Managerial Representations of Competitive Advantage

Managers use mental models of markets to simplify and impose order on complex and ambiguous competitive environments and isolate points of competitive advantage or deficiency. In this study of senior managers of 190 businesses, the authors found four different types of mental models or representations of competitive advantage, varying in the emphasis placed on customer or management judgments about where and how competitors differ. These representations were influenced equally by pressure points in the environment and choice of strategy. The type of representation was also strongly associated with constrained patterns of information search and usage, raising the possibility that the necessary simplifications and narrowing of perspective may come at the cost of myopia and insensitivity to challenges from unexpected directions. There was also a strong association between the completeness of the managerial representation and relative financial performance, which supports related studies on the profitability of a market orientation.