A Time-series Descriptive Model of Competitive Advantage Trajectory

A TIME-SERIES DESCRIPTIVE MODEL OFCOMPETITIVE ADVANTAGE TRAJECTORY- BUILDING INTERMITTENT COMPETITIVE ADVANTAGE
IN HYPERMOVING MARKET TATSUYUKI NEGOROMAMIKO WAKABAYASHI
Research Institute of Information Technology and Management
Waseda University
1-6-1, Nishi-Waseda
Shinjuku-ku, Tokyo 169-8050 Japan
ABSTRACT
When the external context (market environment) changes at hyper speed, theadvantage of resources as the conditions for gaining competitive advantage has to bechanged reactively. The purpose of this paper is to present a time-series descriptivemodel of competitive advantage trajectory in such industry, where it is difficult for a setof identical resources to sustain such an advantage. In the paper, further developmentof resource based view is proposed from the point of views of ‘Isolation of resources’ and‘Value of resources.’ A case study adopting the time-series descriptive model, describing
the trajectory of competitive advantage is done in online securities market. The study
reveals that the trajectory of Matsui Securities, having sustainably superior
performance, shows a similar pattern of building short term competitive advantages
intermittently which is regarded in the paper to be the ideal image in hypermoving
market.
Keywords: Resource-based View, Time-series Descriptive Model, Intermittent
Competitive Advantage, Hypermoving Market

1. INTRODUCTION
Previous strategic theories have been based on relatively stable competitiveenvironments, arguing that the main strategic aim for businesses is to find a way inwhich to construct a sustainable competitive advantage on a long-term basis. From the
1990s onwards, however, businesses are experiencing hitherto unknown speediness inthe competitive environment in which the conditions for the competition are constantly
changing, engendering the imminent birth of a new environment where shares andprofitability fluctuate dramatically. This is especially prevalent in the digital products
and the on-line business markets, or “markets where the life-cycle of products andservices rotate at hyper-speeds”, in which a severe competition commences from thecreation phase of the market and quickly reaches maturation phase, finally resultingwith the competing businesses contending over functions and prices of similar products.
Due to such environmental shifts, various strategic theorists are beginning to discuss“strategies in a rapidly changing environment”（D’Aveni (1994), Eisenhardt et al. (2001),
Kawai (2004) et al.）. This paper aims to develop a theory of resource-based view that is
fit for competition in such rapidly changing environments. Specifically, it proposes a“descriptive model for a competitive advantage trajectory” which focuses on the change
in competitive advantage of resource based on time-series, and also identifies the1

A Time-series Descriptive Model of Competitive Advantage Trajectory

difference between the sustainable competitive advantage pattern that the conventional
resource-based view approach implicitly aims to attain and the competitive advantage
pattern that is considered to be effective under rapidly changing competitive
circumstances (Intermittent Competitive Advantage). The concept of competitive
advantage in this argument shall be defined as “possessing more competitive value (in amarket) and higher profitability in relation to other businesses by the construction of asystem that is isolated from them”. It also assumes that the source of the advantage of abusiness system (the result aggregate of resources and activities) lies in its
management resources1.

2. PREVIOUS LITERATURE
The conventional resource-based view approach argument represented by the VRIO
analysis（Barney,1997）presents the conditions for the resources that bring aboutsustained competitive advantage in a rather stable market conditions, which are
difficult to imitate. However, the VRIO analysis cannot accommodate the“Schumpeter-type changes” such as rapid development of new technologies or
unexpected shifts in demand. This is because Barney’s resource-based view approachassumes the Ricardian rent theory (profit generated from resource differential whererelative advantage does not shift with time)（Fig.１, left）.
D’Aveni（1994）has pointed to the limitation of such existing theory from the perspectiveof the changing speed of competitive environments. “The sustainable period ofcompetitive advantage is shrinking in many markets. In such environments, businesses
have to perpetually develop sources for competitive advantage in order to sustain
economic benefit (rent)”. D’Aveni theorizes that the process of progress and decline ofcompetitive advantage is occurring faster than ever experienced, and that this speed isaccelerating each year – a phenomenon he calls “Hyper-competition”. The right handside of Fig. 1 depicts D’Aveni’s image of hyper-competition.
Economic profitability

Economic Profitability

Hyper Competition

Advantage1 Advantage2 Advantage3 Advantage4

Growth ofadvantage

Sustainment ofadvantage

Deterioration ofadvantage

time

time

Revised by Besanko(2000) based on the reference from DʼAveni, R.A., Hyper competition:
Managing the Dynamics of Strategic Maneuvering, New York: Free Press, 1994, p.8-12

Fig.1 Competitive Advantage and Hyper-competition
1

This report relies on the validity of resource-based view approach which may be questioned as abasic precondition for such a research. However, since a certain level of validity of the resource-based
approach is not completely negated, we present this paper on the assumption that there is a level ofvalue in the argument that we make here, which attempts to develop upon such foundation.

