A STUDY ON HYPERCOMPETITION THE CASE OF VMS FROM 2005 TO 2007

VIETNAM NATIONAL UNIVERSITY, HANOI
SCHOOL OF BUSINESS
Dang Thi Thuyet
A STUDY ON HYPERCOMPETITION
THE CASE OF VMS FROM 2005 TO 2007
Major: Business Administration
Code: 60 34 05
MASTER OF BUSINESS ADMINISTRATION THESIS
SUPERVISOR: DR. NGUYEN THI PHI NGA
Hanoi - 2007
TABLE OF CONTENT
Pages
Sub cover page
Table of content
List of abbreviations.
List of Figures
INTRODUCTION 1
CHAPTER 1: THEORY FOUNDATION
1.1. Introduction 5
1.1.1. The definition of Hypercompetition 5
1.1.2. Competitive advantages in Hypercompetition 6
1.1.3. Levels of competition within an industry 7
1.2. Four Arenas in Hypercompetition 9
1.2.1. Cost & Quality 9
1.2.2. Timing & Know-how 11
1.2.3. Strongholds 13
1.2.4. Deep pocket 16
1.3. New 7S’s Model 18
CHAPTER 2: MOBILE SECTOR AND VMS ANALYSIS
2.1. Competition analysis on Mobile market from 2005-2007 21
2.1.1. Vietnam’s Mobile market 21

2.1.1.1. Overview 21
2.1.1.2. Mobile structure 22
2.1.1.3. Regulations 23
2.1.1.4. Operators 24
2.1.1.5. Technologies 25
2.1.1.6. Market situation 27
2.1.1.7. Forecasted growth 29
2.1.2. Mobile market competition 31
2 .1.2.1. Cost & Quality Arena 35
2.1.2.2. Timing & Know-how Arena 37
2.1.2.3. Strongholds Arena 38
2.1.2.4. Deep-pocket Arena 38
2.1.3. Conclusion on Mobile Market 38
2.2. Analysis of the VMS’s Competitive ability in 2005-2007 39
2.2.1. VMS’s Overview 40
2.2.2. VMS’s competitive ability 40
2.2.2.1. Organization 40
22.2.2. Business culture 41
2.2.2.3. Infrastructure 42
2.2.2.4. Human resource 43
2.2.2.5. Financial 43
2.22.6. Products 44
22.2.1. Marketing and Sales 45
2.2.2.8. Forecasted Growth 47
2.2.3. Conclusions on VMS 48
CHAPTER 3: RECOMMENDATIONS
3.1. For Vietnamese authority 50
3.2. For VMS 51
3.2.1. New 7S’s Model 51
3.2.2. Action plan 55

CONCLUSION 58
REFERENCE 59
APPENDIX
ii
LIST OF ABBREVIATIONS
TECH: technology
MBA: Master of Business Management
ID: Identify
WTO: World Trade Organization
BTA: Bilateral Trade Agreement
BCC: Bilateral Corporation Contract
FDI: Foreign Direct Investment
ROA: Research Group on Asia
HCM: Hochiminh City
VMS: Vietnam Telecom Mobile Service Company
SPT: Saigon Post Tel
VIETTEL Mobile: V1ETTEL Mobile Corporation
HANOI TELECOM: Hanoi Telecom Corporation
VP TELECOM: Vietnam Power Telecom Coiporation
GPC: Telecommunication Service Company
MPT: Ministry' of Posts and Telecommunication
VNPT: Vietnam Post and Telecom Corporation
SMP: Signified Market Power
GSM: Global System for Mobile Communication
CDMA: Code Division Multiple Access
BTS: Base Transceiver Station
WAP: Wireless Application Protocol
3G: 3 generation
NGN: Next Generation Network
SMS: Short Message Service

