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MANAGING MULTIPLE SOURCES OF COMPETITIVE

ADVANTAGE IN A COMPLEX COMPETITIVE ENVIRONMENT:


A multiple strategies framework approach

ALEXANDRE H. H. LAPERSONNE

The aim of this article is to review the literature on the topic of sustained and temporary
competitive advantage creation, specifically in dynamic markets, and to propose further
research possibilities. After having analyzed the main trends and scholars’ works on the
subject, it was concluded that a firm which has been experiencing erosion of its core
sources of economic rent generation, should have diversified its strategy portfolio in a
search for new sources of competitive advantage, ones that could compensate for the
decline of profits provoked by intensive competitive environments. This review concludes
with the hypothesis that firms, who have decided to enter and manage multiple
competitive environments, should have developed a multiple strategies framework
approach. The management of this source of competitive advantage portfolio should have
allowed persistence of a firm’s superior economic performance through the management
of diverse temporary advantages lifecycle and through a resilient effect, where a very
successful source of competitive advantage compensates the ones that have been eroded.
Additionally, the review indicates that economies of emerging countries, such as the ones
from the BRIC block, should present a more complex competitive environment due to
their historical nature of cultural diversity, social contrasts and frequent economic
disruption, and also because of recent institutional normalization that has turned the
market into hypercompetition. Consequently, the study of complex competition should be
appropriate in such environments.

THE TRADITIONAL APPROACHES OF which allows a superior economic rent


S U S TA I N E D C O M P E T I T I V E generation.
ADVANTAGE This approach to competition established a
significant break with the more traditional IO
The idea that a firm could sustain superior scholars who used to defend the economic
economic rent 1 over competitors is a central model of competition where the firm’s choice
subject in the competitive strategy literature. and action has little influence on its
One of the most established approaches to performance and environment, and where the
competitive advantage comes from the firm’s rent generation is mostly determined by
Industrial Organization perspective (IO), industry (Bain 1956, Mason 1939).
popularly represented by Porter’s competitive Conversely, Porter defends that a firm is
strategy framework (1980, 1985, 1990, 1991). capable of influencing its performance, if it is
The competitive strategy framework defines capable of reading the underlying
that a firm can generate and sustain characteristics of its industry and strategically
competitive advantage by strategically choose a favorable position before other
choosing a privileged position in the industry, competitors. Five main “forces” represent

1  According  to  Tollison  (1982),  economic  rents  are  “excess  returns”  above  “normal  levels”  that  take  place  in  competitive  markets.
these industry idiosyncrasies: barriers to entry, entrants decide that the market is not
bargaining power of suppliers and buyers, sufficiently attractive in terms of returns
product substitute and level of rivalry (Porter, compared to the investment, effort and risk
1980). involved (Porter, 1980).
A favorable position would be one where entry
barriers are high; bargaining powers of If on one hand the competitive strategy
suppliers and buyers are low; threats of framework emphasizes the importance of
product substitute are irrelevant and levels of industry idiosyncrasy for the sustainability of
rivalry are low. Then the competitive competitive advantage, then on the other hand,
advantage could come from two different rent the Resource based view perspective (RBV),
generation mechanisms: a differentiation approaches the subject from a completely
approach where the firm by undertaking opposite angle.
unique activities, offers a value that sustains a In the RBV perspective, the superior rent
superior margin by higher price, or by generation comes from inside the firm, and not
choosing a cost approach where by offering from an industry structure effect (Wernerfelt,
equivalent activities at a lower cost, offers 1984). This is the resources and capabilities
value that sustains a superior margin by lower that the firm acquires, and mainly develops
price (superior margin by volume) or by internally that will be responsible for the
equating price (superior margin by lower cost) firm’s superior rent generation (Diericx and
(Porter, 1996). Cool, 1989). This competitive advantage based
Once established in such a condition, the firm on a firm’s valuable and rare assets is
will be in a type of particular monopolist sustained by two principles: resources
position as it will be alone in enjoying a heterogeneity and imperfect mobility (Barney,
specific market segment. The competitive 1991; Peteraf, 1993; Amit and Schoemaker,
advantage comes by virtue of the fact that the 1993). In fact, Barney (1991) demonstrates
position of the firm is exclusive, special, and that if firms have access and can acquire or
particular and cannot be easily exploited by develop exactly the same resources and
other competitors as natural barriers provided capabilities then it is not possible for any one
by the industry structure protect it. In such a of these firms to generate superior rent over
condition it is said that the firm has a superior the other. Consequently, in an industry where a
rent generation over the industry average, firm’s resources are homogeneous and highly
characterized as a competitive advantage. This mobile, sustained competitive advantage is
competitive advantage will be considered simply not possible. (Barney, 1991).
sustainable as long as the configuration of the Therefore, the resources configuration that
industry structure that favors the firm remains sustains the competitive advantage of the firm
unchanged (Porter, 1991). Consequently, should present four main attributes. The
industry structure stability is fundamental for a resources frame needs to be valuable, rare,
firm that has based their strategy and rent inimitable and not substitutable (VRIN). The
generation on such an approach. rareness ensures that other firms would not
The industry will attract new competitors if the have easy access to the same valuable assets.
rent generation opportunities are superior to The inimitability attributes guarantee that
the average interest rate return (Porter, 1980). competitors will not easily reproduce the same
Thus these new entrants will have to lead with resources and capabilities. Imperfectly
high initial investments, risks, and higher costs imitable resources could be the result of
and offer a lower price to enter the market. unique historical conditions, causal ambiguity
Established firms could make it difficult for or social complexity of the firms (Lippman
the entry of new entrants by the use of the and Rumelt, 1982; Black and Boal, 1994;
economy of scale effect, or by previous King 2007).
marketing investment that had resulted in Also, to guarantee the effect of competitive
customer loyalty, by product differentiation or advantage, competitors should not be able to
by distribution channel exclusivity. substitute a strategic firm’s assets by resources
New entrants could try to outline or configurations of resources with equivalent
insurmountable barriers, creating new values. The competitive advantage will be
products, introducing technological innovation sustainable as long as the VRIN attributes of
or influencing customer preference. Also, a the resources remain valid.
new entrant could decide to merge or acquire
an established competitor to enter the market. Although the RBV took a firm inside-out
The competition will increase until new approach for the generation of competitive