2

A Time-series Descriptive Model of Competitive Advantage Trajectory

D’Aveni argues that hyper-competition bears completely different characteristics toformer competitive environments. Thus, he states it is necessary to shift the focus from“how to sustain competitive advantage on a long-term basis”, the aim of conventional
strategic theories, to “how to build a stream of new competitive advantages
consecutively. D’Aveni also argues that from the perspective of the hyper-competitiveenvironment, the conventional strategic theory lacks a dynamic perspective (aperspective that focuses on a time-series shift). Further, an effective strategy in a
hyper-competitive environment which changes rapidly and in which there is constantdisruption in competitive advantages, should be dynamic in nature. Thus, it is therepetitive chain of countermoves among competing businesses over a long-term that will
provide the foundation for understanding the shifts of competitive advantages.
One characteristic of D’Aveni’s theory is the conceptualization of the“hyper-competitive” environment, which contends that, a stable competitive advantage
cannot be maintained in such an environment, hence businesses must repeatedly
abolish their advantages and build new ones - an argument worthy of credit for casting
doubt toward the strategic theory that aims for a sustainable competitive advantage.
D’Aveni’s statement that “in such hyper-competitive environments, businesses must
repeatedly abolish their advantages and build new ones” provides an important
perspective on the descriptive model proposed in this paper. However, D’Aveni
illustrates his points for instance by using the example of a beverage manufacturer
where the acceleration of timing in rolling out new products or changing the design of abottle (superficial competition) are observed. As such, he merely explains the shift inproduct popularity in the market and its short-lived hierarchy, and the argument lacks
insight regarding the inherent source of competitive advantages.
The statement that “competitive advantages collapse after a short period” implies thatthe life-cycle of a resource is short-lived, assuming that the source of competitive
advantage is “resources2”. With this perspective of “resources” in mind, the trajectory ofcompetitive advantage can be described as the short-term and consecutive shift of thecompetitive advantage of the resources. This argument serves as the fundamental basisof this paper.

3. A TIME-SERIES DESCRIPTIVE MODEL OF COMPETITIVE ADVANTAGE
TRAJECTORY
The descriptive model proposed here assumes that the source for competitive advantage
can be broken down into “isolation of resources” and “value of resources” (Negoro, 2006)（refer to Fig. 2.） The advantage of the isolation of resources is established by theinimitability of the resources, while the “value of resources” is determined by “customer
satisfaction and the level of contribution to the positive evaluation of the business by
2

Resources include tangible ones (real estate, plants, land, et al.), intangible ones (patent, brand, etal.), and organizational capability. A management resource discussed in this paper signifies a resourcethat a business can either solely or preferentially utilize, which includes not only its own resources(human, technology, plants, system, brand), but the resources of suppliers or distributors whom it has
preferential relationships with, and an accumulated customer base which has a certain level of loyalty
to it.

3

A Time-series Descriptive Model of Competitive Advantage Trajectory

customers” achieved by the differentiation of products/services which derive from such
resources.
ProfitCompetitive
Advantage

Growth ofadvantage

Sustainment ofadvantage

Deterioration ofadvantagetime
Resource advantage

Isolation advantage

Isolationof Resources
資源の隔離

Value
of Resources Substitution of products
資源の価値
Deterioration of market needs

Imitation byCompeting companies

Change in regulations

Resource Utilization

Resource utilization
×

Development of resource
Formation ofisolation

Sustainment ofisolation

Placing on the market
Deterioration ofisolation

Creation of
value

time

Sustainment ofvalue

Deterioration of
value
time

Fig.2 Breakdown of Competitive Advantage

Here, we study the two phases in the isolation of resources; a situation whereby thebusiness is the sole owner of the resource (isolation of unique resource), and a situationin which this condition fails to apply. The latter is further broken down into twosituations, first in which, apart from a few businesses within the industry, theremaining businesses do not own the resource (mobility barrier i.e. isolation of
resources in strategic group), and second whereby almost all businesses in the industry
own the resource.
Businesses have various management resources. A competitive advantage isestablished when multiple management resources (a set of resources) are brought
together. In this argument, I provide analysis of the “isolation” of main resource factors,
while simultaneously evaluating the “value” of the total set of resources.
One characteristic of the argument here is taking in the conventional perspective of“inimitability” in the resource-based view approach to the theoretical structure of“isolation of resources”, while simultaneously including the shift in competitive
advantage in a market as a change in “value of resources”. The idea of “value” used inthis model is expanded from that conceptualized by Negoro (2006), here meaning thevalue in competition (competitive value). Thus, if all businesses in the industry own aparticular resource, it is perceived as having no “value (competitive value)” within thismodel, regardless of whether the resource is indispensable for fulfilling the customer
needs. Further, the concept of competitive value in a market is not limited to a narrow
sense of the term, but should also include situations where it contributes to indirect
profit such as when the resource is internally leveraged for cost reduction.
Based on the above definitions of competitive advantage, an analysis (descriptivemodel) using a matrix illustrated in Fig. 3 is proposed. The model sets a fixed time4

