Қазақстан Республикасының

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УДК 331.101.262:339.13
I.V. OnYusheVA.
University of International Business,
Vice Rector for Educational Affairs,
PhD, Associate Professor of Economics
and Management Department
the  FACtORs  FORMInG  InteRnAtIOnAL  
hYPeRCOMPetItIVe  enVIROnMent  
In  the  InFORMAtIOn  eCOnOMY
In the given article the factors forming international hypercompetitive environment in the information economy
are considered. The definition of the term ‘hypercompetition’ as the ability to capture the maximum competitive
advantage among its competitors as a result of strategic management and dynamic maneuvering is given. As the
main factors the author identifies the economic processes of globalization and modern innovation and technological
changes.  Globalization  refers  to  the  process  of  economic  interdependence,  reflecting  the  totality  of  the  national
economies, linked to each other by the system of international division of labor, economic and political relations
in the world market and intertwining their economies on the basis of transnationalization and regionalization. On
this basis, there is a formation of a single global economy and its infrastructure. The author gives some interesting
examples of international multinational companies in Europe and Asia , their competitive advantages in competitive
markets. Among them, the BRIC countries – a group of five fast developing countries – Brazil, Russia, India, China,
South Africa and Indonesia, Malaysia, Germany, etc. Along with globalization processes there is an urgent need
for technological development and, as a result, the ubiquitous diffusion of technologies and innovations among the
world’s population. Information economy experienced high rates of technological changes and their diffusion, as
well as the necessity of ownership of the appropriate information, intelligence and expertise – as knowledge is an
important intangible resource and a key aspect of the modern economic system.
Key words: hypercompetition, competitive landscape, information economy, globalization, technological chan-
ges, knowledge intensity, strategic flexibility.
In  the  modern  economic  times  conditioned  the  information  age  the  fundamental  nature  of
competition in many of the world’s industries is chang ing. Reasons for this include the realities that
financial capital is scarce and markets are increasingly volatile. Because of this, the pace of change in
the nature of competition is relentless and is increasing.
Moreover, conventional sources of competitive advantage such as economies of scale and huge ad-
vertising budgets are not as effective as they once were. Moreover, the traditional managerial mindset
is unlikely to lead a firm to strategic competitiveness. Managers must adopt a new mindset that values
flexibility, speed, innovation, integration and the challenges that evolve from constantly changing
conditions. The conditions of the competitive landscape result in a perilous business world, one where
the invest ments that are required to compete on a global scale are enormous and the conse quences of
failure are severe. Increasingly, governments take a more active stance and have begun to interfere
with markets where they perceive them to fail, as has happened in industries such as banking, IT and
oil. This influence of governments is particularly important when firms are active in many countries.
Facing the need to negotiate with politicians in different countries complicates the challenge of build-
ing competitive advantage. Effective use of the strategic management process re duces the likelihood
of failure for firms as they encounter the conditions of today’s competitive landscape.
Hypercompetition  is  a  term  often  used  to  capture  the  realities  of  the  competitive  landscape.
It  is  the  ability  to  take  the  maximum  competitive  advantage  among  its  competitors  as  a  result  of
strategic management and dynamic maneuvering. Under conditions of hypercompetition, assumptions
of market stability are replaced by notions of inherent instability and change. Hypercompetition re-
sults from the dynamics of strategic maneuvering among global and innovative combatants. It is a
condition of rapidly escalating competition based on price- quality positioning, competition to create
new know-how and establish first-mover advantage, and competition to protect or invade established
product or geographic markets. In a hypercompetitive market, firms often aggressively challenge their
competitors in the hopes of improving their competitive position and ultimately their performance [1].
Several factors create international hypercompetitive environments and influence the nature of the
current competitive landscape in the information economy. The emergence of a global economy and

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technological innovations, specifically rapid technological change in our information age are the two
primary drivers of international hypercompetitive environments and the nature of today’s competitive
landscape.
A global economy is one in which goods, services, people, skills and ideas move freely across
geographic borders. Relatively unfettered by artificial constraints, such as tariffs, the global economy
significantly expands and complicates a firm’s competitive environment [2].
Interesting opportunities and challenges are associated with the emergence of the global economy.
For example, Europe, instead of the United States, is today the world’s largest single market, with
700 million potential customers. The European Union and the other Western European countries also
have a gross domestic prod uct that is more than 35% higher than the GDP of the United States [3].
