Chapter 5: Competitive Rivalry & Competitive Dynamics

What factors affect the likelihood a firm will initiate a competitive response to a competitor's action(s)?

Type of competitive action (strategical or tactical) Actor's reputation Market dependence

Competitors

are firms operating in the same market, offering similar products and targeting similar customers

Fast-cycle Markets

are markets in which competitors can imitate the focal firm's capabilities that contribute to its competitive advantages and where that imitation is often rapid and inexpensive

Slow-cycle markets

are markets in which competitors lack the ability to imitate the focal firm's competitive advantages that commonly last for long periods, and where imitation would be costly

Standard-cycle Markets

are markets in which some competitors may be able to imitate the focal firm's competitive advantages and where that imitation is moderately costly.

Resource Similarity

is the extent to which the firm's tangible and intangible resources are comparable to a competitor's in terms of both type and amount.

Competitive Rivalry

is the ongoing set of competitive actions and competitive responses that occur among firms as they maneuver for an advantageous market position

Competitive behavior

is the set of competitive actions and responses a firm takes to build or defend its competitive advantages and to improve its market position

Competitve Dynamics

is the total set of competitive actions and responses taken by all firms competing within a market

How do awareness, motivation, and ability affect the firm's competitive behavior?

Awareness is the degree to which it and its competitors understand their mutual interdependence Motivation is the firm's incentive to attack or respond Ability is the quality of the resources available to the firm to attack and respond These are drivers of Competitive Behavoir

Who are competitors? How are competitive rivalry, competitive behavior, and competitive dynamics defined in this chapter?

Competitors are firms competing in the same market, offering similar products, and targeting similar customers. Competitive rivalry is the ongoing set of competitive actions and responses occurring between competitors as they compete against each other for an advantageous market position. The out comes of competitive rivalry influence the firm's ability to develop and then sustain its competitive advantages as well as the level of its financial returns Competitive Behavior is the set of competitive actions and responses an individual firm takes while engaged in competitive rivalry. Competitive dynamics is the set of actions and responses taken by all firms that are competitors within a particular market

Quality

Exists when the firm's goods or services meet or exceed customers' expectations.

What is market commonality? What is resource similarity? In what way are these concepts building blocks for a competitor analysis?

Market commonality is concerned with the number of markets with which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each. Resource similarity is the extent to which the firm's tangible and intangible resources compare favorably to a competitor's in terms of type and amount. They help shape the firm's awareness, motivation, and ability. Having knowledge of these characteristics increases the quality of the firm's predictions about that competitor's actions and responses

What competitive dynamics can firms expect to experience when competing in slow-cycle markets? In fast-cycle markets? In standard-cycle markets?

Slow-Cycle: include actions and responses intended to protect, maintain, and extend the firms proprietary advantages Fast-Cycle: firms concentrate on developing a series of temporary competitive advantages. This emphasis is necessary because firm's advantages in fast-cycles are not proprietary; they are subject to rapid and relatively inexpensive imitation Standard-Cycle: firms often (but not always) have a moderate amount of protection from competition as they use competencies that produce competitive advantages with some sustainability. Competitors in SC markets serve as mass markets and try to develop economies of scale to enhance their profitability. Innovation is vital to competitive success in each type. Companies should recognize that the set of competitive actions and responses taken by all firms differs by type of market

What factors affect the likelihood a firm will take a competitive action?

Three factors affect the likelihood a competitor will take competitive actions. 1) First-Mover Benefits - those taking an initial competitive action, often gain loyal customers and earn above average returns until competitors can respond successfully to their action. Not all firms can be first movers because they may lack awareness, motivation, or ability to required to engage in this type of competitive behavior 2)Second Mover - by evaluating the first mover's product, customer's reactions to it, and the response of other competitors, the second mover may be able to avoid the early mistakes and find ways to improve upon the value created for customers by the first movers product 3) Late movers commonly are lower performers and less competitive Org Size and Quality

Competitive Response

a strategic or tactical action the firm takes to counter the effects of a competitor's competitive action

Late Mover

is a firm that responds to a competitive action a significant amount of time after the first mover's action and the second mover's response

Second Mover

is a firm that responds to the first mover's competitive action, typically through imitation

First Mover

is a firm that takes an initial competitive action in order to build or defend its competitive advantages or to improve its market position

Strategic Action or Strategic Response

is a market-based move that involves a significant commitment of organizational resources and is difficult to implement and reverse

Tactical Action or Tactical Response

is a market-based move that is taken to fine-tune a strategy; it involves fewer resources and is relatively easy to implement and reverse

Competitive Action

is a strategic or tactical action the firm takes to build or defend its competitive advantages or improve its market position

Market Commonality

is concerned with the number of markets with which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each

Multimarket competition

occurs when firms compete against each other in several product or geographic markets