A Time-series Descriptive Model of Competitive Advantage Trajectory

period, and describes the shift in competitive advantage during that period.
The basic structure of this model consists of the “isolation of resources” in the horizontal
axis, and the “value of resources” in the vertical axis, so that the time-series competitive
advantage trajectory can be observed within the four cells that represent the situationsof competitive advantage (the four types of competitive cells). The horizontal axis
indicates whether the business in question has isolated its resources, or whether
competitors have already succeeded in imitating their resources. The horizontal axis
evaluates whether an isolated, unique resource (that is inimitable) exists. The verticalaxis indicates whether the resource owned is related to value in terms of competition.
As mentioned earlier, when the graph corroborates that the resource has “nocompetitive value”, it does not signify that it has no value to the customer, but that,even when the customers acknowledge value, such a value is rendered null if almost allcompeting businesses are in possession of it. Thus, for example, the bottom right section(third cell) represents a situation where there is competitive value, but the unique
resource has not been isolated; in other words, a group of businesses in the industry
share a particular resource (strategic group resource).

Original resources are isolated

Second Cell
Fortification

Time progresses
outwardly
Time /Path

Third Cell
Competition withinstrategic group

Fourth Cell
Price and attached quality

Resources have competitive value

Resources do not have competitive valueFirst Cell
Exploration of a newCompetitive axis

Original resources are not isolated

Fig.3 Descriptive Model of Competitive Advantage Trajectory
The analysis of this model is shown by the route in which the time-series shifts ofcompetitive advantage for the given business is traced through the four types ofcompetitive cells. In this graph, the transition of time is illustrated by the “circle oftime” that grows from the center outwards in the descriptive model. The speed ofchange is indicated by the frequency with which the competitive position (situation ofcompetitive advantage) moves between cells each time it is plotted along the circle oftime.（By changing the unit of time for the circle according to each market, it is possible
to analyze various markets with differing competition speeds）.
The four types of competitive cells each represent the following situations.
First Cell： Exploration of new competition axis（Development of new resources）
A business attempts to advance the competition axis based on a new resource (unique5

A Time-series Descriptive Model of Competitive Advantage Trajectory

resource) that does not currently exist within the market.
Second Cell：Fortification (Possession of overwhelming advantage）
A situation where a new competitive axis is accepted by the market, and no otherbusinesses possess this resource.
Third Cell：Competition within the strategic group（Group advantage）
In this cell, a business does not own an isolated, unique resource (a resource only
possessed by themselves), but a number of businesses own a group resource (mobility
barrier) that contributes to the competitive value of the strategic group that they belong
to.
Fourth Cell：Competition of price and attached quality (Competition of attrition bysmall variations）
A situation where businesses with similar types of sets of resources compete over “small
variations”.

4. TARGET IMAGE OF “INTERMITTENT COMPETITIVE ADVANTAGE”
With the descriptive model represented in Fig. 3, the target image of the conventional
resource-based view approach can be seen in Fig. 4.

Original resources are isolated

Second Cell
Fortification

Third Cell
Competition withinstrategic group

Fourth Cell
Price and attached quality

Resources have competitive value

Resources do not have competitive valueFirst Cell
Exploration of a newCompetitive axis

Original resources are not isolated

Fig. 4 Target image of conventional resource-based strategic theory

In contrast, the characteristic shifts of competitive advantage in a rapidly changing
market, which this argument attempts to present as its conclusion, can be expressed asin Fig. 5. The aim of the conventional resource-based view approach is to establish a“sustainable competitive advantage” via isolated, unique resources that are inimitable.
Here, the focus is on “how long one can remain in the fortification stage (Cell 2)”. Of
course, one can argue that no resource could completely exonerate itself fromobsolescence at lengthy time-series intervals, and thus Fig. 4 cannot be justified.
However, the target of this study is not the kind of long life-cycles commonly seen inindustrial markets. Instead, it persuades that there are situations where the pattern of6

A Time-series Descriptive Model of Competitive Advantage Trajectorycompetitive positioning of a given business in a short term (5 to 10 years) which can
only be illustrated with the image in Fig. 5, not Fig. 4. Compared to conventional target
images, this image can be identified as “intermittent3 competitive advantage”.
Original resources are isolated

Second Cell
Fortification（

１

Fourth Cell’

Price and attached quality

Third Cell
Competition withinstrategic group

Resources have competitive value

Resources do not have competitive valueFirst Cell
Exploration of a newCompetitive axis

Original resources are not isolated

Fig. 5 Target image of competitive advantage in a rapidly changing market

5. CASE STUDY ANALYSIS
5.1 Online securities market
From here onwards, the descriptive model proposed above is applied to an actual case.
For this analysis, the time-series competitive advantage trajectory of Matsui Securities
in the online securities market is chosen. As mentioned previously, the descriptivemodel presented here attempts to identify the shifts in competitive advantage in a
rapidly changing market. For this case study, the online securities market is selected forthe following reasons.
1.