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advantage, and that Porter’s framework took a players are shifting and boundaries are
firm outside-in, the two theories are much blurring and converging. Demand evaporates,
more complementary than exclusionary. In and competitors could become engaged in a
fact, Porter (1991) sustains that competitive race of fast rounds of innovation-imitation
advantage could come only if the firm’s (D’Aveni 1994, 1999, 2010; D’Aveni,
positioning is based on a unique valuable Dagnino and Smith, 2010; Eisenhardt and
chain of activities. Such activities imply Martin, 2000; Grimm, Lee and Smith, 2006;
intrinsically the uses of valuable and distinct Pacheco de Almeida, 2010).
resources and capabilities. Even though the exact origin of such business
On the other hand, the firm could not remain environments is unclear, many authors agree
unique in its strategy on a resource approach. that recent phenomenon such as globalization,
It will be inevitable to consider the nature of technology dissemination, regulation,
the industry structure and competitors disintegration and demand rarefication could
positioning to evaluate if the resources chosen be one of the causes of such accelerated
will be valuable, and if they have not already disruptive and unstable business
been implemented by other competitors environments. Harvey, Novicevic and
(Grant, 1991; Barney and Zajac, 1994). Kiessling (2001), have classified at least four
main drivers of hypercompetition associated to
Despite the fact that the competitive strategy the globalization phenomenon. There are
framework and RBV perspective emphasize macroeconomic drivers such as availability of
different aspects of a firm’s generation of key production factors, increased flows of
competitive advantage, they are so related that cross border technology transfers, and
many authors consider both a unique irregular intra-country fluctuations in
framework (Wernerfelt, 1984; Mahoney and exchange rates; political drivers such as
Pandian, 1992; Amit and Schoemaker, 1993; removal of barriers to international trade,
Spanos and Lioukas, 2001). The main aspect development of regional trading blocks and
that unifies the Porter framework and the reduced protection of intellectual property
RBV perspective is the fact that the source of rights; technology drivers such as declining
competitive advantage is considered stable and cost of communication, computation and
durable, that, because industry forces transportation, shortened product and
characteristics to remain unchanged or because technology life-cycles, dissemination of
the firm has developed a strategic asset that knowledge-based industries, and increased
once established is difficult to change (Conner, globalization of product offerings; finally,
1991). Spanos and Lioukas (2001) in a study organizational drivers characterized by a
of the similarities and differences of the two g l o b a l i n d u s t r y e ff e c t o f r e s o u r c e s
theory frameworks conclude that the rent commodification, consolidation of competitors
creation mechanism comes from different and development of network organizations.
logic, as Porter’s framework is monopoly type Some scholars have expressed doubt if such
rent creation (Bain type IO) and that the hypercompetitive business environments
resource based perspective is an efficiency already exist (McNamara, Vaaler and Devers,
type rent creation. This is exactly the 2003), others have restricted hypercompetition
complementary aspect that allows integrating to particular cases (Porter, 1996). However,
these two approaches in a unique framework the importance that the subject has been
that allows firms to obtain sustained attracting in the strategic literature and the
competitive advantage. evidence brought by recent empirical research
(Wiggins and Ruefli, 2005), highlights the
relevance and solidity of the theme for the
competitive strategy field and the study of
competitive advantage.
H Y P E R C O M P E T I T I V E
ENVIRONMENTS AND TEMPORARY In such high-velocity and disruptive business
COMPETITIVE ADVANTAGE environments, traditional approaches such as
Porter’s competitive strategy framework are
A completely different approach came from difficult to apply, because the dynamic change
the idea of hypercompetition. of industry is so important that it is
Hypercompetitive environments are problematic to clearly define the boundaries
characterized by high-velocity and a high level between rivals, suppliers and customers and to
of rivalry. Industry structures are ambiguous, establish a stable and durable position. Take as

