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Hypercompetition: Definition & Business Strategy Effects

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  • 0:04 Definition of Hypercompetition
  • 1:15 Technology and Innovations
  • 1:51 Customer Changes
  • 2:43 Decline of Boundaries
  • 3:48 Financial Independence
  • 5:20 Lesson Summary
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Lesson Transcript
Instructor: LeRon Haire
During this lesson, we'll discuss and define the term hypercompetition, along with addressing four factors that can affect business strategies in a hypercompetive market. When you are through, take a quick quiz to see if you've mastered the details.

Definition of Hypercompetition

Once upon a time in a business world far, far away, organizations would hold a competitive advantage over their industry rivals that was sustainable for an extended and indefinite amount of time. However, times have changed and have ushered in a new era of competition known as hypercompetition.

Hypercompetition can be defined as organizations' use of tactics to disrupt the competitive advantage held by industry leaders. Hypercompetition typically occurs at a rapid pace. For example, let's say that you own a fast-food restaurant and your items are priced slightly higher than a rival fast-food chain. If you decide to adjust your prices to be closer to or lower than your rival, that is hypercompetition.

For organizations looking to succeed in a hypercompetitive market, there are four factors that need to be mastered:

  1. Technology and innovations
  2. Customer changes
  3. Decline of boundaries
  4. Financial independence

Let's take a closer look at these four areas and see how they affect business strategies for hypercompetition.

Technology and Innovations

The ever-changing nature of technology plays a major part of hypercompetition in markets today. New innovations for products disrupt the competitive advantage held by others in the market. For example, the introduction of energy drinks into the beverage industry has played a significant part in disrupting the market leaders.

This innovation has proved to be more than just an overnight fad, as its success has also caused competitors to create their own lines of energy drinks. These types of innovations and technology continue to cause upheaval and change in hypercompetitive markets.

Customer Changes

The phrase 'here today, gone tomorrow' is a great metaphor for customer changes that occur in hypercompetitive markets. These are changes that can't be predicted and may occur at any given time. For that reason, these changes can dramatically affect industry leaders in a hypercompetitive market. As we all know, the market is controlled by consumers. When they purchase, organizations succeed, and when they don't, organizations fail.

With consumers holding the ability to change their preferences, the market is unsustainable. Simply stated, this means that you may purchase vanilla ice cream for five months and then decide to purchase strawberry ice cream for the next five months. Because organizations are vulnerable to trends, fads and consumers changing their preferences, any advantages they obtain are often unable to be sustained.

Decline of Boundaries

Do you recall making a blanket fort or a pillow castle as a child? The idea behind building one of these childhood structures was to keep others out of your area. With hypercompetition, however, it's important that organizations act as if there are no boundaries to entry in a particular market.

The phrase boundaries to entry refers to just how easy or difficult it is for outside businesses to enter into a specific market. In the past, organizations operated to reduce the level of competition by making it difficult for outside businesses to enter into their market.

For example, the boundaries to become a doctor are rather high because of the many qualifications that must first be met. In contrast, the job of a window washer has a lower boundary than that of a doctor because those duties are not as complex.

In today's business environment, hypercompetition is focused upon making quick decisions intended to disrupt the competitive advantage of market leaders. These types of decisions are now centered to create a competitive advantage through strategic maneuvering.

Financial Independence

In today's market, companies are generating more revenue, for a variety of reasons. One, for example, is the growth of partnerships, alliances, and globalization. These types of structures cause companies to maintain deep pockets or be financially independent. The goal of organizations in a hypercompetitive market is to erase the competitive advantage held by the industry leaders.

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