Due to the technical advances and spread of the Internet from the end of the 1990s
onwards, the competitive structure of the securities industry itself has changed
dramatically.

2.

The entry barrier to the market has lowered due to technical advancement,
resulting in fierce competition from the formation stages of the market to thepresent.
Comprehensive information of the businesses in this industry necessary to trace
the route of the changes of competitive advantages for the sample case study areavailable through publicized sources.

3.

3Intermittent” according to a dictionary is defined as “stopping and starting often over a period oftime, but not regularly”(Oxford)

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A Time-series Descriptive Model of Competitive Advantage Trajectory

As previously mentioned, this paper differentiates the concept of “value” into two types.
- “Contribution to customer satisfaction and positive evaluation of the business bycustomers.” However, resources that are owned by all businesses within anindustry are considered to have no “value” within this model.
- Values with which the same activity can be conducted at a lower cost than otherbusinesses.
The former is reflected on market share, while the latter is reflected in profit ratio. Thus,
this case analysis will utilize “profit amount”, which is both influenced by share andprofit ratio during shifts in competitive advantage, as a substitute indicator.
5.2 Characteristics of the market
Online securities transactions can be broadly classified into spot trading and margin
trading. When the cash based equity trading (spot trading) is conducted, the income of
securities companies is the commission fee which has traditionally been the stage offierce competitions. In contrast, in the case of margin trading, interest is further added
to the commission fee (2.1% for Matsui Securities at the end of 2004) as income. Margin
trading refers to the equity trading when the securities company grants credit to theclient. It is a system whereby, when clients want to purchase stock but have no available
funds, the securities company advances the money for the buy-in (the maturity date isusually 6 months). Following from Matsui’s success in this field (attaining high profits),
various online securities companies apart from Monex began offering similar services.
Thanks to the active market during that time, this made a huge contribution to theearning recovery of such companies. Ailed by the strong pressure from customers andworsening profits, in February 2003, Monex which adamantly refused to offer margin
trading until then finally introduced the service. This meant that all major online
securities companies were providing margin trading. Amidst the rapidly expanding
online securities market and competition for acquiring quasi-oligopoly control over it,
the competition in commission fees had resurged.
Online investors open multiple accounts and opt for the securities company thatprovides the best services and lowest transaction fee. Thus the difference in service
quality and transaction fees is directly connected to customer mobility, making it
imperative to quickly respond to measures taken by competing companies by imitation
or differentiation. In order to produce “differentiated services” in the online securities
market, it is crucial to have know-how on system development. Therefore, as aprecondition of the competition, the know-how on developing a system which satisfies
customer needs plays a major role.
Margin trading is a service that targets active investors. The reason Matsui Securities
is recognized to be the winner in this sector is for its high profit ratio in relation to thecompetitors. By focusing on margin trading since its entry to the market, Matsui wasable to acquire active investors that engendered a high profit ratio due to the highfrequency of purchase (turnover rate) and interest revenue 4 . Matsui is inferior tocompetitors in terms of account numbers, but it has consistently been at the top of the4

Margin trading interest (2.1%/year), no-time-limit margin trading interest (3.1%/year): data fromMay 2004

8

A Time-series Descriptive Model of Competitive Advantage Trajectoryindustry in terms of profit with only minor fluctuations5.
There are no stores or sales personnel in online securities market. As such, it is basedon a “business model in which profit ratio increases proportionally to the amount oftransactions”, where the frequency of purchase (turn over rate) of the private investors
will have a big impact on the revenue. Yoshitaka Kitao, CEO of E-Trade’s parent
company SoftBank Investment (SBI), states that “the basis of this industry is‘low-margin, high-turnover’ model. It is imperative to lower transaction fees in order tocontain the day-traders6”.
As stated thus far, the online securities market is in the war of attrition wherecompanies require financial power in order to support system development, allowancenecessary for margin trading, and acquiring new customers by lowering transactionfees.

6. CASE STUDY: MATSUI SECURITIES (1990-2004)
6.1 Time-series trajectory of competitive action
Below, the trajectory of Matsui Securities’ competitive action has been divided into four
periods.