R&D: research and deploy
TV: Television
PR: Public relation
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LIST OF FIGURES
Figure 1.1: A series of short-lived actions add up to a sustained Page: 06
advantage.
Figure 1.2: Different level of competition within an industry. Page: 07
Figure 1.3: Different strategies in cost-quality arenas. Page: 09
Figure 1.4: The cycle of timing/know-how competition. Page: 11
Figure 1.5: The cycle of turf battles an entry barrier competition Page: 14
Figure 1.6: The cycle of competition in the deep pockets arena Page: 16
Figure 1.7: Disruption and the New 7S’s Model Page: 18
Figure 2.1: Vietnam’s Telecommunication structure Page: 22
Figure 2.2: The suppliers of Vietnam Mobile Market Page: 24
Figure 2.3: The subscriber growth of Vietnam Mobile Market Page: 27
Figure 2.4: The revenue growth of Vietnam Mobile Market Page: 28
Figure 2.5: The Mobile Penetration Growth Page: 29
Figure 2.6: The Mobile market share in the first quarter of 2007 Page: 29
Figure 2.7: The subscriber growth of Vietnam Mobile Market Page: 31
Figure 2.8: The Vietnam Mobile Market Share 2005-2007 Page: 33
(subscribers)
Figure 2.9: The Vietnam Mobile Market Share 2005-2007 Page: 34
(revenue)
Figure 2.10: History of Vietnam Mobile sector in each of the Page: 36
four arenas
Figure 2.11: History of Vietnam Mobile sector in Pirce-Quality Page: 37
arenas
Figure 2.12: Organization structure of VMS Page: 41
Figure 2.13: The network coverage of MobiFone Page: 43

Figure 2.14: Revenue-Cost-Profit of VMS Page: 44
Figure 2.15: MobiFone’s Market share growth Page: 46
*
Figure 2.16: The choice of current customers when renewing Page: 47
Figure 2.17: The choice of new customers Page: 47
Figure 2.18: VMS' Development Forecast Page: 48
Figure 2.19: The Forecast of technology development in VMS Page: 48
Figure 2.20: The comparison of VMS’ competitiveness Page: 50
Figure 3.1: The suggestion New 7S's Model for VMS Page: 54
Figure 3.2: The suggestion action plan for VMS Page: 58
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INTRODUCTION
1. Problems:
The Vietnam mobile market’s competition is increasing and now VMS
is loosing its market share and its brand name preference in customer
perception. We can see that VMS’s competitive ability is decreasing.
Therefore, How VMS can keep its leading position and compete with its
rivalries?
2. Objectives & Aim
Objectives
- Study on the Hypercompetition (4 arenas and New 7S’s Model)
- Competition analysis on Mobile market from 2005-2007
- Analyze the VMS’ competitiveness.
- Application New 7S’s Model to VMS case.
Aim
- Give out the applicable and effective competitive strategy and action
plan to improve the VMS competitive capacity.
3. Research questions
In order to achieve the objectives of the thesis, the author of thesis will
try to answer the following questions:

- What is the VMS’ competitive capability in 2005-2007?
- How is the competition in Mobile sector in 2005-2007?
- How is the new 7S’s Model of VMS?
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Method/Approaches
- Empirical research/Case study method
- Approaches: statistics
Scope o f work
- VMS 2005-2007
- The competition in Mobile sector
Data resources and processing
Data Resources
- Secondary Source: Report and Data of VMS and its competitors
- Tertiary Source: Richard D ’Aveni and Robert Gunther,
Hypercompetition. 1994. Free Press, Grahan J. Hooley, John A.
Sauders, Nigle F. Pierry, Marketing strategy & Competitive
positioning. 1998. Prentice Hall Europe
Data Processing
Data Processed by excel, chart to summary, compare and analyze
Significance
- Theory: Introduce the significant theory to VN
- Reality: Bring more competitive advantages to VMS
Limitations
- This research only focuses VMS and the data is 2005-2007. It is may
be changed in future.
9. Expected results
- Knowledge in Hypercompetition and Vietnam’ Mobile Market
competition
- What is VMS’ strength and weakness comparing with its rivalries.
10. Dissemination

- This research can be studied further for service sectors
11. Follow-up potential
How VMS’s competitive capability is improved if applied these
recommendations? The checking and adjusting will be done if needed
12. Thesis structure
This thesis is divided into three parts included theory foundation,
Mobile sector and VMS analysis and recommendations.
Chapter 1: Theory foundation
The Hypercompetition theory of D’Aveni (1994) is reviewed in this
chapter by some main parts such as: definition, advantages, four arenas and
New 7S’s Model. The thesis will discuss on this theory. The New 7S’s Model
will be applied to suggest suitable solution for VMS to enhance its
competitiveness.
Chapter 2: Mobile sector and VMS analysis
The statistic data and analysis by hypercompetitive view will give the
deep and detail picture of Mobile sector as well as its competition battles in
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the past. Moreover, we can see how VMS is strong or weak in the
competition.
Chapter 3: Recommendations
Based on the analysis and found reasons in theory application, some
suggestions are delivered to Vietnam Government to build an motivative
business environment and the New 7S’s Model will be given out to improve
VMS’ competitiveness.
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CHAPTER 1: THEORY FOUNDATION
1.1. Introduction
1.1.1. The definition of Hypercompetition
The economic environment is changing to the new knowledge
economy. It leads to Scope of competition changing from Local to Global