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an example the case of the tablet and stability opportunities to develop such
smartphone industries where the two most valuable and unique resources. The disruptive
important players, Apple and Samsung, are at nature of hypercompetition will invalidate the
the same time main rivals and main partners of firm’s resources strategy before the necessary
each other. Take also the case of Nokia, maturity that leads to competitive advantage
Google and Apple, who a few years ago were and generate superior rent. Worse still is for
not competitors as they were in completely the firm that had already developed solid
different industries. resources’ configurations: once its business
Some scholars argue that hypercompetition environment turns to hypercompetition, these
could be a particular situation of Porter’s five solid foundations that used to bring sustained
forces, where barriers to entry are low, rivalry competitive advantage will unveil as the main
high, and bargaining power of buyers and handicaps to react in an abrupt and disruptive
suppliers high (D’Aveni, 2010). In such a competitive situation. In fact, if resources with
situation, firms lose their competitive VRIN attributes are costly and time
advantage as anyone could enter the market to consuming to develop, once established, it is
offer an equivalent product or service for an very difficult to change them. If in a stable
equivalent price (Williams, 1992). Strong competitive environment unique historical
rivalry, associated to the high bargaining conditions, causal ambiguity and social
power of buyers and suppliers, leads to a complexity of a firm’s resources development
collective erosion of profits, resulting in a impose serious constraints to imitation, then
commoditized market that will stabilize with conversely in a hypercompetitive environment,
minimum profit equilibrium. This is what is the pace of change invalidates their values,
commonly called a perfect competition transforming the barriers to imitation in a
situation. D’Aveni (1999) argues that this limited way for adaptation. On the other hand,
situation of perfect competition will never hypercompetition requires resources flexibility
happen, as the pressure of rivalry will trigger and adaptation, therefore, in such an
an innovative disruption that will change the environment resources are much more
rules of competition. In fact, in the pursuit of homogeneous and mobile, invalidating the
undermining competitors’ competitive basic assumptions of sustained competitive
advantage to avoid the commodity trap advantage of the Resource-based perspective.
(D’Aveni, 2010b), firms explore new markets;
launch new breakthrough products in search
for differentiation and new sources of THE RBV RESPONSE TO DYNAMIC
competitive advantage to change the ENVIRONMENTS
competitive game, attaining temporary
advantage that will last until other competitors In a response to these new requirements,
outmaneuver it. In such highly dynamic RBV proponents have introduced the concept
situations, markets never come to full maturity of dynamic capabilities. Dynamic capabilities
and stay in a permanent disequilibrium are a firm’s processes, strategic routines that
situation, remembering the Schumpeterian permit them to alter sets of resources,
creative destruction process. (Schumpeter, integrating, reconfiguring, acquiring and
1942; D’Aveni, 1999). shedding, resulting in new resources’
combinations that enable new sources of
It is also very difficult to maintain a strategy competitive advantage (Teece, Pisano and
based on a resource-based approach in a Shuen, 1997; Helfat, 2000; Winter, 2003).
hypercompetitive environment. This is These new resources’ reconfigurations have
because the development of sustained been used in response to market change and
competitive advantage based on resources even to shift market competition. Dynamic
requires elements that are very difficult to find capabilities have been defended to present the
in a hypercompetitive environment. Resources VRIN attributes, therefore, leading to
that have the VRIN properties require a sustained competitive advantage.
sequence of logical and continuous
investments. The VRIN attributes come with Besides that, many authors defend that
the development of unique resources that dynamic capabilities have returned the sources
require a firm’s unique historical condition, of sustained competitive advantage to RBV
social complexity and causal ambiguity. (Teece, Pisano and Suen, 1997), some other
Unfortunately, in a hypercompetitive authors argue that dynamic capabilities are not
environment the firm will not have the market sufficient condition to sustain competitive

