From 1980's an intriguing narrative of rivalry, imitation, and fierce competition emerged between two industry titans: Coca-Cola and Pepsi, marking a distinct chapter in their ongoing battle for dominance. Where one innovated, the other copied it with a bad product and sank both.
It all began with the emergence of clear soda, led by PepsiCo's introduction of Crystal Pepsi in the early 1990s as an alternative to their traditional dark colas. In the mid-1990s, Coca-Cola's CMO, Sergio Zyman, took a daring step by launching Tab Clear, not to create a successful product, but to disrupt the market and undermine Crystal Pepsi. This strategy used the less successful Tab brand, marketed it as a "sugar-free" diet drink to create confusion about Crystal Pepsi's sugar content, and portrayed Tab Clear as a medicinal elixir. The goal was clear: eliminate Crystal Pepsi, and it succeeded as both products vanished within six months despite Pepsi's substantial branding investments.
This episode showcases the lengths companies go to in their quest for dominance and how mimicking behaviours can impact competition.
But what if I told you there's a deeper layer to this mimicry phenomenon, one that goes beyond the corporate world? let us look at the discovery of mirror neurons, initially found in macaque monkeys and subsequently explored in humans. They offer insights into how behavioural mimicry operates in individuals. These neurons activate not only when we perform actions but also when we witness others doing the same. In an organisational context, this may imply that individuals tend to imitate behaviours by closely observing competitors and replicating their strategies, innovations, and market responses. This mirrors the function of mirror neurons, as executives within these companies react to actions within their industry, such as successful product launches, the adoption of specific marketing approaches, or responses to evolving consumer preferences.
Today, we see numerous instances of companies imitating each other's strategies and products. They closely observe competitors' successes and innovations, often leading to rapid replication of popular features or products. For example, smartphone manufacturers like Apple and Samsung engage in a continuous cycle of imitation as they strive to outdo one another with new features and aesthetics. This trend isn't limited to just the tech sector; it extends across various industries such as fashion, fast food, and e-commerce where businesses mimic their rivals' strategies in order to capture market share.
so why do companies resort to imitating their competitors?
Economics of Imitation:
Imitation, as a business strategy, is grounded in observational learning, where firms copy the successful strategies of other firms to maximise their own gains and minimise the risks and costs associated with innovation(Lieberman & Asaba, 2006).
In the competitive market, firms often imitate their rivals to maintain their position and neutralise aggressive strategies. This is especially common when firms have similar resources and positions, leading to intense competition. By emulating successful tactics, they can reduce risk and ease competitive pressure. In certain domains where innovation involves uncertainty, imitation can be a strategy for organisational innovation. Firms learn from early adopters' experiences to minimise failures or setbacks associated with drastic changes(Lieberman & Asaba, 2006). Notably, competitive pressures can drive firms to imitate their rivals in order to maintain parity. Social network dynamics also contribute to imitation within an industry, as companies occupying equal positions often imitate each other's strategies and expansion efforts(Aghion et.al., 2001;Bara et al., 2022).
These imitation strategies allow firms to safeguard their market position and avoid the difficulties and uncertainties that come with unique, untested strategies.
This phenomenon is also referred to as institutional isomorphism, where firms conform to prevailing norms and practices through imitation. The concept was introduced by DiMaggio and Powell, who identified three causes: coercive, normative, and mimetic. Coercive isomorphism occurs when businesses are forced to be similar due to regulations or political influence. Normative isomorphism happens when organisations feel pressured to conform to industry norms and values. Lastly, mimetic isomorphism occurs when organisations imitate successful ones during times of uncertainty in order to mitigate risk and ensure conformity.
Hence, in the business landscape, there exists a notable demand for imitation, driven by various purposes and tailored to distinct requirements.
But what is the cost of such imitation?
Research has shown that imitating new products can have a discouraging effect on innovation efforts. Conversely, Bekir et al. (2009) have delved into various mechanisms and rationales supporting the potential benefits of product counterfeiting and imitation for legitimate firms. Unfortunately, limited empirical contributions have left practical recommendations in this regard uncertain. In a 2021 meta-analysis, it was revealed that adopting an imitation strategy can be particularly effective in driving firm growth within low-tech industries and non-OECD countries, yielding short-term gains.
When you look at the success stories of companies like Hotmail, Burger King, and Pepsi, it's clear that imitation can be a successful strategy. However, it often presents a double-edged sword, carrying certain costs and risks, especially concerning intellectual property (IP) implications and the perpetuation of detrimental behaviours.
The practice of mimicry can potentially lead to conflicts related to copyright, trademarks, and patents. When companies closely replicate distinctive elements of their competitors, it may infringe upon their IP rights, giving rise to legal disputes. Surprisingly, some sectors, like fashion and culinary arts, take a more relaxed stance on imitation. Here, copying is often seen as a compliment and a source of creativity. However, in an age of digital content creators and easily shareable digital content, the importance of stronger intellectual property protection is gaining significance.
Prof. Pfeffer’s insights further shed light on the imitative nature of the business world, highlighting how layoffs in the tech industry can be seen as a form of social contagion. Instead of being based on solid evidence, these layoffs are driven by imitation and following what other companies are doing, leading to substantial costs.
While the boundary between inspiration and imitation can be complex between sectors, the enforcement of IP rights is crucial for preserving innovation and preventing undue appropriation.
This prompts us to question: How do companies effectively balance the benefits of imitation while fostering a culture of innovation? What are the far-reaching consequences of widespread imitation on industry competition and evolution? Exploring the complexities of imitation, including its pros, cons, and broader implications, a promising avenue emerges for comprehending how companies strategically navigate both innovation and imitation to achieve sustainable growth.
Contribution By Farheen & Shivani
Edited By Aurko