Integrating Strategic Behavior into Competition Analysis

Particularly in markets that are oligopolistic, strategic behavior may shape, or reshape, the competitive environment. It may cause structural change, or it may alter conduct without directly altering the structure of the market. Despite recognition of the significance of strategic behavior for competition analysis, the framework used to analyze competition issues is still essentially that of the structure-conduct-performance model (SCP). The traditional SCP paradigm today appears to have less relevance for analyzing market conduct than it did two or three decades ago. The sophistication of firms' competitive strategies, and their working environments, are now significantly more complex than before. Compared with the SCP approach, the Porter framework focuses attention on the many relationships between all the participants in a market. It demands much more careful and thorough analysis than is required under the linear and narrow SCP approach. It emphasizes the need for a changed mindset that incorporates feedback and dynamic effects.