Shoot the moving target: A dynamic perspective on optimal distinctiveness and strategic repositioning

Abstract

How efficacious is the strategy of pursuing optimal distinctiveness (OD)? Scholars have long strived to identify the optimal positions for firms in the market and advocate them to realign themselves accordingly. While plausible, however, prior literature overlooks the process of repositioning towards OD and the dynamic nature of market landscape. Specifically, if all firms reposition simultaneously, current optimal positions could become inferior, such that firms that deliberately move towards OD (OD firms) may get backfired. Emphasizing the dynamics, we utilize a parsimonious agent-based simulation to explore the efficacy of repositioning towards OD. The results indicate that across different scenarios, a significant proportion of OD firms end up experiencing repositioning failure and fail to improve their performance. More importantly, we underscore that the efficacy of repositioning towards OD depends largely on market conditions. It is particularly undermined in markets with more competitors seeking distinctiveness and/or fewer competitors aiming for conformity (e.g., markets with greater leniency). Experimenting with different approaches firms can take to pursue OD, we also find that exploratory repositioning performs better than exploitative repositioning. Finally, our extensional analyses offer further insights by integrating repositioning costs, sequential repositioning, alternative optimal locations, and random explorers.