![]() Indeed, this is the prevailing view in most competition textbooks, that unique advantages are necessary for enduring value creation. The professor highlights Texas Instruments as one example, which struggled in personal computing despite its prior leadership in semiconductors, integrated circuits and related instrumentation. He adds that “unless a business has a unique advantage…, it has no reason to exist”. Henderson goes on to say that “your most dangerous competitors are those that are most like you”. Rather, strategic and investment analysis requires an appreciation for “the complex web” of competition. That’s not to say there’s no competition between them. As Professor Bruce Henderson sees it in The Origin of Strategy, “they may look alike, but they are different species”. Even K-Mart, Sears and Walmart differ in their segments and localities. And there are many ways to meet those wants. They generate plenty of niches for businesses to fill. In this way, they’re not complete competitors, much in the same way luxury brands congregate amongst themselves in shopping districts. What’s more, their conglomeration adds to the culture and attraction of Chinatown. ![]() You might prefer restaurant B for its ambience and larger sitting capacity. I might prefer restaurant A because their staff is friendlier, and they make my favorite dish. It’s also true that each restaurant, no matter how similar, occupies its own ecological niche. The resulting competition and coexistence appears remarkably stable. And most of them lack the capital to expand beyond their initial remit. But the relative advantages of each restaurant remains small. When restaurants close shop, whether due to hardship, retirement, or a change of scenery, they’re swiftly replaced by promising newcomers. Yet, many enterprises and small businesses that remain in head-to-head competition appear to coexist as well.Ī good example of this, I think, are the wall-to-wall dumpling houses in every city’s Chinatown. This was especially true in the days before modern communications, transportation, and logistics. Of course, similar companies can coexist in the sense that they’re separated by geography. Can we really expect to find complete competitors in biology or economics? What does it mean exactly to be a “complete competitor” or something close to one? While two species might share similarities, they’re likely to differ in genetic markers and/or environmental circumstance. As Hardin puts it, “we still do not comprehend the exact limits of the principle”. I should emphasise that competitive exclusion is only a principle, and a deliberately ambiguous one at that. Sometimes, with enough time and structural conditions, we see monopolies rise from the hotbed of competition. Scorched-earth competition tends to generate a mix of failure and extinction, mergers and coalition, renewal and differentiation. Rarely, do we expect near-identical companies to coexist in the same economic territory for an indefinite period of time. Extinction, differentiation and complete competitorsĬompetitive exclusion may provide some clues into the dynamics of industry. “It should be remembered that the competition will generally be most severe between those forms which are most nearly related to each other in habits, constitution, and structure.” Charles Darwin. ![]() The principle brings crowding-out to attention as different species compete for scarce resources.Īs Charles Darwin put it in the Origin of Species: Put another way, “ecological differentiation is the necessary condition for coexistence”. That is, if two species come to “occupy precisely the same ecological niche… the same geographic territory”, the species with the slightest advantage in environmental fitness will “completely displace” the other over geologic time (assuming all else remains unchanged). To borrow Garrett Hardin’s definition, it states, in brief, that “complete competitors cannot coexist”. Gause’s principle of competitive exclusion is a powerful and alluring insight, not only for biologists and ecologists, but for economists too. Gause’s principle of competitive exclusion Gause’s principle of competitive exclusion.We trace the principle behind competitive exclusion, its implications for industry dynamics and strategy, and a misconception about imitation and mimicry in business.
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