Tomorrow may look different. Especially, large emerging markets such as Brazil, China, India, Russia,
Turkey, Indonesia, Malaysia, South Africa and others have growing populations and economies that
outperform industrialized economies on growth. The gross domestic product (GDP) of Brazil, Russia,
India and China (BRIC) is expected to be greater than that of the G6 countries by 2040. Since the
first estimates about how these countries will exert decisive influence on the global economy in the
future have been disseminated, emerging markets have come to redefine the strategic context. “In the
past, China was generally seen as a low-competition market and a low-cost land. Today, China is an
extremely compet itive market in which local market-seeking MNCs (multinational corporations) must
fiercely compete against other MNCs and against those local companies that are more cost effective and
faster in product development. While it is true that China has been viewed as a country from which to
source low-cost goods, lately many MNCs are actually net exporters of local management talent. They
have been dispatching more Chinese abroad than bringing foreign expatriates to China” [3, p. 45–49].
India, the world’s largest democracy, has an economy that also is grow ing rapidly and now ranks as
the fourth largest in the world. Consider the oppor tunities not only within such countries but related to
them. Hong Kong, Taiwan and Singapore have benefited through their cultural proximity to mainland
China. Now the Gulf region, an emerging area of economic activity in its own right, has built the hubs
that India lacks and the regions’ airlines successfully exploit them. These hubs effectively link the East
and West. Not exactly a copy of the ancient Silk Road that connected the rich East with the emerging
West, but the analogy is intriguing. Many large multinational companies are also starting as significant
global competitors from these emerging economies. Consider how the Mexican cement manufacturer,
Cemex, has flawlessly executed an internationalization strat egy that was heavily leveraged, fueled by
low interest rates, and turned itself into a top three global player before 2008. One more example can
be rapid rise of Tata Group, a diversified Indian conglomerate.
The statistics detailing the nature of the global economy reflect the realities of a hypercompetitive
business environment, and challenge individual firms to think seriously about the markets in which
they will compete. Consider how Volkswagen AG spotted opportunities in the Chinese market as early
as 1984. Today 18 per cent of the sales of the whole Volkswagen group, which includes Volkswagen,
Audi, Skoda, Bentley and Lamborghini, come from the Chinese market. Having set up a wholly-
owned subsidiary, the group is still capitalizing on the soaring growth of the Chinese market and is
planning to invest a further €4 billion in in creasing its production capacity there [4]. This is just one
example of how companies are making strategic decisions today, such as investing significantly in
BRIC coun tries, Africa or other emerging markets, in order to improve their competitive posi tion in
what they believe are becoming vital sources of revenue and profitability.
Globalization is the increasing economic interdependence among countries and their organizations
as reflected in the flow of goods and services, financial capital and knowledge across country borders.
Globalization is a product of a large num ber of firms competing against one another in an increasing
number of global economies [5].
In globalized markets and industries, financial capital might be obtained in one national market
and used to buy raw materials in another one. Manufacturing equipment bought from a third national
market can then be used to produce pro ducts that are sold in yet a fourth market. Thus, globalization
increases the range of opportunities for companies competing in the current competitive landscape.
For  instance,  the  German-based  discount  supermarket  chain  Aldi  is  growing  in ternationally
through replicating its low-cost business model throughout the world. By offering deeply discounted
prices on about 1400 popular food items (a typical grocery store has 30000), Aldi buys cheap land

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mostly on city outskirts, builds cheap warehouses, employs a tiny staff and carries mostly private-
label items, dis playing them on pallets rather than shelves. Starting its international expansion in 1968
with Austria, the company has been growing on an evolutionary basis. For example, after Austria,
most of Aldi’s original international investments were in neighbouring Belgium, the Netherlands and
Denmark  because  it  was  easier  for  the  firm  to  apply  its  global  practices  in  the  countries  that  are
geographically close to its home base. Because of the success it had in the proximate international
markets, Aldi is now pursuing further retailing opportunities in countries such as USA, Australia and
Ireland. A new store opens every week in Britain alone and there are around 1000 Aldi stores in 30 US
states. Firms experiencing and engaging in globalization to the degree Aldi is, must make culturally
sensitive  decisions  when  using  the  strategic  management  process. Additionally,  highly  globalized
firms must anticipate ever-increasing complexity in their operations as goods, services and people
move freely across geographic borders and throughout different economic markets [6].
