Is constructive competition possible?

Is constructive competition possible?

Article Type: Editorial From: International Journal of Commerce and Management, Volume 20, Issue 1

Zizek (2009) argued that people who have been deceived by twentieth-century communism and disillusioned with twenty-first century capitalism, in their search for justice, will have to start from scratch and invent their own ideologies. Explicitly, Zizek asserts that neither communism nor capitalism provides adequate solutions for mankind’s pressing desire for a better life, including social and economic justice. More importantly, Zizek appears to reach a conclusion that both systems have to be substituted with a new ideological framework that is able to satisfactorily address the shortcomings of these systems and is practical enough to accommodate people’s varying desires.

How sound is Zizek’s proposition? Though it is impossible to probe the future with accuracy, it is possible that the next generation may be in a better position to judge whether or not Zizek is utopian or prophetic in his thinking. Certainly, we know that both communism and capitalism are created and designed by human beings. As such, both of them are far from perfect and are inherently susceptible to demise or change. In fact, variations occur and experimentation takes on different forms.

A related and particularly interesting argument is made by Barrett (2009). He suggests that capitalism has meant different things to different thinkers and economic players. Barrett asserts, however, that the recent financial crisis demonstrates the foolishness of one theory of capitalism: “a utopian version of free-market theology that happens to have dominated American economic thinking for two generations.” Barrett warns that the prophets and actors of this form of capitalism are still very much with us and their simplistic mythology is appealing to some quarters.

This by no means implies that other forms of capitalism cannot reemerge and adapt to changing circumstances. While market mechanisms are the foundation of capitalism, it is the entrepreneurs and their desire to innovate that strengthens the market’s spirit of renewal. It is this spirit which makes the journey of mankind always pleasant, mysterious, and challenging. The first component, pleasant, underscores the willingness to espouse discovery and change. The state of mysteriousness manifests the often sudden emergence of spirited and creative actors (e.g. Henry Ford, Steven Jobs, etc.) who are motivated to change not only how markets function but also shape the landscape of competition and, by consequence, the wellbeing of people around the globe. The third element, challenging, represents the forces within entrepreneurs and senior managers which either facilitate or restrict the temptation to act blindly, deceivingly, and selfishly. The stronger the desire toward temptation, the weaker is the spirit for renewal and purposeful and responsible conduct.

In our discourse on “Creative capitalism,” in Ali (2007), we underscored the need for aligning economic progress with societal goals. It was argued that responsible market actors continuously search to upgrade market mechanisms to incorporate the ever-changing needs of the world’s population, be they rich or poor. At the time, we highlighted the vitality of any manmade system, including capitalism, in its capacity to change and meet the needs of the broader members of society; that is, corporations and individuals must look beyond their immediate interests. The question which must be confronted is, “Is going beyond immediate interests possible in market competition?”

In answering this question, it is essential to probe whether or not there are contradictions between market competition, which is the essence of capitalism, and serving societal interests. In our “Creative capitalism” editorial, the message was that for capitalism to evolve, it has to creatively meet and serve societal goals especially, as Gates (2007) argued, by listening to the voices of those who are left outside the market mechanism. The latter actors have neither the means nor the power to effectively influence market mechanism. This fact is characteristically linked to the concept of control in the marketplace. Those with considerable resources and influence are situated in powerful positions thereby increasing the probability for controlling market events and mechanisms to their advantage. The mere presence of this state limits free market function and may weaken other actors and create fertile conditions for mischief.

Indeed, in a free market economy, firms actively seek to be ahead of competitors. This implies a company has to have:

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  an independent point of view about future opportunities; and

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  strategies on how to take advantage of existing and emerging opportunities.

Both are the outcome of a deliberate process initiated by the entrepreneur and or senior managers. The initial thinking, the deliberation process, and the outcome are shaped by the interplay of various factors and considerations present in the market and the society. Though the degree of influence of each factor varies, in a free market economy profit consideration almost always takes priority and may constitute a determining factor in the quest for being a leading player in an open market. This very fact should not be overlooked in any discourse on competition.

However, there is more than money involved in being a leading competitor. Steve Ballmer, Chief Executive Officer of Microsoft, articulated this point when he stated, “there’s even more power than money in being the leader.” Though Ballmer is merely stating a reality that is known to other market actors, the desire for more forms of power underscores the nature of competition and its destructive aspects if it is left to evolve unbridled. The recent financial crisis evidences that unrestricted competition often produces undesired outcomes. The fact that corporations which dominate the market almost always substantially limit opportunities for others implies that, in one form or another, harm is inflected on society and that the market is not as free as we wish it to be.