‐Preparation period for entering the online market (1990-1998)
Established in 1918, Matsui Securities has a long history. As soon as the current CEO
Michio Matsui, the 4th in its history, was appointed executive director and senior sales
director in 1990, he radically altered its traditional business stance which was based on
the face-to-face sales in stores by salesmen, and switched all transactions to call-center
operations. Despite fierce opposition within the company, he further conducted a
restructuring of operation system as well as an exhaustive price-cutting. These
measures taken as a response to the imminent deregulation of transaction fees, part of
the “Big Bang” liberalization of the financial sector , were followed by even more radical
and bold measures introduced after June 1996 when Matsui was appointed CEO of thecompany. In May 1998, again defying opposition, he shut down even the call centertransactions which constituted the main source of revenue, and opened a website foronline trading, called “Net Stock”. By concentrating all management resources to theonline trading, Matsui Securities had its first step to become an online securities
company.

‐The beginning of the online market (1999-2000)
With the full deregulation of transaction fees in 1999, Matsui Securities made use of its
strength derived from the low-cost character of the “have-not management” that havebeen cultivated until then, by introducing an innovative flat-rate low-cost transactional
fee system called “Box Rate”, and secured its position as an innovator in the industry.
5

Whereas E-Trade, being the first in the industry possesses a significantly larger number ofaccounts(325 thousands) than Matsui (125 thousand), its ordinary profit ratio is only 27% incomparison to Matsui’s 50% : data from May 25th, 2004
6

Weekly Economist, 25 May 2004

9

A Time-series Descriptive Model of Competitive Advantage Trajectory

Box Rate was a service that allowed multiple transactions of less than the prescribed
limit (3 million yen) to be carried out with a flat–rate of three thousand Jyen. Based on
the ideal of being selected by customers by responding to their needs rather than bytrying to forcibly contain them, the “customer oriented” ideology much propounded by
the company, received enthusiastic support from highly active private investors, leading
to a dramatic growth of the service. Moreover, the balance amount of the margin trading,a service that has been introduced by Matsui ahead of the competitors, was ranked 9thin 1999 among all securities companies, and 1st in 2000 surpassing Nomura Securities the giant in the industry- in the domestic private retail sector. In August 2000, Matsui
Securities went public in the first section of the Tokyo Stock Exchange.

‐Period of stagnation (2001-2002)
In the midst of fierce competition for transaction fee in the market since 2001, Matsui
Securities had employed a strategy to avoid the price-cutting race and to pursue good
profit ratio. However, E-Trade, equipped the lowest transaction fee in the market andhaving closely followed Matsui’s footsteps, finally surpassed Matsui in the private retailmarket share, becoming top in the industry in the latter half of 2002.
During this period, Matsui did not provide market-leading products or services andcontinued adhering to its strategy based on flat rate and margin trading system
introduced before 2000 that targeted active investors.

‐Period of expansion (2003 and after)
After having been displaced at the top in market share by E-Trade in late 2002, Matsui
adopted a more aggressive stance from 2003 to “seize back customers that have beentaken away”.
Time-limited margin trading was no longer a valuable factor for differentiation due tothe competitors’ imitation of the service. Using its financial power, Matsui Securities
then introduced no-time-limit margin trading for the first time in the industry in July
2003. This resulted in an unexpectedly overwhelming response: ten thousand new
accounts in two months, with a balance of 500 billion yen. In March 2004, simultaneousto the imitation of the no-time-limit margin trading service by E-Trade, Matsui makes
all spot trading free of charge (for transaction amount less than 100,000 yen) to attract
investment beginners who are highly responsive to prices, and to seize back customers
from E-Trade. With this, Matsui succeeded in a large expansion in customer base
(March 2003 account number growth rate: Matsui 56%, E-Trade 39%7).
In FY 2004 ended March, the financial closing was significantly higher than predictedfigures: 25 billion yen operating profit (+85% from previous year) and 14 billion yen
ordinary profit (+298% from previous year). The breakdown of operating revenue
reveals Matsui’s characteristic strength in the margin trading domain, with the financeincome reaching 4.8 billion yen due to an increase in margin trade loan, compared to20.2 billion yen from the transactional commission received. The turnover from margin
trading at the end of 2003 shows Matsui dominating competing players: Matsui (176.4
billion), E-Trade (88.5 billion), DLJ (614 billion), Monex (21.3 billion).
6.2 Changes in Matsui Securities profit ratio
7

Nippon Keizai Shimbun Newspaper, 8 April 2004

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A Time-series Descriptive Model of Competitive Advantage Trajectory

Fig.6 shows changes in ordinary profit ratio over the years for Matsui Securities and forthe whole industry in Japan. Changes for Matsui Securities are on one side similar toindustry-wide changes, but there also are discrepancies in which the relatively higher
figures are saliently noticeable. The similarities with industry-wide changes can beinterpreted to be due to the significant impact of market conditions to all securities
companies.

