Is the world becoming hypercompetitive? Many scholars have pointed out that the nature of competition has changed over the last few decades, posing a challenge to strategy making. On the one hand, the gradual increase in international trade, and what we broadly refer to as globalization, has led to the rise of the multinational, affecting markets in host countries, as well as creating new opportunities for export. On the other hand, new technologies and digitalization have led to rapid change and the emergence of a new online and digital economy.
In this context, some scholars have argued that the basis for competitive advantage erodes more rapidly for the individual firm. Building long-term competitive advantages is therefore becoming more difficult. Others have taken the analysis a step further and argue that firms today face a combination of more complexity, higher rates of change, and what has been labelled a situation of “hypercompetition”. Uncertainty and change are ubiquitous, leaving managers “coping as best they can”. Managers are thought to have to accept temporary advantage as the best that can be achieved. A number of empirical studies have sought to measure hypercompetition and some scholars disagree that there is clear evidence of hypercompetition. One possibility is that hypercompetition could be limited to high-tech industries. Yet, even in this industry the evidence is unclear.
The key problem in this debate is methodological. Different studies have used very different techniques and samples to measure very different variables that may or may not be indicative of a changed nature of competition. Some have focused on measures of company performance, such as return on assets (ROA), and the degree of volatility in these. Others have examined volatility in individual firm resources, or firm mortality (firm exit) data. The lack of methodological consistency makes it difficult to find agreement on the existence or non-existence of hypercompetition.
Adding to the confusion is the fact that managers make decisions on behalf of their organizations based not on objective realities of the industry environment, but rather on their shared subjective perceptions of that reality. There is by now ample evidence from, for example, the literature on scanning and interpretation, that managers are in fact poor judges of the environment, being prone to misperceptions and overconfidence in their own knowledge of this environment.
Given the ubiquitous nature of the assumptions of high uncertainty, high rates of change, and hypercompetition, both in popular management literature and in the general media, one has to ask the question: is the rate of industry environmental change truly accelerating towards hypercompetition, or are we living in a hype? Furthermore, how do managers perceive this rate of change, and is strategic planning still perceived as possible by these managers?