For example, in Microsoft’s core business there is no real competition. Various versions of Windows run more than 95 percent of all PCs (O’Brien, 2009). More than likely, this domination causes corporations and consumers to experience limited opportunities in and or access to the market. Therefore, they might be far from optimally realizing their goals. Consequently, three propositions emerge:These developments, however, are not in line with Adam Smith’s original competition propositions. In his envisioning of the “invisible hand,” Smith assumed that when an owner or an entrepreneur pursues “his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.” The rising corporate frauds and scandals, inside trading, and the collapse of major corporations in recent decades demonstrates that the invisible hand is not as invisible as Smith thought and that entrepreneurs and senior managers may not espouse traditional market ethics of hard work and level playing fields.

Are there factors which render Smith’s propositions irrelevant in today’s business world? Aside from the fact that the market is more complex than during Smith’s era, there are powerful forces which leave their marks on contemporary market competition. These are:

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  Companies, due to their varying motives, directions, and interests, operate in ways which either further their benefits or minimize damages to their interests.

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  Market actors are not solely confined to suppliers and customers but include governments, super-national organizations, and non-governmental organizations.

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  In today’s business world, all players attempt to predict or at best have reasonable knowledge of what other actors might do in the market.

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  Market actors no longer act independently. In fact, there are growing instances where actors coordinate activities (e.g. major bankers and the federal government agreed on what had to be done to curtail the financial crisis; G-20, in cooperation, with other actors initiated certain actions and coordinated various policies, etc.).

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  Senior executives’ interests may not coincide with that of stakeholders or the society at large.

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  Senior executives, due to a prevailing business culture, view sociopolitical issues as a heavy burden.

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  Rising roles and influences of mega corporations and consequently changing the nature and priorities of commitment and allegiance.

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  The complex interplay among market actors and the evolving business realities in a globalized world, eventually, weakens market mechanisms.

More importantly, the nature of competition has undergone profound change. Not only were competitors few and operating in highly delineated areas, but also in recent decades market competition has experienced a fundamental shift:

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  from localized to globalized (changing the geographical space);

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  from restricted to unbridled (changing regulations or imposed limits);

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  from forgiven to cut-throat (changing business behavior); and

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  from the quest for level playing fields to market control (changing orientation and market ethics).

Along with these developments, the market has increasingly witnessed a rise in consumer activism and independence (sovereign customers). This signals a new era in the marketplace where customers are a force that dictates and influences how the market operates and gives meaning to corporations. Furthermore, increasing numbers of executives may not identify with Adam Smith’s assumption that entrepreneurs naturally promote the interests of the society. That is, these executives may have a vague idea of their stance toward sociopolitical issues. More importantly, these same executives overlook purposeful and responsible conduct and view deception as part of normalcy. Likewise, the fact that competitors may rise from unrelated industries or segments (e.g. Apple’s venturing into music, movies, and mobile telephones) adds an extra uncertainty in the market and creates a sense of vulnerability, even to the most entrenched corporations.

The type of competition which was envisioned by the early pioneers of the market economy no longer exists. Instead, the market is complex and the competition is anything but simple and forgiven. While this evolution may require a degree of sophistication for operating effectively in the marketplace, it also signals that capitalism, in its creative form, is subject to change, adaptation, and renewal. Other forms of capitalism may not survive if they do not incorporate elements of change and responsiveness to societal goals.

Indeed, it is possible to postulate that it is only in creative forms of capitalism that constructive competition is possible. This is because “Creative capitalism” is based on the following assumptions:

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  There is no dichotomy between competitiveness of the firm and its societal non-economic role, profit motive and human dignity, and between customers and employees.

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  Partnership between corporations and governments is essential for accessing opportunities, creating value to shareholders, minimizing frauds and corruptions, dealing with the severity of disease and poverty, and tackling global economic imbalances.

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  Corporations, in order to grow, have to maintain a balance in satisfying the needs in the marketplace. Recognizing and subsequently meeting existing and potential needs, be they consumption or societally driven.

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  Executives and corporations have a purpose beyond economic goals and a prudent and ethical discipline serves as a safe guard against selfish and immediate interests.

While acknowledging the existence of voices who doubt the possibility of constructive competition, under prevailing world circumstances it is possible to argue that creative capitalism effectively facilitates the presence of responsible market conduct, including competition. This is because creative capitalism offers a practical safeguard against unbridled competition and the urge to control, manipulate, and abuse the market environment. Indeed, the capacity of creative capitalism for renewal and adaptation generates optimal conditions for the ascendancy of constructive competition.

Abbreviations: P1.; Under current market conditions, competition does not resemble the ideal form.; P2.; For many companies, fierce competition has made the space for survival and growth highly contested.; P3.; Consumers, on many occasions, have no unrestricted access to other competitors for the products they desire at prices they are willing to pay.

Abbas J. Ali