Interpretation of Dynamic Competition Theory

For the group of business owners and professional managers who have been struggling in the market all the year round, what makes them most anxious? The answer is undoubtedly competition, especially in a gradually fair and open economic environment, the profits of any industry will be dragged down infinitely due to the rapid influx of competitors, until it reaches saturation and has to form a structure of mutual tolerance.

And now there is an even more troubling question before business owners and professional managers. As the characteristics of this era are information expansion, fast-paced rhythm, and efficient integration, "faster, faster, faster" has long been the main trend of market competition. At the same time, in the high-speed and violent dynamic environment, the focus of enterprises in building a competitive strategy is no longer able to calmly consider how to build a long-term advantage of the enterprise as in the traditional way, but has to focus more on attacking and attacking in the short term. Respond to competitors. Therefore, how to initiate and respond to premeditated market moves among the same industry, and how to achieve market expansion through tactics such as cannibalization and swallowing again and again, have become common problems before decision makers.

In fact, traditional static analysis theories, such as Porter's five forces model, are no longer sufficient to analyze and Explain the business phenomenon above. Many companies with strong competitive elements in reality suddenly fell down in the competition of the same market, while some little-known small companies stood out in the fast running. Chairman of the Corporate Business Development Research Institute, the earliest major corporate strategist in Asia) said that in the dynamic era, corporate decision makers have been slow to think about how to establish a long-term dominant position, and must consider when is the best time to launch an attack. Micro-strategic issues such as timing, which attack method to take, how to respond to the opponent's attack, and who is influencing.

In this context, Chen Mingzhe's dynamic competition theory does not start with the traditional static analysis idea, but takes the subtle forms of enterprise competition behavior as the basic element, constructs the dual relationship between attack and response, and quantitatively analyzes the delicate relationship between them. From this point of view, the competition mode between manufacturers is extended, and finally it is extended to the overall level of the group's competition situation discussion, and the decision-making combination mode of the competitive strategy is analyzed in this series of processes.

How to deal with individual competition

Chen begins his work with a question, what is the response of a simple competitive act? We put this assumption into a realistic context. If you are an enterprise manager who is making a certain decision, and you try to use this decision-making behavior to increase the company's market share, and attack your main competitors, first of all The question to ask is: Can you predict that the decision-making behavior will have the expected positive and positive effect, and how can you ensure that competitors do not interfere with you and cause unnecessary excessive confrontation.

It should be said that the above problems are commonplace in the market game, and all decision makers are considering: how to reduce the external competition risk that is not conducive to their own decision-making behavior, and how to delay the follow-up response of competitors. However, in the one-to-one dual competition relationship, Chen Mingzhe further clearly proposed how actors can effectively restrict the behavior of competitors. Chen believes that the obviousness of a competitive behavior itself, the difficulty for competitors to respond to the behavior, and the importance of the market being attacked by the behavior are the three factors that trigger the group's competitive response. If the decision maker wants to reduce the external confrontation of the decision-making behavior Risks, reduce the follow-up response of competitors in order to reduce the excessive consumption of resources caused by confrontation, we should think more about the above three factors. Chen then used data to illustrate the trend in his own research samples.

From a practical market perspective, Chen's above point of view is not difficult to understand. When a decision maker's competitive behavior is more obvious, the probability that the action will be detected and responded by market competitors is bound to be greater. The company poached people all over the country to open new product businesses and planned to hold a press conference. This behavior will inevitably arouse a high degree of vigilance in the industry; This makes competitors more likely to respond. For example, domestic home appliance manufacturers have a “hand-to-hand” price war. Because it is simple, they respond collectively and use them arbitrarily. For example, Midea's entry into the air-conditioning market, Gree, whose main market is air-conditioning, must be highly vigilant, and responded to Midea's measures in the channel, engaging in a tug-of-war.

For the above concepts, we also believe that professional managers who have experienced market competition all year round are familiar with it. However, many managers rely too much on traditional inertial experience in actual market operations, rather than relatively objective and detailed analysis. Inference, Chen's extensive quantitative inferences are of immediate benefit to how a group of managers can establish a clear logical framework.

