Lecture 1: Course Intro & The Modern Business Context
The Modern Business Context: An Era of Hyper competition?
o ‘Hypercompetitive’ perspective
Past state of affairs:
Stable, slow moving, oligopolistic conditions
Sustainable competitive advantages (based on ex):
o Industrial organization economics: stable structure barriers
limiting competitive entry and enriching incumbent firms
o Resource-based view: fixed and idiosyncratic
configurations of business-specific resources and hard to
replicate positioning within an industry
o Corporate strategy perspective: long-term incompetence
in strategic planning and control of resources utilized by
affiliated businesses across different industries
Increasing possibility (thru ex.):
o Avoiding price wars
o Segmenting the market to avoid head-to-head competition
o Trying to keep the number of competitors low thru
establishment of barriers to entry around industries and
markets
And now:
Shift over recent times in intensity and type of competition
Intense and rapid competitive environments, competitive ‘strikes’
are quick, often involving unexpected, unconventional
competitive means
‘Hypercompetitors’ continuously generating new competitive
advantages that destroy, make obsolete, or neutralize existing
advantages and conditions, leading to disarray and disequilibrium
‘The fundamental forces driving hypercompetition (are) so
overwhelming that no company has power to stop it
Importantly, for D’aveni (some guy), hypercompetition is
o NOT the result of global or national recessions
o NOT the result of global overcapacity in most industries
o NOR will it go way on its own nor can it be stopped by
wishful thinking of executives longing to return to ‘good
old days’
4 drivers of Hypercompetition
Consumer expectations for greater value: they want more, they
want it their own way and they want it now – ‘today’s world is a
buyer’s market’
Technology: paradigm shifts caused by technological revolutions,
leading in some cases to the deconstruction/fragmentation of
industries
, Falling barriers to entry: into industries, markets and nations
‘Deep pockets’: ‘competitors often stage those devastating
attacks w/ the backing of Big Money, even Really Big Money – in
the ‘good old days’ firms would compete 1-on-1
Implications for firms:
New dynamic approaches to strategy:
o Any advantages are temporary- long-term domination of
an industry (rather than long-term sustainable advantage)
o In hypercompetitive markets, firms respond quickly and
counterattacks are fast and frequent- firms must
preposition themselves to generate many advantages, not
just one
o Obtaining a series of short-term advantages before
competitors can catch up – the winners don’t constain
competition; they escalate it to ever-high levels – being
flexible and by ‘creatively disrupting’ both themselves and
their marketplaces
Hypercompetition is near ‘perfect markets’
Dynamic repositioning:
o Price quality: offer superior value (redefine quality) as a
response to rising tide of consumer expectations
o Know-how/timing: temporary advantages in technological
base – and in the speed with which they use this
knowledge to create knowledge to create new products,
services, and internal processes
o Stronghold creation/invasion around geographic or
product markets by creating entry barriers
o Deep pockets: neutralize, join alliances
An empirical test of hypercompetition
Empirical evidence on arguments that performance has become
o Less dependent on stable market positions, resource
configurations, corporate practices and industry structures
o More dependent on adept, skillful management of fluid,
short-term factors in increasingly volatile markets
Hypotheses on increased instability in patterns of business
performance
Key findings same as it ever was?
o Relative importance of hypercompetitive assumptions
aboutmarkets, business strategy, and performance
appears to be much the same as it was in the late 1970s,
early 1980s, and late 1990s
o Unstable, often fleeting effects accounted for substantial
portion of the variance in business profitability
, o Cyclical characteristics – punctuated equilibrium with
exogenous shocks (ex. Policy) pushing firms and markets
temporarily into periods of enhanced volatility
Explaining the mismatch
An issue of timing?
o Missing the Bigger Picture through too narrow a focus (on
a selected time period/cycle), leading to a misleading
(across broader timescale) conclusion of persistent
increase in hypercompetition
A behavioral tendency of hindsight bias?
o Past events considered, in retrospect, more logical and
stable with a clear causal pattern – the chain of events
being clearly predictable
o Lower confidence in predicting the outcomes of similar
situations for which the outcome is as yet unknown
Mintzberg – ‘groundless escalation’ of vocab by strategy
researchers in describing mounting ‘turbulence’; perhaps more a
case of ‘desirable myth’, rather than ‘ascertainable fact’
For McNamara et al., if hypercompetition reflects another case in
point then it is by no means the first (or perhaps the last)
o Claims (regarding unprecedented instability and
turbulences of ‘current conditions) in scholarship
predating the 1980s
Implications
A need to take care in assuming that ‘hypercompetitive trends are
becoming more pronounced, either generally or in specific
business settings of interest’
o Drawing evidence obtained from ‘aberrant’ time periods,
founded upon possible hindsight bias, or indeed simply
shaped on ‘theoretical fashions and fads’
The field of theoretical perspectives is rather heterodox
o Available evidence for the significance of both stable and
unstable factors for firm performance
A Long-Term View, Beyond short-term economic cycles? – The Future of Markets
o Opportunities – in emerging markets
Failure to engage w/ these markets means missing out on the bulk of the
economic growth expected in the world economy b/w now and 2050
Opportunities as these economies progress into new industries, engage
w/ world markets
Rapid growth in size and disposable income of their consumer base that
is, on average, younger
As these emerging countries develop their institutions, fostering social
stability and strengthening their macroeconomic fundamentals, they will
The Modern Business Context: An Era of Hyper competition?
