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Hypercompetition: Managing the Dynamics of Strategic Maneuvering, by Richard A. D'Aveni. New York: Free Press, 1994.
Reviewed by Rajaram Veliyath, Department of Management and Entrepreneurship, Kennesaw State College, Marietta, GA.
Richard D'Aveni's Hypercompetition addresses competitive analysis under conditions in which competitive advantages are quickly eroded, established rules are repeatedly flouted by iconoclastic rivals, industry boundaries are constantly breached, and customer loyalty is fickle. Under such hypercompetitive conditions, sustainable competitive advantages (Williams, 1992) are replaced by a series of temporary unsustainable advantages. The extent of rivalry depends on the mindset and actions of the most hypercompetitive player in the industry and not on the number of industry players. Thus, an industry with only two competitors could still be hypercompetitive.
Because the temporary advantage goes to the player who is a step ahead on the ladder of escalating rivalry, firms have an incentive to be the first to break existing collusive agreements, placing them in a situation resembling the prisoner's dilemma (Rapoport, 1989). Perfect competition cannot be sustained because it generates only marginal profits that do not provide the wherewithal to reinvest in innovative research needed to develop future competitive advantage. Oligopolistic cooperation does not produce excess profits because of the relative ease of entry for new (maybe international) competitors who could break tacitly collusive arrangements. Therefore, firms drive the industry toward hypercompetition by competing in any of the four arenas.
These four arenas are cost and quality, timing and know-how, strongholds, and deep pockets. In the cost and quality arena, the trade-off between price and quality is eliminated, forcing the industry's product offerings toward a point of ultimate value for consumers, combining low prices with high quality. However, at this juncture, none of the industry s players are making more than marginal profits. Thus, hypercompetitive firms will either redefine quality and increase prices or force competition toward the timing and know-how arena.
A first mover requires a uniquely different set of skills or competencies than that of a follower, and it can confer different types of advantages. Alternatively, competitive moves could be along the know-how dimension, which involves building the...