70.0%
60.0%
Matsui
Securities

50.0%
40.0%

OverallMarket

30.0%
20.0%
10.0%
0.0%
-10.0%

2000

2001

2002

2003

2004

2005

Fig.6 Comparison of ordinary profit ratio (Industry-wide and Matsui Securities)

6.3 Resources of Matsui Securities
Among the resources owned by Matsui, those listed below are to be focused:
1. Information technology that enables differentiation in services.
2. Active investors (with a relatively constant loyalty)
3. Accumulated know-how regarding securities services
4. Financial power.
1.

Information technology:
During the rising period of the on-line securities market, Matsui shifted its focus tomargin trading in contrast to the competing companies which remained focused on
spot trading. The reason for this has been explained by a management member
involved in the system development as follows (Matsui Securities document, 2003):••••

At the time, margin trading constituted a third of private trading in volume (itwas already beginning to form a market)
No other competitors were granting credit to customers living in distantlocations (there were only a few companies that have a know-how of credit
administration)
There were only a few companies that focused their efforts on margin trading,both in Japan and abroad (differentiation from other companies)
It was believed that with an open system, it was possible to build in logic thatwould put significant stress onto the system at low cost (possible from atechnical standpoint)11

A Time-series Descriptive Model of Competitive Advantage Trajectory•

Constructing a system that can process margin trading in real time wasconsidered to be extremely difficult (and therefore a significant advantage overother companies are to be gained when the system is successfully constructed)

In addition, the document above also illustrates the process (1996-1998) of selectinga system suitable for the differentiation strategy to incorporate margin trading asfollows:•••

Plan 1．Rejected. Existing systems from abroad do not follow rules in Japan.
Plan２．Rejected. Shared computer systems are unable to handle real-timeprocessing. Original business models such as margin trading cannot be built
into them.
Plan３．A reluctant choice has been made to construct the company’s own
system (multiple vendors were considered).

From the above factors, it may be deducted that gaining an advantageous positionin this field was easier than contending in a simplistic competition for lower
transaction fee, because of the difficulty to build a margin trading system which
would also fight off attempts to imitate it.
2.

Active Investors:
While competitors employed a strategy of widening the customer base by, forexample, actively seeking investment beginners, Matsui aimed exclusively at active
investors since its entry to the market. This resulted in its monthly turnover rate togrow by 8 to 10 folds between 1999 to 2003, despite the lowering commission ratesince the deregulation of transaction fees.
By targeting active customers, Matsui has retained a customer base composed ofthose with high loyalty (which can be regarded as a type of resource). There havebeen periods where Matsui was inferior to competitors in terms of customer
numbers, like in 2002 when E-Trade took away some customers with the market’s
lowest transaction fee, but from the point of view of rent the company has
consistently retained a high ground. In addition, the measures taken since late2003, such as the introduction of lowest fees in the industry (free spot trading below
100,000 yen) have successfully led to the regaining of lost customers.

3.

Accumulated know-how regarding securities services:
The experience of call center sales allowed Matsui to accumulate knowledge
regarding customer needs, which led to the introduction of a differentiated service(margin trading) from the initial stages of the market activity. Because the level ofisolation is particularly high in building the system for margin trading, it waspossible to isolate the resource at the time of the company’s entry to the market.
Moreover, succeeding to attain active customers for the purpose of margin trading
proved the competitive value of the resource to have been high.

4.

Financial power:
Matsui has established the high-profit structure since the nascent days of themarket and has maintained financial power for continual investment. The rent thatwas gained was invested in new, differentiated services (e.g. no time limit margin
trading), which in turn would attain more rent to form a cycle of high profitability.

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A Time-series Descriptive Model of Competitive Advantage TrajectoryThis financial power is an isolated resource that is difficult to imitate, and hashelped Matsui retain a relatively high competitive advantage over its competitors.
To summarize, the relatively high profit ratio of Matsui Securities stems from theretaining of “active customers” as a resource, by being a constant innovator in theindustry as can be seen in Fig.7. Those active customers accept the value ofdifferentiated services supported by inimitable information technology, and remain
steadily loyal, in turn conferring Matsui to gain rent (profit).

時期

First in
日本初
Japan

革新的な施策Innovative
measureApril 1996

Free safe deposit fee of stocks○

Feb 1997

Half price of commission forover-the-counter shares and convertible bonds○

May 1998

Launching of Internet trade “Net Stock”

Oct 1999
Dec 1999

Introduction of fixed rate transaction fee system“Box Rate”
Deposit assets protection system “Account Protection”
IntroducedFirst inｵﾝﾗｲﾝ初online○○○Aug 2001