with hypercompetition and make the new Competition Rule - “the fast eats
the slow” instead the old “The big eats the small”. The Hypercompetition is
bom in this context in USA, 1994 by Richard D’Aveni. The author is the
professor of strategic management and now he is coordinator of the strategy
and technology group at the Tuck school.
The Primary issue of Hypercompetition is “creative destruction”.
“Creative destruction” refers to the fact that innovation creates new
opportunities of profit while destroying competitor’s advatage.
The definition of Hypercompetition is [D'Aveni, 1994, p. 217-218]
Hypercompetition is an environment characterized by intense and
rapid competitive moves, in which competitors must move quickly to
build advantages and erode the advantages o f their rivals. This
speeds up the dynamic strategic interactions among competitors.
Hypercompetitive behavior is the process o f continuously
generating new competitive advantages and destroying,
obsolescing, or neutralizing the opponent's competitive advantage,
thereby creating disequilibrium, destroying perfect competition, and
disrupting the status quo o f the marketplace. This is done by firms
moving up their escalation ladders faster than competitors,
restarting the cycles, or jumping to new arenas.
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It shows that D’Aveni is basing his theory of Hypercompetition on a
Schumpeterian idea of competition.
1.1.2. Competitive advantages in Hypercompetition
FIGURE 1.1
A SERIES OF SH ORT-LIVED ACTIO NS A D D UP TO
A SUS TAIN ED A DVAN TAG E
[D'Aveni, Hypercompetition, 1994, p. 12]
D’Aveni(1994) is aware that today’s companies are fast at copying
each other’s advantages. Therefore, the advantage is only temporary, but if

you are constantly innovative you will have temporary advantages all the
time, which is then a sustainable competitive advantage. In this context, the
company is not seeking for a sustainable advantage.
The primary goal of this strategy is to disruption the current situation in
order to seize the initiative through creating a series of temporary advantages.
In cased of the shortened competitive cycles, it is necessary to rapidly develop
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new advantages. It has become more important for the company to focus on
generating their next advantages even before their current advantages eroded.
By this way, the company can keep one step ahead of its rivalries,
moving from one temporary advantage to the next.
1.1.3. Levels o f competition within an industry.
Low Intensity Moderate High Intensity Extreme
Competition — ►Competition

►Competition — ►Competition
• N o
competition
• M onopoly
• Legal
monopoly through
patent
• E xcessive
are
for
years
profits
sustainable
• Competition Avoidance
• Firm position around each

other but not directly against each
other
• Segmentation o f markets
occurs so there is only one player
in each segment
• Barrier to entry are used
to limit entry o f markets by
competitors.
• If som e small degree o f
segm ent/niche overlap occurs,
firms tacitly cooperate to restrict
this overlap or restrain competitive
behavior.
• Long-term sustainable
advantage and profits are possible,
but only as long as all the
com petitors cooperate or respect
the entry barrier
• Hypercom petition
• Firms aggressively
position against one another
by attempting to disadvantage
opponents
• Firms create new
com petitive advantages which
make obsolete or match
opponents’ advantages in one
or more o f the four arenas.
• Firms attempt to stay
ahead o f their com petitors in

one or more of the four arenas.
• Firms create new
competitive advantages that
make the opponents’
advantages irrelevant by
m oving to compete in another
arena.
• Temporary
advantages and short periods
o f profits are achievable until
com petitors catch up with or
outmaneuver the aggressor’s
last com petitive move.
• Perfect
competition
• All four o f the
com petitive advantages
have been eliminated so
the players are equal in
all four arenas.
• Firm com pete
in price until no one
make abnormal profits.
• Normally,
perfect competition is
not preferred over
lower levels o f
competition because
lowers levels o f
competition lead to

