Introduction

The question “why some companies remain at the top” over a long period of time has posed a great importance in the business field and is known to have evolved around competitive strategy. The assumption is not that the firms will persist in their performance differences. The persistence performance will arise between the firms which traditional models cannot explain. The traditional models can treat them as unusual or to some point due to the monopolistic activity of the firm, by the virtue that it is the only firm in that area. This will bring about proposed frameworks and models by researchers to explain such competition and the performance differences that arise.

Brief summary of the Case study

A construction company known as Southern is a private entity which has its branches in the Southland and Midlands of England. In the mid-1960s, it started as a civil engineering contractor and has since diversified into sections of market sectors. The firm currently has an exchange-traded fund that has replaced investment holdings every year which has been approximated at 230M and employs around 1,000 staff. The company has over and over enjoyed continuous growth and this was witnessed between the mid-1980s to the mid-1990s. The purpose of the case study is to examine the competitive dynamics occurring in the company for strategic development.

Strategic issues

The case strategic issues to deal with that pertains to the competitive dynamic of the company include the following.

Evolutionary economic as the dynamic approach to competitive dynamics to affect Southern engineering construction companies.
Recourse-based view of Southern company.
The concentration of the firms in Southland and Midland of England

Review of evolutionary economic as the dynamic approach to the competitive dynamic of Southern company.

The strategy, performance, and survival of the Southern Company in Midland can be demonstrated using Darwin’s natural theory. The southern company goes for targets instead of profit maximization (Chen, 2009). One of these targets is opening more branches across Midland by the end of the financial year, regardless of how little the profit is. Some firms In England veering too far will be faced out of the market. The southern company had to adapt to the survival of the natural selection.

Resource-based view of Southern company

The southern company exists to combine resources for the production of the construction products. The company has some inputs which constitute its outputs, and these inputs are mainly labor and capital (Ndofor, Sirmon, He, 2011). For the perfect competition, the assumption is that the optimum input is mobile and divisible. The objective of the Southern company is to maximize its returns through the use of its resources in the construction firms in England.

The concentration of the firms in the Southland and Midland of England

In southland and Midland, the same construction firms can be concentrated in one area. Their concentration will make to move towards or back from the equilibrium. In this regard, the movement is of great concern, not the equilibrium (Baum, Korn, 1996). Competitive dynamics occurring among the concentrated firms will result in their reactions since the firms want to maintain their existence, long-term existence, or performance for that matter.

Theoretical concepts of strategic competition based on competitive dynamics

Evolutionary theory. Based on the issue of economic evolution, the evolutionary theory applies. Due to the diversity of the evolutionary views in theorizing in a various range of individuals to aggregates, there comes in the analogies to the biological perspective of variation, inheritance, and selection (Baum, Korn, 1996). Besides, there is also a real-time entity of social and economic changes in Midland. The evolutionary view gives the company the aspect to be modeled as possessing path-dependent knowledge units. The concept gives a rationale for robustness which is vital for the utilization of selection issues. Though there is little application on the concept by the firms.

Coase/Williamson transaction cost theory. This theory applies to the resource-based view issue. Firms and markets are alternative methods for coordinating their production. These firms exist based on choosing alternatives. The analysis is that the operation of the market brings some authority to direct the resources, certain costs are preserved (Ndofor, Sirmon, He, 2011). The view focus on the cost of inputs. The existence of the firms is to economize on the costs of conducting exchange between the contractors. The framework of the approach is the market failure framework based on Coase’s work, hence brings a challenge to the normal assumption of the firm. The organization form that develops in exchange situation depends on the efficiency of the form for completing necessary transactions. The framework assumption is that decision-makers are opportunistic with bounded rationality. The most vital characteristics of transactions between firms and consumers which impact how the exchange process will be conducted are asset specificity, uncertainty, and frequency. Because the investment of an asset which is specified in the transaction makes a commitment for both parties to the transaction for some time is asset specificity. On-specific market makes the contracting process efficient. Thus, the framework provides a good insight into issues of firm existence and boundaries. Generally, the view considers the firm existence and boundaries. Generally, the view considers Southern company as a governance structure that is crafted to economize on transaction costs.

