Hypercompetition theory

The hypercompetition theory analyzes the 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.

Main contentsSee more

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

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

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

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

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,

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

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

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

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

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

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,

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

Dynamic 7’S analysis: analyzing how competitors seize the initiative from each other

Even if the company is good at using the New 7-S’s, competitors can still seize the initiative, as indicated by the above discussion of the four

A new 7-S analysis of intel’s secret to success: The new 7-S’s inside

The New 7-S’s can be used to assess competitors, especially to identify their strengths, weaknesses, and use of these factors in the four arenas of competition.

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

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

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

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

Hypercompetition: A new ideology of competition

Markets were never really static; they just moved to higher levels of com­petition so slowly that they appeared to be static. But today markets are driven

An old tradition returns-with a twist

The current drive to return to cooperation may be the last gasp of diehard adherents of sustainable advantage and traditional collusion-based strat­egy. If they cannot cooperate

Two competing American approaches to strategy

There are two competing American approaches to competitive strategy. On the one hand is the collusion-based approach. According to this view, companies sustain advantages by using

Sustaining the unsustainable by using the new 7-S’s

Ultimately, knowledge of how to use the New 7-S’s to disrupt the status quo and seize the initiative with a series of unsustainable advantages may be

Loss of the initiative and downward spirals of decline

1. The Downward Spiral With the new analytical tools discussed above, hypercompetitive firms can use the New 7-S’s to seize the initiative. When a company using

New tools for dynamic strategic planning based on the new 7-S’s

As discussed in Part II, approaches to long-term strategic planning that are designed to sustain advantage actually are a poor preparation for long-term success. At best,

For example, we can analyze the price wars according to the hypercompetition theory. Price wars are easy to initiate but usually very expensive for companies. For example, in 1975, Datril launched a product at a much lower price than Tylenol and captured 50% share in test markets. Tylenol responded aggressively by reducing its own price and launching its first ad campaign, because Tylenol could sustain lower prices due to scale economies. While Datril ended up with less than 1% of the marketshare, Tylenol gave up a lot in profits.

To escape price wars, companies try to occupy different locations on the price—quality axis, using micromarketing, offering mass customization and shifting strategies based on the industry trends, for example the luxury car segment has moved from a redefine-perceived quality approach of product offering to fuel efficiency during the energy crisis, safety and comfort, 24-hour road-side assistance, micro-marketing and mass customization. The problem with all of these strategies is that they are highly imitable.