more opportunity for
profits
The tr e n d s
_______
^ ^ ^
M onopoly O ligopoly Schumpeterian Competition Perfect Competition
(One Player) (Sm all number o f players) (Several players) (Many players)
Excessive Profits Sustainable Profits Intermittent/Low Profits N o Abnormal Profits
FIGURE 1.2
DIFFERENT LEVELS OF COM PETITION WITHIN A N INDUSTRY
[D'Aveni, Hypercompetition, 1994, p. 28]
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D’Aveni defined the competition into four level with the number of
players increasing relatively. Firstly, the low intensity competition or
Monopoly brings the excessive profit to one player in this field.
Secondly, the moderate competition or oligopoly is more competitive
level of some players. But incase each player take over one different segment,
it is still monopoly in segment. In this level, the company can get the
sustainable profits.
Thirdly, the hypercompetition with several players is more popular in
this decade in Vietnam. All firms can make intermittent profits by taking
short-lived actions and moving from the first to the fourth arenas with
different levels.
Fourthly, the extreme competition or perfect competition is the highest
level of competition between many players. No one wants to move this stage
because of no abnormal profit.
Base on this figure, the company can know where is your industry
stand how is its next move. The competitive strategies will be defined
relevantly with each level’s characteristics.
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1.2. Four Arenas in Hypercompetition
1.2.1. Cost & Quality
L*: Low-cost producer position
D*: Differentiator position
E4*: All firms at industry’s creation
FIGURE 1.3
DIFFERENT STRATERGIES IN CO ST-QUALITY ARENAS
[D'Aveni, Hypercompetition, 1994, p. 50,55,58]
This is the overall picture of all competitive strategies in the cost-
quality arena. The first point of arena is E4 - the industry’s creation. Then
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based on the company’s strategy, they move to the D* or L*. In this case,
each company comes to each segment.
But in sub arena, the consumer’s behavior may be changed such as, the
high-end customers still want to get the less price with the same or even
higher quality and the low-end need to use the higher quality product without
paying more money. So its rivalries could jump into D’ or L ’.
Based on the gaps between each segments from L* to D*, the current
or new competitors can enter them by niching opportunities or flaking
position. This is the full line producer strategy of current rivalries or niche-
market entrance strategy of new comers. This forces the existing competitors
to respond by offering better values to the customers with lower price, higher
quality or both.
However, the aggressive firms find that it can be difficult to simply
move up or down into the markets of the full-line producer unless they can
offer better in terms of price or quality to customers than the full-line
producers. This leads to the next dynamic strategic interactions: the move
toward Ultimate Value.
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1.2.2. Timing and know-how

FIGURE 1.4
THE CYCLE OF TIMING/KNOW-HOW COMPETITION
[D'Aveni, Hypercompetition, 1994, p. 108]
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The first mover starts the cycle by create its advantages based on
technological recourse. The company bases on this to move in to new market.
The followers escalate the conflict by imitating the new product. The pioneer
goes further by throwing up obstacles to keep the followers from imitating
subsequent products. Once again the followers escalate by overcoming the
obstacles and replicating the resource base of first mover. At this point, some
first movers use the leap-frog strategy to keep the first position by creating the
new cycle with the higher risks and greater cost. Sometimes, they apply the
transformation strategy in stead of leaf-frog one.
By this strategy, they can compete with later comers by replicating
their recourse base of process know-how and low-cost manufacturing
methods. The transformation strategy leads to a price war and the leap-frog
strategy makes risks and costs that are greater than the rewards. Moreover, the
pioneer can also use the vertical integration to gain temporary advantages
over competitors.
This way is can be imitated and creates a complex and no adaptable
organization. It makes the firm vulnerable to more flexible, less integrated
competitors. Two or more resource based can be used at the same time. Also
some companies skip steps along this ladder or end up frozen at one rung
temporarily. In general, this is the full picture of typical process. But
competitors will climb up this ladder in many different ways. In this arena, we
see that how pioneer and followers maneuver against each other to move
ahead on the escalation ladder with new product introductions and new
generations of products. We have also seen how these maneuvers speed up
over time and get bolder.
Hypercompetitive firms attempt to avoid or break out of perfect

