THE CLIMATE AND DYNAMICS OF COMPETITION : A Study of Interaction Between Competitors

A partly new train of thought has emerged during the last few years, which claims that national conditions are of importance for company strength in relation to international competitors. National competition has stood out as one of the most important explanatory factors, and is seen as the catalyst or motor in dynamic industrial environments. The demands and pressures that evolve from competition between geographically proximate companies stimulate the innovativeness within the industry. Thus, the question about why and how dynamics of competition develop and function has not been answered in existing research. The main purpose of this study is therefore to analyse the process of competition in industries with a high degree of geographical proximity between competitors, in order to improve the understanding of the character and dynamics of competition. A general review of literature dealing with competition at industry, strategic group, and organisation level was compiled. The review gave two dimensions by which four types of competition were possible to distinguish, degree of symmetry between competitores and degree of activity in competition. To obtain an understanding for the character and dynamics of competition, it is not enough to identify different types of competition. The process through which competition is formed over time also needs to be studied. Other theoretical approaches are therefore necessary. First, the companies' competitive actions should be understood from their experience and expectations of competition. Second, the specific competitive moves that are taken by individual companies are of importance for the competition. Third, competition has to be described as a process of interaction over time. A case-study approach has been used for the gathering of data. Case-studies have been conducted within three industries that differ from each other with regard to competition. Competition in the Frontloader industry has been driven by two companies equal in both size and relative strength. The competitors in the Lining industry are,on the other hand, dissimilar, both in respect to relative strength and to the orientation of their business. The third industry, that of Hoisters, is characterised by the domination by one company. Two major results have been reached in this study. First the concept climate of competition has been coined to analyse and describe the character of the four types of competition. The following four climates of competition emerge from the analysis; climate of rivalling competion, of co-existing competition, of evolutionary competition and climate of revolutionary competition. The climates of competition differ with regard to the functional and psychological distance between competitors, the possibility to survey competition, and the actors' acceptance of current rules-of-play and role distribution. The second result of the study is a greater understanding for the dynamics within competition. By analysing the character of and change in competition over time two partly different, but interwined forces, have been detected. Competition gives rise on the one hand to different kinds of learning processes, and on the other forces competitors to innovative and creative measures.digitalisering@um