Ecological model of competition
Encyclopedia
The ecological model of competition is a reassessment of the nature of competition
in the economy
. Traditional economics
models the economy on the principles of physics
(force, equilibrium, inertia, momentum, and linear relationships). This can be seen in the economics lexicon: terms like labour force, market equilibrium, capital flows, and price elasticity. This is probably due to historical coincidence. Classical Newtonian physics was the state of the art in science when Adam Smith
was formulating the first principles of economics in the 18th century.
According to the ecological model, it is more appropriate to model the economy on biology
(growth, change, death, evolution, survival of the fittest
, complex inter-relationships, non-linear relationships). Businesses operate in a complex environment
with interlinked sets of determinants. Companies co-evolve
: they influence, and are influenced by, competitors, customer
s, governments, investors, suppliers, unions, distributors, banks, and others. We should look at this business environment as a business ecosystem that both sustains, and threatens the firm. A company that is not well matched to its environment might not survive. Companies that are able to develop a successful business model
and turn a core competency
into a sustainable competitive advantage
will thrive and grow. Very successful firms may come to dominate their industry (referred to as category killers).
Competition
Competition is a contest between individuals, groups, animals, etc. for territory, a niche, or a location of resources. It arises whenever two and only two strive for a goal which cannot be shared. Competition occurs naturally between living organisms which co-exist in the same environment. For...
in the economy
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
. Traditional economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
models the economy on the principles of physics
Physics
Physics is a natural science that involves the study of matter and its motion through spacetime, along with related concepts such as energy and force. More broadly, it is the general analysis of nature, conducted in order to understand how the universe behaves.Physics is one of the oldest academic...
(force, equilibrium, inertia, momentum, and linear relationships). This can be seen in the economics lexicon: terms like labour force, market equilibrium, capital flows, and price elasticity. This is probably due to historical coincidence. Classical Newtonian physics was the state of the art in science when Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
was formulating the first principles of economics in the 18th century.
According to the ecological model, it is more appropriate to model the economy on biology
Biology
Biology is a natural science concerned with the study of life and living organisms, including their structure, function, growth, origin, evolution, distribution, and taxonomy. Biology is a vast subject containing many subdivisions, topics, and disciplines...
(growth, change, death, evolution, survival of the fittest
Survival of the fittest
"Survival of the fittest" is a phrase originating in evolutionary theory, as an alternative description of Natural selection. The phrase is today commonly used in contexts that are incompatible with the original meaning as intended by its first two proponents: British polymath philosopher Herbert...
, complex inter-relationships, non-linear relationships). Businesses operate in a complex environment
Environmental scanning
Environmental scanning is one component of the global environmental analysis. Environmental monitoring, environmental forecasting and environmental assessment complete the global environmental analysis. Environmental scanning refers to the macro environment.The global environment refers to the...
with interlinked sets of determinants. Companies co-evolve
Co-evolution
In biology, coevolution is "the change of a biological object triggered by the change of a related object." Coevolution can occur at many biological levels: it can be as microscopic as correlated mutations between amino acids in a protein, or as macroscopic as covarying traits between different...
: they influence, and are influenced by, competitors, customer
Customer
A customer is usually used to refer to a current or potential buyer or user of the products of an individual or organization, called the supplier, seller, or vendor. This is typically through purchasing or renting goods or services...
s, governments, investors, suppliers, unions, distributors, banks, and others. We should look at this business environment as a business ecosystem that both sustains, and threatens the firm. A company that is not well matched to its environment might not survive. Companies that are able to develop a successful business model
Business model
A business model describes the rationale of how an organization creates, delivers, and captures value...
and turn a core competency
Core competency
A core competency is a concept in management theory originally advocated by CK Prahalad, and Gary Hamel, two business book writers. In their view a core competency is a specific factor that a business sees as being central to the way it, or its employees, works...
into a sustainable competitive advantage
Sustainable competitive advantage
Competitive advantage is defined as the strategic advantage one business entity has over its rival entities within its competitive industry. Achieving competitive advantage strengthens and positions a business better within the business environment....
will thrive and grow. Very successful firms may come to dominate their industry (referred to as category killers).
See also
- Competitor analysisCompetitor analysisCompetitor analysis in marketing and strategic management is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context to identify opportunities and threats...
- EconomicsEconomicsEconomics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
- MarketingMarketingMarketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
- OligopolyOligopolyAn oligopoly is a market form in which a market or industry is dominated by a small number of sellers . The word is derived, by analogy with "monopoly", from the Greek ὀλίγοι "few" + πόλειν "to sell". Because there are few sellers, each oligopolist is likely to be aware of the actions of the others...
- Strategic managementStrategic managementStrategic management is a field that deals with the major intended and emergent initiatives taken by general managers on behalf of owners, involving utilization of resources, to enhance the performance of firms in their external environments...
- Sustainable competitive advantageSustainable competitive advantageCompetitive advantage is defined as the strategic advantage one business entity has over its rival entities within its competitive industry. Achieving competitive advantage strengthens and positions a business better within the business environment....