competition (no one has an advantage) by speeding up the ladder faster than
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the other players or restarting the cycle by building new knowledge bases that
allow new products and business methods to be used.
1.2.3. Strongholds
The root of this arena’s analysis is Michael Porter’s Five Force Model.
In the Porter’ Model, he mentioned about “threat of new entrant”- prevented
by entry barrier. This model is used popularly in consulting firms, strategic
department and MBA as analytic tool to identify how the firm can reduce the
aggressiveness of rivalry, the power of buyers and suppliers, and the threat of
entrants and substitutes.
However, as competitors have become more aware of the strategic
importance of entry barriers and as market becomes more dynamic,
companies have become more creative and aggressive in circumventing entry
barriers. According to Porters, there are seven entry barriers: economies of
scale, product differentiation, capital investments, switching costs, access to
distribution channels, cost disadvantages other than scale and government
policy.
Base on this view, D’aveni said “to overcome the above entry barriers,
entrants often rely on synergies with their other businesses and acquisitions to
break into strongholds”.
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FIGURE 1.5
THE CYCLE OF TURF BA TTLES AND ENTRY BARRIER COMPETITION
[D'Aveni, Hypercompetition, 1994, p. 145]
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The figure 1.5 shows the erosion of safe havens following the
escalation ladder. Both the incumbent and the entrant initially build barriers
around their strongholds.
The entrant launches an attach into the incumbent’s market with tactics

designed to delay the incumbent’s response. At the first time, the new comers
always get the accommodating from the incumbent. But sometimes, the reply
is a fierce attack. Ultimately, all incumbents respond to serious attacks by
using their current advantages in the entry barrier that they have been created.
The new comers should overcome these barriers and take the market share or
start a price war in the incumbent’s market. Then the incumbent attacks the
entrant’s home market. Finally, both strongholds are eroded or merge in to
one market.
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1.2.4. Deep pockets
FIGURE 1.6
THE CYCLE OF COMPETITION IN THE DEEP POCKETS ARENA
[D'Aveni, Hypercompetition, 1994, p. 174]
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It is the evident truth that deep pockets are a vita strategic weapon. But
they do not last forever. As the above chart, clever competitors can
circumvent a deep-pocket advantage. Even firm with the deepest pockets has
limits to how much it can throw its weight around without self-destructing
because of customer or supplier reactions.
The firm with substantial resource has great opportunities and the
support on competitors. But if “the rich-resource firm” does not have a clear
path to success, “the street-smart small firm” can end up the deep pockets’
strategy and push the competitive conflict up the escalation ladder as the
figure 1.6. Thus, a deep-pocket advantage is not sustainable forever.
The cycle begins when a firm with deep pockets launches an offensive
against its smaller competitors in order to kick them out of the industry. The
small firms counter by asking antitrust laws or other forms of government
intervention. If not, they are forced to try to outmaneuver the large firm by
animosity takeover by any resource bases, cooperative strategies or avoidance
through niching other approaches.

This model of deep pocket advantage is static. It assumes that battles
can be won or lost by accounting up the level of resource of each player at a
given moment in time. But sometimes a small competitor can neutralize the
advantage of the deep-pocket company. By dynamic maneuvering, relatively
small company can defeat a large one and in the process become a large firm
with its own deep pockets. In addition, alliances can be built to add to the
resources of small players.
To end this level of hypercompetition, some firms may again try to gain
an “even-deeper-pocket advantage”. Through, alliances and merges, one firm
or another will try to get the upper hand, restarting the deep-pocket cycle all
over again.
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ĐẠI HỌC QUỐC G ia h ả Mọ
TRUNG TÂM THÔNG TIN THƯ VIỆN
A - LQ i .ÀQ
1.3. New 7S’s Model
momentum by
developing abilities
for:
• Speed
• Surprise
that can be applied
across
many actions to build
a series of temporary
a d v anta g es
Vision for Disruption
Identifying and
creating
opportunities for

temporary
advantage via
understanding
•Stakeholder
Tactics for Disruption
Seizing the initiative
to
gain advantage by
• Shifting the rules
• Signaling
• Strategic thrusts
with actions that
shape,
mould or influence
the direction or nature
FIGURE 1.7
DISRUPTION A ND THE NEW 7 S ’s MODEL
I
[D'Aveni, Hypercompetition, 1994, p. 258]
D’Aveni (1994) is explaining seven points that enables a firm to deal
with a Hypercompetitive environment.
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