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advantage (Eisenhardt and Martin, 2000). This competition. Pacheco de Almeida (2010),
is mainly because of their equifinality and categorizes degrees of competition in two
commonality nature. In fact, dynamic dimensions: innovation and imitation
capabilities are routines to modify routines, or strategies, with two speeds: slow and fast.
more popularly called “best practices”. Best Eisenhardt and Martin (2000) distinguish two
practices could be applied in different ways levels of market competition: moderately
and take different paths to results in equivalent dynamic markets and high-velocity markets.
outcomes, hence their equifinality nature. In a more recent article, D’Aveni (1999)
Dynamic capabilities also present a categorizes four patterns of varying market
commonality nature, because best practices are turbulence: from a stable market with very
easily substitutable or interchangeable by other infrequent disruptive events to a total
best practices, independently of the firm. disequilibrium market state nearly reaching a
Therefore, dynamic capabilities could be chaotic situation. To simplify and integrate
valuable, and also rare, as they are not easily this different approach, a classification of three
acquired by all firms, but they fail to match the different levels of market competition is
non-imitable and non-substitutable proposed: stable market, dynamic market and
requirements, due to their equifinality and high-velocity market (see Figure 1).
commonality nature. As such, they could at
best provide temporary advantage (Eisenhardt Stable markets are characterized by low levels
and Martin, 2000). of competition, with a small number of
players, where direct competition is normally
As Eisenhardt and Martin (2000) have avoided. Competitors usually choose to
elucidated, depending on the level of position themselves alone in a segment.
competition in moderate dynamic markets, Industry structure is stable and durable with
dynamic capabilities could be used to create defined boundaries and identifiable players.
sustained competitive advantage by a sequence Firms have a long-term strategy approach
of temporary advantage. However, the nature based on industry positioning or resources
of sustainability would not come from the approach or a combination of the two.
capabilities itself, but from a successful Competitive advantage is sustainable and
sequence of resources’ configurations. provides high and durable profits.
Conversely, in high-velocity markets, dynamic
capabilities are much more simple and In dynamic markets, the level of competition
improvised routines, by consequence is moderate to intense. Industry structure still
ephemeral in nature, and can at best provide has clear boundaries and players, but is much
isolated and short temporary advantage, more dynamic and changeable than in stable
completely losing their VRIN attributes from markets. Despite this, market evolution is still
the Resources-based heritage. predictable. Several players characterize
competitive arenas. Competition is more
direct, with several players per segment and is
UNDERSTANDING THE DIFFERENT characterized by a moderate rate of
LEVELS OF COMPETITION innovation-imitation. Firms have a medium to
short-term strategy approach, which is based
In a recent article, D’Aveni, Dagnino and on dynamic capabilities that provides a
Smith (2010) proclaimed that markets have sequence of concatenated temporary
entered a period where sustained competitive competitive advantage.
advantage would be so rare that it can be
considered temporary competitive advantage In High-velocity markets, the level of
with intermittent and no abnormal profit as the competition is intense to extreme. Industry
new pattern of rent generation. To understand structure is confusing, boundaries are unclear,
this, it is necessary to distinguish different and players are shifting and ambiguous.
levels of competition. Market evolution cannot be predicted linearly.
Competition is extremely aggressive with
Most of the hypercompetition proponents many players in the same arena and depicted
defend a classification of hypercompetitive by a fast rate of innovation-imitation. Strategy
degrees. In his famous book on approach relies on actions and reactions of
Hypercompetition, D’Aveni (1994) defends quick market maneuverings (D’Aveni, 1994;
four degrees of competition: Low intensity, Eisenhardt, 1989). Competitive advantages are
moderate, high intensity and extreme a t b e s t t e m p o r a r y, i n t e r m i t t e n t a n d

