfy customers better than competitors at a given point in time and over and over again. The battle for the market is the battle for the hearts and minds of customers. This is accomplished by satisfying current customers in exist­ing markets, finding

Capabilities for disruption

To capitalize on the advantages identified through the first two S’s, hypercompetitive firms develop capabilities for speed and surprise. Speed and surprise are capabilities that can be used in many ways. Fixed capabilities, such as investments in plants and other resources, tend to commit a company to a certain course of action. In static

Tactics for disruption

The final three S’s are concerned with tactics for delivering disruptions— shifting the rules of competition, signaling strategic intent, and simulta­neous and sequential strategic thrusts. The vision for disruption and capa­bilities for disruption help shape the tactics that will be used. And if a firm is good at specific tactics, the company may shape

How the new 7*S’s work together to create disruption

This chapter has described how each of the New 7-S’s contributes to the disruption of competitors. It has described how the strategies of sustaining advantage used in static environments have been replaced by strategies of disruption in hypercompetition. The “three circles” diagram (see Figure 8-1) suggests how the New 7-S’s work together toward the