What is hypercompetition? Briefly discuss conditions under which hypercompetition takes place
What will be an ideal response?
The term "hypercompetition" is used to describe a dynamic competitive world in which no action or advantage can be sustained for long. Under such conditions, everything changes because of the dynamic maneuvering and strategic interactions by hypercompetitive firms. According to D'Aveni's model, competition unfolds in a series of dynamic strategy interactions in four arenas: cost/quality, timing and know-how, entry barriers, and deep pockets. Each of these arenas is continuously destroyed and recreated by the dynamic maneuvering of hypercompetitive firms. Competition in the first arena, cost/quality, occurs via seven dynamic strategic interactions: price wars, quality and price positioning, "the middle path," "cover all niches," outflanking and niching, the move toward an ultimate value marketplace, and escaping from the ultimate value marketplace by restarting the cycle. The second arena deals with timing and know-how. A firm that has the skills to be a "first mover" and arrives first in a market has achieved a timing advantage. A know-how advantage is the technological knowledge. It deals with six dynamic strategic interactions that drive competition in this arena: capturing first-mover advantages, imitation and improvement by followers, creating impediments to imitation, overcoming the impediments, transformation or leapfrogging, and downstream vertical integration. Next, one deals with the barriers to entry. These barriers include economies of scale, product differentiation, capital investments, switching costs, access to distribution channels, cost advantages other than scale, and government policies. The last one deals with deep pockets, which evidently leads to hypercompetition.
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