o ‘Hypercompetitive’ perspective
Past state of affairs:
Stable, slow moving, oligopolistic conditions
Sustainable competitive advantages (based on ex):
o Industrial organization economics: stable structure barriers
limiting competitive entry and enriching incumbent firms
o Resource-based view: fixed and idiosyncratic
configurations of business-specific resources and hard to
replicate positioning within an industry
o Corporate strategy perspective: long-term incompetence
in strategic planning and control of resources utilized by
affiliated businesses across different industries
Increasing possibility (thru ex.):
o Avoiding price wars
o Segmenting the market to avoid head-to-head competition
o Trying to keep the number of competitors low thru
establishment of barriers to entry around industries and
markets
And now:
Shift over recent times in intensity and type of competition
Intense and rapid competitive environments, competitive ‘strikes’
are quick, often involving unexpected, unconventional
competitive means
‘Hypercompetitors’ continuously generating new competitive
advantages that destroy, make obsolete, or neutralize existing
advantages and conditions, leading to disarray and disequilibrium
‘The fundamental forces driving hypercompetition (are) so
overwhelming that no company has power to stop it
Importantly, for D’aveni (some guy), hypercompetition is
o NOT the result of global or national recessions
o NOT the result of global overcapacity in most industries
o NOR will it go way on its own nor can it be stopped by
wishful thinking of executives longing to return to ‘good
old days’
4 drivers of Hypercompetition
Consumer expectations for greater value: they want more, they
want it their own way and they want it now – ‘today’s world is a
buyer’s market’
Technology: paradigm shifts caused by technological revolutions,
leading in some cases to the deconstruction/fragmentation of
industries
, Falling barriers to entry: into industries, markets and nations
‘Deep pockets’: ‘competitors often stage those devastating
attacks w/ the backing of Big Money, even Really Big Money – in
the ‘good old days’ firms would compete 1-on-1
Implications for firms:
New dynamic approaches to strategy:
o Any advantages are temporary- long-term domination of
an industry (rather than long-term sustainable advantage)
o In hypercompetitive markets, firms respond quickly and
counterattacks are fast and frequent- firms must
preposition themselves to generate many advantages, not
just one
o Obtaining a series of short-term advantages before
competitors can catch up – the winners don’t constain
competition; they escalate it to ever-high levels – being
flexible and by ‘creatively disrupting’ both themselves and
their marketplaces
Hypercompetition is near ‘perfect markets’
Dynamic repositioning:
o Price quality: offer superior value (redefine quality) as a
response to rising tide of consumer expectations
o Know-how/timing: temporary advantages in technological
base – and in the speed with which they use this
knowledge to create knowledge to create new products,
services, and internal processes
o Stronghold creation/invasion around geographic or
product markets by creating entry barriers
o Deep pockets: neutralize, join alliances
An empirical test of hypercompetition
Empirical evidence on arguments that performance has become
o Less dependent on stable market positions, resource
configurations, corporate practices and industry structures
o More dependent on adept, skillful management of fluid,
short-term factors in increasingly volatile markets
Hypotheses on increased instability in patterns of business
performance
Key findings same as it ever was?
o Relative importance of hypercompetitive assumptions
aboutmarkets, business strategy, and performance
appears to be much the same as it was in the late 1970s,
early 1980s, and late 1990s
o Unstable, often fleeting effects accounted for substantial
portion of the variance in business profitability
, o Cyclical characteristics – punctuated equilibrium with
exogenous shocks (ex. Policy) pushing firms and markets
temporarily into periods of enhanced volatility
Explaining the mismatch
An issue of timing?
o Missing the Bigger Picture through too narrow a focus (on
a selected time period/cycle), leading to a misleading
(across broader timescale) conclusion of persistent
increase in hypercompetition
A behavioral tendency of hindsight bias?
o Past events considered, in retrospect, more logical and
stable with a clear causal pattern – the chain of events
being clearly predictable
o Lower confidence in predicting the outcomes of similar
situations for which the outcome is as yet unknown
Mintzberg – ‘groundless escalation’ of vocab by strategy
researchers in describing mounting ‘turbulence’; perhaps more a
case of ‘desirable myth’, rather than ‘ascertainable fact’
For McNamara et al., if hypercompetition reflects another case in
point then it is by no means the first (or perhaps the last)
o Claims (regarding unprecedented instability and
turbulences of ‘current conditions) in scholarship
predating the 1980s
Implications
A need to take care in assuming that ‘hypercompetitive trends are
becoming more pronounced, either generally or in specific
business settings of interest’
o Drawing evidence obtained from ‘aberrant’ time periods,
founded upon possible hindsight bias, or indeed simply
shaped on ‘theoretical fashions and fads’
The field of theoretical perspectives is rather heterodox
o Available evidence for the significance of both stable and
unstable factors for firm performance
A Long-Term View, Beyond short-term economic cycles? – The Future of Markets
o Opportunities – in emerging markets
Failure to engage w/ these markets means missing out on the bulk of the
economic growth expected in the world economy b/w now and 2050
Opportunities as these economies progress into new industries, engage
w/ world markets
Rapid growth in size and disposable income of their consumer base that
is, on average, younger
As these emerging countries develop their institutions, fostering social
stability and strengthening their macroeconomic fundamentals, they will