Overall, it is also important for firms to understand that globalization has led to higher levels of
performance standards in many competitive dimensions, including those of quality, cost, productivity,
product  introduction  time  and  operational efficiency.  In  addition  to  firms  competing  in  the  global
economy, these standards affect firms competing on a domestic-only basis. The reason is that customers
will pur chase from a global competitor rather than a domestic firm when the global company’s good
or service is superior. Because workers now flow rather freely among global economies, and because
employees are a key source of competitive advan tage, firms must understand that increasingly, “the
best people will come from ... anywhere” [7]. Thus, firms must understand that in the competitive
landscape of the twenty-first century, only companies capable of meeting, if not exceeding global
standards, typically have the capability to earn above-average returns.
Although globalization does offer potential benefits to firms, it is not without risks. However,
managers in a given firm or country who decide not to benefit from all that globalization offers, may
take the highest risk as the competitors that they are already know, and new competitors, will seize
the opportunity and put the firm at a disadvantage. Research shows that firms in industries with open
mar kets see the opportunities and the threats and are more likely to have both a higher degree and a
greater scope of international diversification. Collectively, the risks of participating outside a firm’s
domestic country in the global economy are labeled a ‘liability of foreignness’ [7, p. 38].
One risk of entering the global market is the amount of time typically required for firms to learn
how to compete in markets that are new to them. A firm’s performance can suffer until this knowledge
is  either  developed  locally  or  transferred  from  the  home  market  to  the  newly  established  global
location. Additionally, a firm’s performance may suffer with substantial amounts of globalization. In
this instance, firms may overdiversify internationally beyond their ability to manage these extended
operations. The  result  of  over  diversification  can  have  strong  negative  effects  on  a  firm’s  overall
performance.
Thus, entry into international markets, even for firms with substantial experience in the global
economy, requires effective use of the strategic management process. It is also important to note that
even though global markets are an attractive strategic option for some companies, they are not the only
source of strategic competitive ness. In fact, for most companies, even for those capable of competing
successfully  in  global  markets,  it  is  critical  to  remain  committed  to  and  strategically  competitive
in  both  domestic  and  international  markets  by  staying  attuned  to  technological  op portunities  and
potential competitive disruptions that result from innovations.
Technology-related trends and conditions can be placed into two categories: tech nology diffusion
and disruptive technologies, the information age and increasing knowledge intensity. Through these
categories, technology is significantly altering the nature of competition and contributing to unstable
competitive environments as a result of doing so.
The rate of technology diffusion, which is the speed at which new technologies be come available
and are used, has increased substantially over the last 15 to 20 years.
With the term of technology diffusion is closely connected another term -perpetual innovation –
that is used to describe how rapidly and consistently new information-intensive technologies replace
older ones. The shorter product life cycles resulting from these rapid diffusions of new technologies
place a competitive premium on being able to quickly introduce new, innovative goods arid services
into the marketplace [8].

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In fact, when products become somewhat indistinguishable because of the wide spread and rapid
diffusion of technologies, speed to market with innovative pro ducts may be the primary source of
competitive  advantage.  Indeed,  some  argue  that  increasingly  the  global  economy  is  driven  by  or
revolves around constant innovations. Not surprisingly, such innovations must be derived from an
understanding of global standards and global expectations in terms of product functionality.
Another indicator of rapid technology diffusion is that it now may take only 12 to 18 months for firms
to gather information about their competitors’ research and development and product decisions [9]. In
the global economy, competitors can sometimes imitate or circumvent a firm’s successful competitive
actions within a few days. In this sense, the rate of technological diffusion has reduced the competitive
benefits of patents. Today, patents may be an effective way of protecting proprie tary technology in a
small number of industries such as pharmaceuticals. Indeed, many firms competing in the electronics
industry often do not apply for patents to prevent competitors from gaining access to the technological
knowledge included in the patent application.
Both the pace of change in information technology and its diffusion will continue to increase. The
declining costs of information technologies and the increased acces sibility to them are also evident
in the current competitive landscape. The global proliferation of relatively inexpensive computing
power, and its linkage on a global scale via computer networks, combine to increase the speed and
diffusion of infor mation technologies. Thus, the competitive potential of information technologies is
now available to companies of all sizes that are located in countries throughout the world including
those in emerging as well as developed economies.
The Internet is another technological invention contributing to hypercompetition. Available to an
increasing number of people throughout the world, the Inter net provides an infrastructure that allows
the delivery of information to computers in any location. Access to the Internet on smaller devices
such as mobile phones is having an ever-growing impact on competition in a number of industries.
