Industry Competitive Environment And Mental Model

Most studies in strategic management research are conducted from an economic view of point which assumes an object environment and complete rationality of strategists. For example, the school of industry organization assumes that decision makers are complete rational and have complete information, and are able to make strategic decisions according to the structure of industry. Therefore, the core issue of strategy is to choose a profitable industry and a favorable position in an industry. However, the role of managers in strategy decision making and creating the competitive environment in many studies is neglected that limit the understanding of the nature of competition and the process of strategic management. This debate derived from previous studies neglected the effect of specific characteristics of industry and the validity of methods in eliciting managers'competitive cognition.Later, more and more researchers believe that decision makers are bound rational and have limited information processing capabilities. Managers act on their mental model, so any competitive responses must consider the mental model of strategic decision makers. As managers decide who will be their competitors and where they will compete, they must have a image about their competitors, and managers'strategic moves must base on their mental model.Some researchers try to study how managers understand the competitive environment form a cognitive respect, and large of concepts, theories and methods from psychological science are introduced in the field of strategic management research attempted to open the black box of mental model of managers. Some researchers conducted studies at industry and organizational level attempt to know how industry competitive structure form and evolve from the understanding of managers' mental models, they point out that managers in the same strategic groups have common knowledge structure. On the other hand, some studies have questioned this result and claim that the knowledge structure of managers is largely heterogeneous.This study goes along the main line in the research of competition and cognition. We consider the main factor of industry that potentially affect the mental model of managers, and use multiple case studies and repertory grid technique to study managers'mental model in software and light equipment industry from the levels of individual, group and industry. We found that managers' mental model of competition in industry are systematic different in content and structure, however, they have homogeneous core construct on how to compete in an industry. At the industry level, managers share a common cognition of key success factors in understanding how to run a business in the same industry, and managers who are in traditional industry have higher degree of cognition of key success factors. At the group level, the characteristics of managers'mental model in high and low performance groups are significantly different, with high degree of cognition in high performance group and low degree of cognition in the low one. The results of this study offer more insights in understanding how industry competitive environment affect the mental model of managers, and the difference in mental models of managers in high and low performance groups, and this study makes a significant contribution theoretically in understanding the mental model of strategists.