Behavioral theory of the firm; the theory is analyzing firms reject the assumption of rationality of “economic man”. The main aim of the theory is price prediction, output, and resource allocation decision making (D’Aveni, Dagnino, Smith, 2010). According to Simon a traditional microeconomics, organization’s goal is not maximizing profit but satisfying levels of profits. The view was based on a system of individuals with multiple goals who operate in a defined structure. On the other hand, managerial decision making is limited because they cannot build comprehensive models of the world, and also their information processing is so limited (Markman, & Phan, 2011). Therefore, maximizing profit is impossible since managers are incentives for discovery and innovation. Under this, the goal of strategy formulation is not on limiting competitive forces but rather on the entrepreneurial discovery. Schumpeter’s view discusses the roles of entrepreneurs and innovation in the success of the business. Economic development within the Southern company occurs when it implements new products, Production processes, and organizational techniques. According to Schumpeter, the entrepreneur disrupts the market and push it toward out of equilibrium. Innovations come into the market and innovator out-competes rivals and earn profits. The incentives which are short-lived are provided by the abnormal profits. As innovations are initiated, economic profits dissipate and vanish thereafter. The market returns to equilibrium until another innovation takes place. This dynamic process which shows the movement is creative destruction. The profits of the Southern company give it a time window to pursue innovations. These forces of dynamic competition destroy any firm that attempts to status quo.

Chicago tradition; the implicit theory of the firm in this tradition is that firms exist to enhance efficiency in the production and distribution of the Southern company products (D’Aveni, Dagnino, Smith, 2010). In the Chicago approach, when the firms act together as a monopolist in the construction industry, their combined profits are maximized. However, Stigler figures out that effective collusion requires costly to control and enforce, given that each party has an incentive on the agreement. According to Chicago, effective collusion is not likely to persist. It applies the main concepts of neoclassical price theory in profit-maximizing and competition.

Application of Strategic models

Structure- Conduct –Performance

The assumption in this view is that Southern company and other construction companies in Midland exist to hinder output through the monopoly power or collusive behavior with each other. These companies want to restrain output so that market price goes up and therefore successful firms will make a profit from between market which; is artificial and their costs. From the economic point of view, these above-normal returns reflect the nefarious company behavior occurring at the consumers’ expense (D’Aveni, Dagnino, Smith, 2010). The approach mostly focus has been empirical testing of structure conduct performance hypothesis articulated by Bain. The hypothesis, the structure of the company determines its conduct which in turn determines economic performance. Conduct is often left since it is determined by the industry.

The motivation for expansion is increasing monopolization or preventing another company from gaining control. Bain’s view was that the notion of perfect completion sets the standard for the normal industrial organization and provides the foundation for the premise that companies like Southern can earn super-normal returns primarily by practicing the power, of monopoly. The view of perfect competition encompasses the richer concept of firm heterogeneity; although it predicts that there are no persistent performance differentials when the market is in equilibrium. Based on different studies these heterogeneities come in the form of dominance in firm size.

Conclusion

In conclusion, there are many frameworks and models of strategic competition that have made a great impact on steering integrated different aspects of dynamic competition. The southern company relies mostly on the application of these models. Therefore, it is at the discretion of the management to determine which suits the company best. Apart from that, the model that should be selected by the responsible authority should be well-grounded on theory.

References

Chen M. J., “Competitive dynamics research: An insider’s odyssey,” Asia Pacific Journal of Management, vol. 26, no.1, pp. 5–25, 2009.

D’Aveni R. A., Dagnino G. B., Smith K. G. , “The age of temporary advantage,” Strategic Management Journal, vol. 31, no.13, pp. 1371– 1385, 2010.

Baum J. A. C., Korn H. J., “Competitive Dynamics Of Interfirm Rivalry,” Academy of Management Journal, vol. 39, no.2, pp. 255– 291, 1996

Markman, G. D., & Phan, P. D. (2011). Competitive dynamics of entrepreneurial market entry.

Ndofor H. A., Sirmon D. G., He X., “Firm resources, competitive actions, and performance: Investigating a mediated model with evidence from the in-vitro diagnostics industry,” Strategic Management Journal, vol. 32, pp. 640-657, 2011.

Competitive Dynamics

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