At the same time, in avoiding the risk of excessive confrontation, Chen gave concise suggestions. He believes that policymakers should adopt careful competitive behavior, and create "asymmetry" through some subtle and deliberately calculated attacks, such as manufacturers taking some secret, difficult-to-respond, and locked-in market edge areas of competition to create "asymmetry". Continuous rewards; if you have to attack the opponent's hinterland market, you should release some kind of signal as much as possible to obscure the target, limit and interfere with the opponent's judgment, delay the opponent's follow-up response, and the method adopted should also be difficult to imitate in the short term. approaching in the direction.

Who is influencing the competition at the vendor level

The above quote is the micro-dynamics of individual actions Competitive relationship extends to the manufacturer level. Chen put forward another interesting point: what factors affect the competitiveness of manufacturers? This is also a problem often encountered by business owners and managers. For the organization itself, especially in the complicated daily game, which factors will affect the external competitiveness of the enterprise.

Chen believes that the strategic level of competitive action, the complexity of organizational structure, the degree of external orientation of enterprises, the degree of resource adequacy owned by manufacturers and the level of experience of top managers are all related to the response efficiency of manufacturers.

In his research, a dynamic logic is clearly demonstrated through experimental inferences. The higher the strategic content of a manufacturer's competitive action, the less likely the competitor will respond. If you think the above concepts are a bit abstract, put it in a realistic context It will be easy for everyone to understand. Generally speaking, at the actual enterprise level, a strategic behavior is defined as a major commitment of the enterprise to specific and unique resources that often involves specific and unique resources, and it is not easy to be revoked and implemented. For example, a manufacturer has repositioned itself within the enterprise to enter a new market. It is often not easy to revoke the business scope and the opening of a new business department. Tactical behaviors are general adjustment behaviors, which involve fewer resources and can be quickly undone, such as the daily advertising and promotion activities carried out by enterprises. Therefore, in terms of difficulty coefficient, strategic behaviors are more difficult and are not easy to be imitated by competitors.

In addition, the larger the organizational structure of the enterprise, the more complex and specialized the organization is set up, which is not helpful for improving the enterprise's own response to market competition; (such as companies with marketing and service as the core), so the probability of responding to their market competitive behavior is also higher; in terms of the abundant resources owned by manufacturers, when faced with a competitive crisis, a manufacturer with abundant resources cannot prove that it is better than resources Restricted companies are more capable of responding to competition; in terms of teams, the higher the experience level of the senior manager team, the higher the probability of responding to competition, and the higher the heterogeneity of team structure and background, the more likely they are to attack in competitive behavior. The higher the intensity, the bolder it is.

In it, Chen also deeply explores the relationship between the size of the manufacturer and the actual market competition response. How to improve performance capabilities in different scale organizational systems is also one of the practical issues that many professional managers are concerned about. In the real context, operators will often see two market competition patterns under the influence of the concept of scale. One is that big fish eat small fish. For example, in the domestic beer industry, Qingdao and Snowflake want to acquire local breweries, and do so through mergers and acquisitions. Large-scale; another type is that small fish eat big fish, such as Geely's acquisition of Volvo.

The question that arises is, what are the characteristics of the competitive behavior between small and large firms? Chen teased out a clear comparative trend through research. He believes that, compared with large-scale enterprises, small-scale enterprises have higher initiative, faster execution speed, and lower obviousness in competitive actions. Considering the actual market, this is also the reason why small-scale enterprises do not need to undertake a complex structure. advantage; at the same time. The competitive approach adopted by large manufacturers follows the typical tendencies, because the size of large enterprises often puts them under the wide attention of various stakeholders, in order to maintain the confidence and support of many stakeholders and industry honor. Large manufacturers are constantly warned not to engage in unconventional, deviant competitive behavior.

Chen's research in this area is of reference to many managers and entrepreneurs themselves, because in their careers, it is normal for managers to change jobs or start their own businesses. As a manager, how to It is particularly important to switch roles in companies of different sizes, such as whether the competition routines of small companies can be applied to large companies, whether the operating habits of large companies can be grafted to small companies, and how to reshape the habits of their respective teams, etc., all need to be cautious. Balanced.