Overall, however, possible changes to Internet Service Providers’ pricing structures could affect the
rate of growth of Internet-based applications. In mid-2009, ISPs such as Vodafone, Time Warner Cable
and Verizon were “trying to convince their customers that they should pay for their service based on
how much data they download in a month” [9, p. 115–122]. Users downloading or streamlining high-
definition movies, playing video games online and so forth would be affected the most if ISPs were
to base their pricing structure around total usage. In comparison, today in the Republic of Kazakhstan
the most widespread system is the unlimited tariff using of the Internet provided by Beeline, Megaline
and others where the customers pay for speed only but not how much data they download in a month.
Nowadays knowledge (information, intelligence, and expertise) became the basis of technology
and its application. In the competitive landscape of the twenty-first century, knowledge is a critical
organizational resource and an increasingly valuable source of competi tive advantage of the information
economy.
Knowledge is gained through experience, observation and inference and is an in tangible resource.
The probability of achieving strategic competitiveness is enhanced for the firm that realizes its survival
depends on the ability to capture intelligence, transform it into usable knowledge, and diffuse it rapidly
throughout the company. Therefore, firms must develop (e.g., through training programs I and acquire
(e.g., by hiring educated and expe rienced employees) knowledge, integrate it into the organization to
create capabili ties, and then apply it to gain a competitive advantage. In addition, firms must build
routines that facilitate the diffusion of local knowledge throughout the orga nization for use where it
has value. Firms are better able to do these things when they have strategic flexibility.
By the term of strategic flexibility it is understood a set of capabilities used to respond to various
demands and opportunities existing in a dynamic and uncertain competitive environment [9, p. 128].
Thus, strategic flexibility involves coping with uncertainty and its accompanying risks. Firms should
try to develop strategic flexibility in all areas of their operations. However, those working within firms
to develop strategic flexibility should understand that the task is not an easy one, largely because
of inertia that can build up over time. A firm’s focus and past core competencies may actually slow
change and limit stra tegic flexibility.
To be strategically flexible on a continuing basis and to gain the competitive benefits, a firm has
to develop the capacity to learn. In the words of John Browne, former CEO of British Petroleum:

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“In order to generate extraordinary value for shareholders, a company has to learn better than its
competitors and apply that knowledge throughout its businesses faster and more widely than they
do” [10]. Continuous learning provides the firm with new and up-to-date sets of skills, which allow it
to adapt to its environment as it encounters changes. Firms capable of rapidly and broadly applying
what they have learned, exhibit the strategic flexibility and the capacity to change in ways that will
increase the probability of successfully dealing with uncertain, hypercompetitive environments.
To  sum  up,  in  the  given  article  is  devoted  to  the  formation  of  international  hypercompetitive
environment in the modern knowledge economy. It has been defined factors creating international
hypercompetitive environments and influencing the nature of the current competitive landscape. It has
been concluded that a global economy and technological innovations, specifically rapid technological
change in our information age are the two main drivers of international hypercompetitive environments
and the nature of today’s competitive landscape. To be hypercompetitive a firm should be extremely
flexible in developing of its strategy according to the changing information age.
LIST OF LITERATURE
1  Volberda H.W. Building the flexible firm: How to remain competitive // Oxford: Oxford University
Press, 2010. – P. 56–59.
2  Hagel J., III, Brown J.S. and Davison L. Shaping strategy in a world of constant disruption // Harvard
Busi ness Review. – 2008. – № 4. – P. 81–89.
3  Chang S.J., Park S. Types of firms generating network exter nalities and MNCs’ colocation decisions //
Strategic Management Journal. – 2010. – № 1. – P. 595–615.
4  Wilson D., Purushothaman R. Dreaming with BRICs: The path to 2050. – Long Range Planning, 2010.
P. 221–239.
5  Bruton G.D., Dess G.G., Janney J.J. Knowledge management in technology-focused firms in emerging
economies: Caveats on capabilities, networks and real options // Asia Pacific Journal of Management. – 2011. –
№ 24 (2). – P. 115–130.
6  Prospero M.A. The march of war. – Fast Company, 2005. – P. 14 20.
7  Elango B. Minimizing effects of liability of foreignness: Response strategies of foreign firms in the
United States // Journal of World Business. – 2012. – № 4. – P. 51–62.
8  Hill W.L.  Establishing  a  standard:  Competitive  strategy  and  technological  standards  // Academy  of
Management Executive. – 2011. – № 2. – P. 7–25.
9  Volberda H.W. Strategic flexibility: Creating dynamic competitive advantages. The Oxford Handbook
of Strategy. – Oxford University Press. – 998 p.
10  Izosimov A.V. Managing hypergrowth // Harvard Business Review. – 2011. – № 4. – P. 121–127.

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