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unpredictable with low or abnormal short intense competitive situation.
profit generation.
In conclusion, if on the one hand, stable
According to hypercompetition proponents, markets with a munificence position are
stable market situations are becoming rare: it becoming scarce, then alternatively, high-
is more and more difficult for a firm to find velocity markets could be temporary in their
market segments where it could be possible to competitive intensity, returning to a more
sustain a durable and highly profitable position normal competitive situation. These
(D’Aveni, 1999; Wiggins and Ruefli, 2005). conclusions could lead to a convergence to the
On the other hand, other scholars argue that intermediate level of competition, one of the
high-velocity markets are particular situations dynamic markets characterized by dynamic
of some industries or particular to a specific capabilities with concatenate temporary
moment of change, and that their competitive advantage as a dominant situation.
hypercompetitive patterns could not be However, these hypotheses fail to give out
generalized to the entire economy (Porter, more empirical evidence in the strategy
1996; McNamara, Vaaler and Devers, 2003). management literature.
In accordance with the two extreme and
contradictory points of view, it has been
defended that the intermediate situation of R E - C O N C E P T U A L I Z I N G
dynamic markets, much more intensely HYPERCOMPETITION WITH THE
competitive than stable markets, but DIMENSION OF MARKET
moderately dynamic compared with high- COMPLEXITY
velocity environments, would be the common
trend. In practice, most firm’s situations are not so
simple. To avoid an aggressive competitive
In fact, recent empirical research demonstrated situation with loss of profit and in search of
that a market munificence situation that offers new sources of competitive advantage, it is
a position of sustainable abnormal profit is common for firms to have explored and
becoming rare. (Wiggins and Ruefli, 2005). As entered new markets, and developed new
previously stated, globalization, technological kinds of product portfolio (Miller, 1992, 1993,
dissemination and deregulation are some of 1996; Lumpkin and Dess, 1995). This
the reasons that make markets more repertoire of strategy diversification could
competitive and dynamic, and consequently have lead to the management of a more
less profitable in the long run (Pacheco de complex competitive situation, with different
Almeida, 2010). However, as was rivals, in different types of markets, with
demonstrated by Pacheco de Almeida (2010), different levels of competitive intensity.
that hypercompetitive markets depicted by a
fast rate of innovation and imitation leads to Proponents of complex theory have argued
erosion and time compression of competitive that marketplaces and market conditions
advantage, lowering and bringing profit near present characteristics of complex system
the industry mean. Firms in an industry behavior, as these are made up of collective
leader position would prefer to lose their chains of activities that present nonlinear
leadership due to the expensive cost of high- patterns and unpredictable sequences and
speed innovation. outcomes (Levy, 1994). In such complex
market environments, no individual firm could
This is in accordance with previous Porter determine or fully manage market conditions
(1980) arguments that a firm would enter or (Stacey, 1995). This perspective is partially in
stay in a market while it remains attractive. accordance with the hypercompetition
Market attractiveness is defined by the perspective, as many authors recognize that
possibility of a firm to earn a profit return hypercompetition reaches a chaotic situation
higher than the median return rate of the level and is unpredictable in nature (D’Aveni,
industry. A high-velocity environment, 1994, 1999, 2010; Eisenhardt and Martin,
characterized by extreme competition, could 2000).
lead to a destructive situation, and motivate
firms to quit markets or to avoid entering it. However, hypercompetition proponents,
In such a scenario, if the market loses its emphasis much more the speed of the pace of
attractiveness it would become less disputed change of market conditions than its
and by consequence it could return to a less

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complexity nature in terms of components and similar to the view of Chakravarthy, who
relationship numerousness. defined complexity as:
For example, regarding the complex theory,
hypercompetition proponents recognize the “… a measure of the number of competitive
unpredictability nature of high velocity and configurations that a firm must ideally
dynamic markets, but they understand that this consider in shaping its own
unpredictability is due to the nature of the strategy” (Chakravarthy, 1997).
accelerated pace of competition. This high
velocity is characterized by continuous A complex market with a stability situation
takeover maneuvering strategies which should be one where the firm has multiple
provoke market disruption through innovation sources of sustained competitive advantage
or make changes in the rules of the game based on industry and resource configuration.
(Eisenhardt, 1982; D’ Aveni, 1994, 1999; Such environments are very similar to the core
Lengnick-Hall and Wolff, 1999). competency approach where a firm could
It is undeniable that nowadays marketplaces compete in many markets with many players
have been increasing in terms of complexity of because it shares a common valuable resources
elements and interactions such as in the frame that brings at the same time,
number of products and service portfolios, differentiation and economy of scale, and
segments and customer type preferences. allows maintenance of superior rent generation
Hypercompetition proponents have indirectly in many different markets. (Prahalad and
recognized this complexity nature of dynamic Hamel, 1990). A classical example of this kind
markets when they relate that marketplaces of strategy configuration is the one adopted by
have been increasing in terms of the number of General Electric (Eisenhardt and Martin,
rivals and products offered. Also, the 2000).
unpredictable industry convergence and In the other extreme of the matrix, a simple
blurring boundaries depicted by market with high velocity could be
hypercompetition proponents is very similar to characterized by a single source of temporary
non-linear system behavior and emergence advantage sustained by the use of dynamic
phenomenon described by complexity theory capabilities or by an action-reaction strategy
proponents. approach. This competitive situation is simple
Therefore, to be more precise, in terms of market elements, but very fast in
hypercompetition markets should be not only terms of maneuvering and counter
measured in terms of the speed of change, but maneuvering (Eisenhardt, 1989). In such
also in terms of components complexity. This situations, markets are characterized by two or
approach is in accordance to the Chakravarthy three players that are involved in a price war
(1997) strategy approach. and/or disruptive innovation cycle focused on
few products. That should be the case for
The definition of complexity used here is the example when market conditions do not allow
one established by Simon (1962), where diversification strategies.
complexity is defined in terms of the
numerousness of components and their inter- Finally, the complex market with a high
relationships. Therefore, a two dimensional velocity situation is one characterized by
matrix with four situations that characterize multiple sources of temporary competitive
the nature of market competition is proposed advantage sustained by dynamic capabilities
as: simple market with stability, complex or/and by an action-reaction strategy approach.
market with stability, simple market with high In such a situation, a firm should compete in
velocity and complex market with high many different high velocity marketplaces
velocity (see Figure 2). with a variety of different types of products/
service offers. This situation should be
As market competitiveness in terms of characterized by the management of a
different speeds (see Figure 1) have already different cycle of concatenate competitive
been described, the complexity aspects of advantage that could have a different speed
market competition will be highlighted here. and frequency of renewal. The firm that
Market complexity is defined as the quantity competes in such a situation should have a
of rivals, segments, product/service offers, core competency of dynamic capabilities,
customer set preferences, suppliers and complemented by local action-reaction
partners that the firm should have to manage strategies.
in a competitive framework. This is very