How to schedule resources at the overall level

Up to the overall level, the previous one-to-one competition Point and line analysis at the behavior and manufacturer level is not enough to support this height, especially in a diversified market environment, a company involves several industries, and many large companies even compete with each other in multiple fields with high intensity, so Its complexity is no longer comparable to a single initiative. Moreover, for most large-scale enterprises, the multi-point competition formed by diversification is the normal mode. Because of this, this multi-point intertwined market often presents information asymmetry, uncertainty, and difficulty in transparency. On the other hand, a large-scale enterprise may have more abundant resources and involve a more complex market, but as a decision-maker of the enterprise, the energy of himself and his team cannot be as much as the resources. In fact, Limited decision-making ability limits the ability of enterprises to focus on external resource allocation.

At this time, how to transform limited decision-making power into an optimized resource allocation strategy, and achieve multiple market competition advantages through this resource re-allocation method has become the key to winning the competition among enterprises, and this is also the Skills that must be understood and mastered at the helm of a large enterprise.

In this regard, Chen provided such an enterprise resource allocation idea in his research at the overall level - resource steering strategy, and explained its meaning in layman's terms, that is, how manufacturers influence target opponents through their own resource allocation measures decision-making, and control the limited energy investment and resource allocation of the other party, so as to benefit itself; at the same time, it will not trigger a comprehensive confrontation between enterprises in multiple markets, so as to avoid excessive consumption of resources.

Below, we describe Chen's abstract strategy in a concrete context. We assume such a simplified realistic multi-market competition scenario. Both manufacturers A and B have resources to invest in the X market and the Y market to compete for products. Under this condition, manufacturer A does not want to cause a comprehensive confrontation between the two sides in the X and Y markets, and Want to expand its market share in the X market, what should I do? In this regard, in his research, Chen proposed three simplified strategies for resource allocation - forward attack, camouflage, and "strategic chess".

The first method is "forward attack". Manufacturer A invests a lot of resources in the X market, strongly releases signals to put pressure on B, and even pulls out the resources in the Y market to invest in X, so when A configures this attack The more resources, the greater the intensity, and the more market interests, the higher the probability that B chooses to withdraw from the field.

The second method is "camouflage". A's goal is to expand the influence of market X, but instead of directly attacking opponent B's market X, he attacks B's Y market to attract the attention of manufacturer B. When A invests more resources in the Y market and the action is more obvious, if the Y market is B's core market, then the possibility of B withdrawing resources from X to protect Y is greater, and finally A will achieve the opportunity to dominate the X market. also bigger.

The third method is "strategic chess". Manufacturer A's goal is to expand the influence of market Y. In order to reduce resistance, A has obviously sacrificed its position in the focus market X, and clearly expressed to competitor B that it will Withdraw resources from market X and hope that B will flood into market X, and then A will invest the transferred resources into target market Y to reduce the risk of being blocked by B.

The above three methods are actually Sun Tzu's art of war: smashing grass to startle the snake, attacking the east and attacking the west, and retreating to advance. We can give an example in real business battles. For example, the transformation road of Big Blue IBM uses the strategy of "retreat to advance". Back then, IBM gave up the PC market, which had been working hard for many years, and sold the entire PC department to Lenovo, allowing Lenovo, HP, Dell and other companies to compete for profits in the paper-thin PC manufacturing industry, while it devoted all its resources to transforming into the service industry. Afterwards, the facts were as expected. After Lenovo obtained IBM's resources, the X market became huge in an instant, and successfully dragged HP, Dell and other PC companies, so that several companies continued to fight in the low-profit X market, and it was difficult to be distracted. Interfere with IBM's transformation.

By the way, Professor Chen has intensively read Sun Tzu's Art of War seven times. In the class, he used one, two, and three to talk about his dynamic competition, and the witty words were in a row. Due to space limitations, it cannot be described here. Most Chinese entrepreneurs have read Sun Tzu's Art of War. Dynamic competition is not difficult for you to understand, either from collective unconsciousness or from long-term careful speculation. But maybe you don't necessarily understand the significance of dynamic competition to international management theory, or the significance of dynamic competition in international management academic circles, and you have not experienced those wonderful logical argumentation processes. As Situ Daxian said, in the international academic circles, it was Chen Mingzhe who formally proposed this new paradigm with rigorous empirical research and discussion.