Wharton on Dynamic Competitive Strategy
Wharton School of Business is part of the University of Pennsylvania. The school publishes books on various business topics. Specifically, a book was written in 1997 called Dynamic Competitive Strategy. The book was written by George S. Day, David J. Reibstein and Robert E. Gunther with the Wharton School of Business and published by John Wiley & Sons, Inc. The book addresses an approach to remaining dynamic in regards to competitive strategy. In the nine chapters assigned, the book can be broken down in four sections.
First it analyzes strategy, addresses external forces, provides two different theories and ultimately presents a solution for creating and maintaining a dynamic competitive strategy. The book provides a very logical and analytical approach creating an effective strategy for a company to work off of. Having the ability and knowledge to adapt to an ever-changing business environment is crucial to success. Through in-depth research in strategy the book presents theories developed around the formulation and implementation of such strategies and can be used as a tool for business managers. The book begins by assessing competitive arenas and maintaining the competitive edge.
These two subjects can be categorized as the analysis part of the book. This section contributes to the readers ability to analyze a situation. Specifically, the authors challenge the reader to identify the arena in which handle. There are two types of arena, customer and competitor defined arenas. Once you have identified the arena, the next step is to identify a way to maintain that competitive edge. The book then present the competitive advantage cycle. This describes how a company can have a competitive advantage in the market, but it ultimately goes through a cycle and will change over time. In some cases, such as Dell Computers, companies go through numerous shifts in the market and must change their approach regularly in order to keep their advantage.
The book then presents how a company’s strategy can be influenced by outside forces. Two of these outside forces in the book are public policy and technology. Public policy can also be used to help shape a company’s strategy and develop practices of integrating such forces to their advantage. Traditional theories on strategy development do not take into account public policy when building out the strategy. In figure 3.1 in the book, the authors show how while these strategists do not incorporate public policy, the strategies they create are affected by them. Figure 3.1 – Policy Trends and Dynamic Advantage
Personally, I found this chart to be very helpful. It helped me understand how public policy can be better integrated into the company’s strategy. For example, a college may want to seriously consider how they integrate public policy into their strategic plan since many of the financing is done through federal grants. By being aware and even getting involved in how public policy is shape would be a large part of the strategic plan. The second part of the outside forces is technology. Technology is constantly changing and evolving. The book has an example of a bank in Hong Kong in which they did not see a competitor enter the market because it didn’t think it needed to explore the more technical side of banking. As in the first chapter where you identify the arena in which you are working in, these arenas can change and new ones are developed easily by how the technology changes. This bank in Hong Kong started to see their best customers leave to Citibank because the new bank was able to offer features that the Hong Kong bank did not. By not being aware of this outside force, a company can see a decline in business from competitors pilfering customers. Read about HP competitive advantage
In the next section the book presents two types of theories: game theory and behavioral theory. Game theory was created over 2,500 years ago by the Chinese military (Ho & Weigelt, 1997). It has only entered the business environment recently but still uses the same concepts and is a tool for doing strategic analysis. Game theory is essentially a way to make decisions. How will it affect your company? How will it affect your competitor? It takes into account cause and effect, considering all possibilities and what resources will be needed. The second theory offered is behavioral theory. This theory investigates why it is that managers often make irrational decisions that may negatively affect the future of the organization. Often, managers make decisions based on their own biases and not necessarily rational like the game theory.
In the seventh chapter, the book makes its point through coevolution. Coevolution focuses on interdependent adaptation, the race to adapt to new conditions, and the importance of initial advantage and conditions (Johnson & Russo, 1997). By taking the game theory and the behavioral theory, coevolution bridges the gap and makes the connection between the two theories. Over the course of the first and second section, the book has been building to provide the tool to help managers make better decisions regarding their competitors, the markets in which they compete and outside forces that can affect the organization. I found the book to have a very approachable structure of presenting the research and findings. It is important that managers in their organization consider all the factors that go into creating a competitive strategy. When considering your competitors, it is imperative that one be able to truly identify and understand the situation.
By arming the manager or executive with the tools to make sound decisions, it only sets the organization up for success. This book provides a leader in an organization with those tools and in a way that is easy to understand. It was very clear to me where they went with their research and how they got there. It is also a book that can stand the test of time since they stayed away from very specific situations. We always know that public policy and technology will always be part of the market as outside forces. In addition, The outside forces that the authors selected to include in their book are two things that will remain constant. Government and technology have existed for centuries and will continue to be part of the development of companies.
In conclusion, the book addressed the idea of dynamic competitive strategy in a way that was easy to understand and useful to leaders of organizations. The authors provided ways to assess the market, outside forces that can change how the market acts, theories to address competitors and ultimately brought it all together with coevolution. With these tools in place, organizations can look forward to a strategy that not only propels the company, but also manages and controls the competition.
References
- Day, G., Reibstein, D. and Gunther, R. (1997). Wharton on dynamic competitive strategy. New York: John Wiley.
