Hypercompetitive behavior in the timing and know-how arena

We have observed how first movers and followers maneuver against each other to move ahead on the escalation ladder with new product introduc­tions and new generations of products. We have also seen how these ma­neuvers speed up over time and get bolder. Hypercompetitive firms at­tempt to avoid or break out of perfect competition (where

Limiting competitors

When it is apparent that competitive advantage can be lost in the first two arenas—cost and quality, timing and know-how—firms resort to using the powerful impact of entry barriers. By creating hurdles for their potential competitors, established firms try to head off competitors that might en­gage in the price-quality and timing-know-how cycles before they

The dynamic view of strongholds: turf battles and breaching entry barriers

Thus, entry barriers and the five forces play an important role in competi­tive strategy. However, as competitors have become more aware of the strategic importance of entry barriers and as the market becomes more dy­namic, companies have become more creative and aggressive in cir­cumventing entry barriers. These barriers, as we will show in examples

Barriers to entry and strongholds are not sustainable forever

Over the long run the result of most of these turf wars will be to heat up the competition in the strongholds both of the incumbent and of the orig­inal entrant. Both strongholds are eventually eroded and destroyed as safe havens. Often the two markets merge into one larger market. Thus, we may tend

Hypercompetitive behavior in the stronghold creation/invasion arena

Competition does not always become bloody. Competitors sometimes learn from the signaling process to tacitly divide the turf into different territories. This allows parties to create local monopolies and make profits by avoiding direct competition. But many competitors either don’t con­sider this or, believing they will win, draw their opponent into battle. They want

Traditional views of the deep-pocket advantage

The deep-pocket advantage appears to be intuitively obvious. Common sense tells us that a larger and better-supplied firm will usually win against a smaller, weaker competitor. Its resources give it the ability to outlast the smaller firm or to win in a test of strength, such as a war of attrition. Besides the ability

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

The New 7-S’s

My studies of successful and unsuccessful companies in hypercompetitive environments reveal seven key elements of a dynamic approach to strat­egy that encompass the three factors for effective delivery of a series of market disruptions: vision, capabilities, and tactics. The New 7-S frame­work is based on a strategy of finding and building temporary advantages through