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As the matrix proposed in Figure 2 is a Take as an example a grocery and general
paradigm, it is highly possible to find a appliance retail chain. This firm could have
composed situation where the firm is involved different store formats that serve different
in many quadrants of the matrix. types of customers, through different channels,
offering different types of product and
It is also important to observe that firm size services. This firm could have a large store
and maturity should be variable in relation to format with a general purpose in grocery and
the degree of market complexity. In fact, to appliances supply, with a low cost, low price
participate in a different marketplace, to approach.
compete with a different type and quantity of It could also have different neighborhood
competitors require a minimum firm’s size and grocery store formats: one that attends to
maturity level. On the other hand, a firm sophisticated customer demands; which offers
involved in a simple market situation could be high quality/high diversity products
very young and smaller. For this young and assortment and customized services. Another
small firm, high velocity could be a reality at is an express format for quick supply, offering
the very beginning. limited products assortment and services, with
high location capillarity. Additionally, these
stores could be located in very different ethnic/
TOWARD A MULTIPLE STRATEGIES class level neighborhoods, requiring specific
APPROACH OF COMPETITIVE products assortment and services.
This firm should also have different types of
ADVANTAGE sales channels such as home delivery and an
Internet store.
In such a situation a firm may have to manage
at the same time a mature source of rent The original market of this retail firm could be
generation based on a market position, one of its store formats, such as the
protected by an economy of scale, or by a hypermarket. Because of it, the firm has been
reputation, or/and complemented by a set of sustaining its competitive advantage based
core resources. As the firm suffered a mainly on an economy of scale industry effect.
commoditization effect on its original source As the firm developed many different types of
of competitive advantage, and lost part of its store formats with different sizes, product
superior rent generation, the firm’s managers assortment offers and capillarity locations, the
could have decided to enter new segments and firm’s managers should have developed a
markets through the introduction of new types second core source of competitive advantage
of products/services or by establishing new based on a strategic resources and capabilities
types of alliances, to attain new types of of supply chain management (Lowson, 2001).
customer or to attend new customer habits. Whereas in the past these two cores have
For example, a recent research in the been sufficient to sustain its competitive
prepackaged software industry, demonstrated advantage it could not be the case nowadays,
that the continuous renewal management of as the increase of competitiveness provoked
complementary products have been used to by new entrants and a change in customer
sustain competitive advantage (Lee, habits could have undermined such sources of
Venkatraman and Tanriverdi, 2010). advantage.
These new markets/segments could present In fact this firm would probably have
different levels of competitive intensity and traditional rivals from past competition. These
maturity. Some new segments entered are still rivals should be positioned in different
unexplored by competitors because the speed segments/markets and offer different sets of
of imitation process is slow (a stable market values to avoid direct competition. These
situation). Other new segments, besides their rivals have also developed around their
youth are intense in competition, as many position sets of unique strategic resources as a
competitors are trying to reach a leadership second source of competitive advantage. The
position (a high-velocity market situation). In competition with these traditional rivals is
these nascent high dynamic markets, the firm based on economy of scale and efficiency, and
would have to manage a sequence of segment positioning, to avoid direct and
competitive actions to sustain advantage aggressive rivalry situations.
(Rindova, Ferrier and Wiltbank, 2010).