Listed on the first section of Tokyo Stock Exchange○

Sep 2002

Introduction of “Stock Deposit” system○

July 2003

No time limit margin trading system launched○

March 2004

Free transaction fees if less than
100,000 yen/day○

Fig. 7 Matsui Securities as innovator

6.4 Analysis of causes for the competitive advantage trajectory
As previously mentioned, the competitive advantage trajectory is analyzed by using the
trajectory of ordinary profit as a proxy indicator. The analysis below studies thecompetitive advantage trajectory of Matsui Securities with those proxy indicators bybreaking down the indications into the two elements of “isolation of resources” and“value of resources” based on the previously mentioned conditions. The analysis period
is set from when it entered the market, simultaneous to the birth of the online securities
market (1999), to 2004 when all affiliated data could be confirmed at the time offormulating this paper.
As a preparation for the analysis, those products and services which Matsui has newly
incorporated and led features in the industry were assembled, and the fundamental
resources which enabled such services were indicated with ‘xx’ in Fig. 9). Similarly,
resources that formed the basis for all of Matsui’s services in general will be indicatedwith ‘x’. Only the resources which constitute a competitive advantage over othercompanies (industry average) will be considered in this analysis and be divided into theaforementioned four categories (four cells).
With the actual products and services which were introduced to the market, theisolation of resources that enabled these products and services have been assessed on a13

A Time-series Descriptive Model of Competitive Advantage Trajectory

3-point scale of 5-3-1 (5= resources are original and isolated, 3= many are common
resources shared by the strategic group, 1= most resources are shared throughout theindustry). The assessment has been based on public documents and interviews of
personnel in the industry.
Similarly, the competitive values of those resources have been assessed on a 3-point
scale. In principle, competitive value can only be obtained through a direct research ofcustomers as it largely involves their assessment. However, for it would be impossible tocarry out a meaningful research of past situations in the market for the purpose of thisanalysis, the following procedure has been adopted to arrive at an assessment ofcompetitive values:
1. The analyst makes a provisional assessment.
2. A numerical point for the overall resource advantage is calculated in combination
with the assessment of isolation of resources mentioned earlier. (formula“assessment for isolation of resources × assessment for the value of resources” hasbeen adopted).
3. At the same time, the shift of profit data of the target business is used as aproxy-indicator for the competitive advantage trajectory. The data for Matsui
Securities’ ordinary profits and losses is adjusted (change in market-wide
profitability is considered due to market conditions and data is adjusted
accordingly) as can be seen in Fig. 8, and subsequently it is indexed.8 (data has
been adjusted according to the market situations)
4. In case there was a gap in the pattern of profit shift when the data obtained in theabove 2. and 3. were compared, the assessment for the value of resources in 2. iscorrected. (This correction was based on the assumption this paper argues, that thecompetitive advantage trajectory can be analyzed using the two parameters of
isolation of resources and value of resources)(hundred million yen）
Matsui Securities Ordinary profit ratio
Total profit
Ordinary profits and losses
Securities industry-wide Ordinary profit ratio
Total profit
Ordinary profits and losses
Matsui Securities (adjusted)
Industry-wide profit ratio （index）
Matsui profit ratio （adjusted）
Matsui ordinary profits and losses (adjusted）

1999
52.3%
65
34
32.9%
38172
12540

2000
37.0%
81
30
18.2%
32442
5893

2001
30.5%
128
39
-0.7%
25430
-173

2002
26.1%
134
35
5.6%
24205
1357

2003
56.0%
250
140
23.9%
33184
7932

2004
61.2%
369
226
14.1%
34262
4834

100
52.3%
34

55
20.5%
17

-2
-0.6%
-1

17
4.5%
6

73
40.7%
102

43
26.3%
97

Source: Account Settlement of Securities Companies and Stock Market T(Japan Securities Dealers Association Sept, 2005)

Fig. 8 Matsui Securities’ ordinary profits and losses (after adjustment)
Fig. 9 shows the assessment of the company’s “isolation of resources and value of
8

1.

Matsui Securities’ ordinary profit ratio is adjusted using the profit ratio of FY 2000 (ended
March) as the basis, and by then subtracting the industry-wide rate of change compared to 2000
from Matsui’s rate of change.
2.
The adjusted ordinary profit for each year is calculated by multiplying the company’s ordinary
profit with adjusted/actual ordinary profit ratio.
3.
The adjusted ordinary profit is indexed using the ordinary profit of 2000 as the basis at 100 (seefig. 8).
Because each financial year ends on March, it was considered appropriate to regard each year’s data
as reflecting the previous year’s condition of competitive advantage. For example, the closing of 2000
shows the competitive advantage condition of the year 1999.

14

A Time-series Descriptive Model of Competitive Advantage Trajectory

resources” obtained through the procedure above.
Isolation of Resource Value of Resource
Competitive Value: Low
Sole possession
Sole possession

Competitive Value: High

Possession ofStrategic group

Competitive Value:
Mid to highNot isolatedCompetitive Value: Low

Resource◎: Resource which enabled the above
services that other businesses
had advantage in. ○: Resource which
benefited overall service that
other businesses had advantage in.

