Elevating Repositioning Costs: Strategy Dynamics and Competitive Interactions

Anoop R. Menon; Dennis  Yao

Article | Strategic Management Journal | October 2017

Elevating Repositioning Costs: Strategy Dynamics and Competitive Interactions

by Anoop R. Menon and Dennis Yao

Abstract

This paper proposes an approach for modeling competitive interactions that incorporates the costs to firms of changing strategy. The costs associated with strategy modifications, which we term “repositioning costs,” are particularly relevant to competitive interactions involving major changes to business strategies. Repositioning costs can critically affect competitive dynamics and, consequently, the implications of strategic interaction for strategic choice. While the literature broadly recognizes the importance of such costs, game-theoretic treatments of major strategic change, with very limited exceptions, have not addressed them meaningfully. We advocate greater recognition of repositioning costs and illustrate with two simple models how repositioning costs may facilitate differentiation and affect the value of a firm’s capability to reduce repositioning costs through investments in flexibility.

Keywords: ＂repositioning costs; strategy dynamics; strategic interaction; game theory; capabilities; Cost; Strategy; Change; Game Theory; Organizational Change and Adaptation;

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Citation:

Menon, Anoop R., and Dennis Yao. "Elevating Repositioning Costs: Strategy Dynamics and Competitive Interactions." Strategic Management Journal 38, no. 10 (October 2017): 1953–1963.

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Elevating Repositioning Costs: Strategy Dynamics and Competitive Interactions

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