Jump to navigation Jump to search Hypercompetition is rapid and dynamic competition characterized by unsustainable advantage. It is the condition of rapid escalation of competition based on price-quality positioning, competition to protect or invade established product or geographic markets and competition based on deep pockets financial capital and the creation of even deeper pocketed alliances. Often a characteristic of new markets and industries, hypercompetition occurs when technologies or offerings are so new that standards and rules are in flux, resulting in competitive advantages and profits resulting from such competitive advantages cannot be sustained. In order to compete irrespective of how short-term the competitive advantage is, companies can implement a strategy based on finding and building temporary advantages through market disruption rather than trying to sustain an unsustainable advantage. Price wars are easy to initiate but usually very expensive for companies.
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The first four chapters describe ladders of escalation of competition and the dynamic strategic interactions that occur at each step. The fifth chapter describes hypercompetition in more detail while the sixth chapter outlines a New 7-S model for developing competitive strategy. It was a pleasure to read, and I find myself looking at industries, companies, and competition through the lens of this book. For example, Mercedes and Cadillac fight for price and quality in their differentiated position while Stanza and Yugo fought for price and quality in their differentiated position.
Those segments also can compete against each other as one takes a cost leadership role and the other takes a differentiation role. But companies must beware… small niche competitors can flex and stretch into other segments, stealing away market share. But in perfect competition, there are no profits and thus no winners. They can do this by shifting competition to cost leadership or differentiation again, redefining perceived quality, switching from products to service, masscustomizing, extending product lines, or moving into a completely new industry or niche.
In order to escape perfect competition, companies attempt to move up the stages in this escalation ladder faster than competitors. In the course, we discussed the Old Rip Van Winkle Distillery who makes high-end aged bourbon that takes around 25 years to make. Thus it has successfully found a niche for those willing to buy — and wait for — high quality aged bourbon.
In addition to this company, I can think of so many examples where these stages occur. Just look at the cereal aisle or chip aisle in the grocery store. Every company is trying to differentiate themselves with varieties of flavors, packaging, and ingredients to avoid perfect competition. Occasionally, Pepsi and Coke will enter into a price war and then quickly use marketing or new product extensions to differentiate themselves again.
They also have used niching and product extensions with their Scion, Daihatsu, and Hino Motors brands. Hypercompetitive Rivalries. This entry was posted in Books , Business. Bookmark the permalink.
Hypercompetitive Rivalries – Part 1