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On the other hand, recent entrants, familiar to capabilities or/and action-based advantages
customer habit changes could bring a new characterized by sequences of concatenate
layer of competition intensity. Smaller temporary competitive advantages. Figure 3
specialized retail stores, in specific segments shows an example from a simple strategy
or channels, could have confronted this retail approach with a unique source type of
firm. For example, a specialized grocery store competitive advantage compared to a multiple
could explore specific product assortments and strategy approach with a multiple source type
service attendances in ethnic neighborhoods. of competitive advantage.
Furthermore, a specialized appliances store
could offer an aggressive rivalry through In this theoretical example, in the first
Internet channels, offering a large and wide instance, the firm is established in a stable
assortment of variety in a few categories, market with low complexity, has sustained its
extensive knowledge of product usability and rent generation based on a unique source type
affordable price on an Internet channel. In of competitive advantage: an industry
conclusion, this retail firm has been competing structure. As the level of rivalry increases and
in very different situations, in very different the nature of the market becomes more
segments with very distinct competitors. dynamic, the firm suffers a reduction of its
superior rent generation, which was re-
The original competitive advantage sustained established by a second strategy based on
by the economy of scale and supply chain Resources.
resources and managerial best practices, could In a third step, that part of superior rent
be partially or totally nullified by these smaller generation sustained by the resource approach,
but aggressive competitors due to customer also eroded, and was re-established by a third
preferences constantly shifting. This type of strategy approach based on dynamic
situation has been referred to as a residual capabilities.
effect of competitive advantage and remains as The last situation presents the most complex
an unexplored subject in the strategy composition of a type of competitive
management literature (D’Aveni, 2010a). advantage source, combining industry and
resources residual effects, sequence of
In such conditions, a hypercompetitive concatenate temporary advantage and
environment may form by a sequence of quick intermittent temporary advantage.
maneuvering and counter maneuvering, as
price cuts, promotional offers, and new Also, the temporary part of the superior rent
product introductions. This hypercompetitive sustainability could be composed of sequences
environment occurs at the store level, as each of different frequencies and speeds. In fact, as
store locality could present a different it has already been elucidated, all types of
competitive configuration and intensity, with a competitive advantage are temporary in
different variety of rivalry in quantity of nature, and they differ only by the degree of
competitors and type of competition. their duration effect. Therefore, the one that
lasts for a very long period of time is called
In such a context, a firm should deploy sustained competitive advantage.
multiple competitive strategies and manage Consequently, a multiple strategies approach
multiple sources of competitive advantage should compose competitive advantage of
with different degrees of temporality, erosion different duration effects and demand a
and time compression. Multiple competitive different velocity of replacement. In a
strategies could be composed of a different hypercompetitive environment, a firm should
velocity of dynamic capabilities cycles (Helfat have to manage these different temporary
and Peteraf, 2003), each one corresponding to competitive advantage velocities.
a different market level of competition and
maturity. This point of view is in accordance with recent
In a multiple competitive strategies approach, trends and research opportunities raised by
a firm could benefit from sustained D’Aveni, Dagnino and Smith (2010) in the
competitive advantage balancing and field of strategy and temporary advantage in a
combining different types of sources of recent article. After gathering the main trends
competitive advantage. This composition in of research on temporary competitive
this higher complexity could be sustained advantage, the authors ask if the existence of
partly by an industry effect, partly by a firm’s sustained competitive advantage and
resources effect, partly by the use of dynamic temporary advantage are mutually exclusive or