1999

2001

2002

2003

Fixed rate
Margin Trade

No timelimit margin

Fixed rate

Info-technology
Active customers
Know-how of service
Financial Power

2004

No timelimit margin Free handling*

Fixed rate
Margin trade

Fixed rate

Fixed rate

Fixed rate
Margin Trade

Margin Trade

Margin Trade

XX
XX
XX

XX
XX
XX

X
X
X

X
X
X

5
3

3
3

1
1

1
1

X
X
X
X
3
5

Resource Isolation
Resource Isolation

Assessment

2000

X
X
X
X
5
5

*=Cash transaction ¥100,000 or lessFig.9 Matsui Securities: competitive value and isolation of resources
6.5 Description of time-series trajectory of competitive advantage
Next, using the descriptive model shown in Fig.3, the strategic actions of Matsui
Securities, specifically the levels of isolation of resources and value of resources will beplotted onto the “circle of time” (Fig.10). As it can be seen in Fig. 10, the dynamics(time-series trajectory) in competitive advantage of Matsui Securities have successfullytransferred from the first cell (exploration of new competitive axis) to the second cell
(fortification) in 1999. It can also be seen that in 2004, there has been a rapid transition
from the third cell (strategic group) to second cell. During the period between 2001 and
2002, however, Matsui was unable to provide new competitive axis to the market andhad stagnated in the fourth cell (competition of small variations), allowing thecompeting E-Trade to keep pace.
Original resources are isolated
Second Cell
Fortification

04

８
04
03

03
99

99
00

02

01

04

Fourth Cell
Price and attached quality

Third Cell
Competition withinstrategic group

Resources have competitive value

Resources do not have competitive valueFirst Cell
Exploration of a newCompetitive axis

Original resources are not isolated

Fig. 10

Matsui Securities dynamics of competitive advantage trajectory

All above in consideration, the dynamics of Matsui Securities’ competitive advantage

15

A Time-series Descriptive Model of Competitive Advantage Trajectory

trajectory can be summarized as follows.
•
The company has obtained a first cell position several times preceding its
competitors (leading in new competitive axis construction).
•
Successfully made a transition from first cell to second cell several times (thecapability to grasp market needs, an effective acquisition of rent), (establishingdifferentiated services and successful fortification).
•
Succeeded in the transition to first cell (exploration of new competitive axis) whenit dropped to the third cell (competition within the strategic group).

In other words, the pattern of Matsui Securities’ dynamics has failed to maintain thefortification status on a long-term basis amidst the fierce market competition, butinstead can be interpreted as a pattern close to the model which intermittently accedes
to the fortification position with a new competitive axis while continually being pursued
by competitors (similar to the pattern described as “intermittent competitive
advantage” at the beginning of this argument). A closer look however, reveals the factthat there is a slight gap with the ideal pattern of “intermittent competitive advantage”
as can be discerned by the Matsui’s stagnation in fourth cell (competition of small
variations) during the years of 2001 and 2002.

7. CONCLUSION
In this paper, a descriptive model, where the source of competitive advantage isseparated into “isolation of resources” and “value of resources” which are then combined
to form 4 cells to display the trajectory of the competitive advantage in it is proposed.
The case study analysis has used this model to show that this descriptive model can beutilized to analyze the competitive advantage trajectory in a rapidly changing market.
The example of Matsui Securities, which has used as the case study, has shown topossess a competitive advantage trajectory akin to the “construction of intermittent
fortification” that has been introduced as an ideal pattern in the rapidly changing
market. However, it is not clear whether this is the result of a conscious pursuit of such
pattern or whether it is the consequence of reactions to circumstances. The case study
implies the validity of a strategy which specifically aims to attain “intermittent
construction of competitive advantage” instead of “sustainable competitive advantage”
in the rapidly changing market environment. This strategy is possible when “isolatedresources” are constantly explored and the existent resources that are the foundation of
the competitive advantage are continually replaced by them.
One possibility for improvement in this descriptive model would be the further
objectification of the method of measurement. In addition, in order to propose a new
descriptive model that would withstand a hyper-moving environment, the discussion
was simplified by limiting the analysis on tangible and intangible resource sets. The
isolation and value of a business system, however, can also be influenced by the
structure of “activity system” as well as by the resources. Moreover, organizational
capability to respond to the changing environment also requires analysis. How to build
these factors into the descriptive model for the competitive advantage trajectory will bea challenge for the future.
Considering that the individual resources have different lifespan, it will be necessary in

16A Time-series Descriptive Model of Competitive Advantage Trajectorysome cases to conduct an analysis where a resource is isolated on sustainable basis andwhere its isolation period is short-lived.
Finally, yet another research topic for the future would be the influence of the business’s
strategic actions on the “competitive speed” in the market, and also whether if such acompetitive speed is controllable by the businesses.

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