Understanding Supercompetition in Business: A Guide for Strategy and Policy

Supercompetition is a concept that was introduced by the French economist, Jean Tirole, in his book “The Theory of Corporate Finance”. It refers to a situation where a firm has a significant market share and is able to exert a strong influence over the market, but is not necessarily the largest or most profitable firm in the industry.
In a supercompetitive market, there are typically several large firms that compete with each other intensely, and the market is characterized by high levels of innovation, investment, and price competition. The firms in this market may have significant economies of scale and scope, which allows them to produce goods and services at lower costs and prices than smaller firms. However, the intense competition means that the profits for individual firms may be lower than they would be in a less competitive market.
Supercompetition can be seen in industries such as technology, where companies like Apple, Google, and Amazon have large market shares and are constantly innovating and competing with each other to stay ahead. It is also common in industries where there are high barriers to entry, such as telecommunications or energy, where a few large firms dominate the market.
The concept of supercompetition has important implications for business strategy and policy. For example, firms operating in a supercompetitive market may need to focus on innovation and differentiation in order to stand out from their competitors and maintain their market share. Additionally, regulators may need to take steps to ensure that the market remains competitive and that no single firm is able to dominate the market to the detriment of consumers.