9
could simultaneously co-exist. Additionally, complex strategy, it would not necessarily
the authors concluded that competing in bring superior rent generation, and it may not
hypercompetitive environments could not be be necessary to imitate it. On the other hand,
done only with a unique and simple strategic in an empirical research, McNamara, Luce and
approach. They defend the adoption of Tompson (2002), demonstrated that firms
multiple strategic approaches, one for each whose top management teams use more
competitive situation. Below is a transcription complex strategic group knowledge to take
of their own words: decisions have a better economic performance
than others.
“Finally, another emerging insight is that firms do not
have just one strategy. They may have a multiplicity of
strategies – each strategy takes on rivals one at a ECONOMIES OF EMERGENT
time. In fact, in a world of temporary advantages, it COUNTRIES AS CANDIDATES FOR
may be rare to see a firm having just one strategy that
universally applies across all rivals. A firm may have
THE STUDY OF COMPLEX
as many strategies as it has competitors. Yet the field COMPETITIVE ENVIRONMENTS
of strategy still talks about firms as if they had just one
strategy”. Markets of developed countries should present
the most complex competitive environment in
In fact, some OI traditional scholars long comparison with developed countries that have
defended the use of generic and unique stable and mature markets, firstly because of
strategy. The famous Porter (1996) advice to their cultural diversities, frequent disruptive
“do not get stuck in the middle”, is based on economic change and high social contrasts. It
the concept of adopting only one positioning is common in an emerging economy that a
strategy, having to choose between a firm should have to lead in a very short cycle,
differentiation or cost approach. with a high variation of cost due to currency
Miller (1992) and Miller & Friesen (1986) rate volatility, or by disequilibrium between
demonstrated that generic strategy and a supply and demand related to many social
simple strategy repertoire could be a trap for and economical infrastructure investments. In
mature firms. One of the reasons is that firms fact, in emergent countries a recent
that experienced in the past success focusing development of economic prosperity with
on few assets, competencies and markets, increased demand could lead to a rise in
become accommodated and do not develop inflation, due to bottlenecks in infrastructure
new capabilities or take the risk to explore and raw material supplies. Frequent changes
new opportunities. At the very time that their in fiscal and business policies, a lake of
market changes to hypercompetition, such industrial and national economic long-term
firms do not have the correct reaction at the strategies, lead to many markets being
correct time to adapt and change. In addition, unpredictable in relation to a firm’s long term
Miller (1992) defends that a simple strategy investments.
adoption should be easier to imitate by rivals Secondly, because institutional development
than a more mixed approach and who benefit and competitive regulation have been
from a different source of competitive established, reducing advantage based
advantage and should be difficult to reproduce. monopoly and duopoly, leads by consequence
On the other hand, complex competitive to hypercompetition (Hermelo and Vassolo,
environments should require a more complex 2010). Consequently, emerging economies
strategic approach. For example, the should present a very interesting context to
management of multimarket contact through study as to how firms have been developing
multiple maps of competitive pressure their strategy framework to lead in such
highlights the nature of the complexity of complex competitive environments. In such
competitive environments (D’Aveni, 2002). environments, the adoption of multiple
Rivkin (2000) demonstrates that a complex strategies should lead to the development of
strategy approach could be used as a barrier to new managerial capabilities in order to handle
imitation. In fact, a strategy composed of at the same time paradoxical activities, such as
many parts, which results in many possible the one described by the ambidexterity
combinations should be intractable by an approach in exploration versus exploitation
imitator. However, Rivkin (2000) fails to tasks (O’ Reilly and Tushman, 2004; Simsek,
establish a relationship of strategy complexity 2009). In fact, a complex and
with a firm’s performance, more precisely, the hypercompetitive competitive environment
relation of rent generation sustainability. As a should require balancing, at the same time as

10
an exploitation of current products and service sources of competitive advantage. These
portfolio, but also which is renewable diverse competitive realities should involve
(exploration) to sustain the chain of different approaches to be able to lead with
concatenated temporary advantage. In an sources of competitive advantage and should
emerging economy these strategy management involve multiple strategies for their
capabilities should lead to a resilience effect of management. Finally, a multiple strategy
sustained competitive advantage where a approach could be characterized as a resilient
successful source of temporary advantage capability, where the management of a
compensates others that have been eroded or diversity of rent generation source, by a
did not bring the expected rent. In such a compensatory effect, sustains competitive
situation, a firm’s source of competitive advantage
advantage resilience could bring a more
persistent competitive advantage. In this literature review we raised many
research opportunities for further
development: Firstly, that research in
CONCLUSION hypercompetition has been considered only in
terms of velocity, and that they have been
In summary, firms have been confronted by an omitting the complexity aspect of competition.
increase of competition. This intensity of This has probably been restricting the
rivalry is due in part to the increase of research to some particular cases of
competitors but also because industry hypercompetition of high velocity with a low
structures are much more dynamic in nature, complexity environment. Thus, considering
frequently altering the rules of the game, the complexity dimension of a
making obsolete market leaders sooner and hypercompetitive environment, a firm should
bringing new entrants. In this literature review, have been using a multiple strategies approach
it was clear that stable markets, the ones that to lead with this complexity. The main
offer a stable position with unfailing entry questions that remain are whether the firms
barriers, which permit the firm to find a have been combining different types of
profitable position and enjoy long-term competitive advantage? If old sources of
abnormal returns are rare. On the other hand, it competitive advantage such as industry and
seems that hypercompetitive markets, resources still have a residual effect on rent? If
specifically the ones characterized by high firms have been leading with different life
velocity are more common than the exception. cycles of competitive advantage? And finally,
This general increase of market dynamics considering if a firm has been managing a
raised the question of the existence of multiple source of competitive advantage, and
temporary advantage and put in doubt the real if it has been successful in sustaining a
existence of the sustainability of competitive superior economic performance over its rivals?
advantage. A disruption of epistemological
concept has surged, at the same time that the
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