Chapter 11 Exam 3 Review

What are the strategies most likely to be useful to a monopolist?

-Raise barriers to entry -Limit Competitive access to scarce resources -Innovate and Patent -Introduce new products frequently.

What is a strategic group analysis and how is it useful?

Breaks down the structure of a market or industry into these constituent groups. It identifies the major arenas of competition and who competes directly with whom.

What is competitive behavior and what are some examples?

the set of competitive actions and responses a firm takes to (1) build its competitive advantage, (2) defend its competitive advantages, and (3) improve its market position.

What is a strategy canvas and how is it used?

- Introduced by W. Chan Kim, and Renee' Mauborgne as a way to assess relative competitive strengths and weaknesses against specific purchase criteria. -uncovers existing differences among competitors -identifies new ways to beat rivals. -able to identify new opportunities for competitive positioning by studying the differences between how other airlines and cars are competing across relevant purchase criteria.

What strategies are most likely to be useful for firms in a "perfectly" competitive market?

-Merge or consolidate markets (to increase bargaining power) -Pursue a low cost strategy -Pursue a differentiation strategy. -Create switching costs

What are the strategies most likely to be useful for an oligopolist?

-Monitor and mimic behavior -Employ tit-for-tat strategies (take most beneficial action, while expecting competition to do the same. If a competitor defects, respond aggressively)

Identify four general principles of competitive strategy.

1. Know your strengths and weaknesses. 2. Bring strength against weakness 3. Protect and neutralize vulnerabilities 4. Develop strategies that cannot be easily imitated or copied (go where the competitor is not).

What are the four principles for identifying potential competitive moves?

1. Know your strengths and weaknesses. 2. Bring strength against weakness 3. Protect and neutralize vulnerabilities 4. Develop strategies that cannot be easily imitated or copied (go where the competitor is not).

Competitor Response Profile

A profile of a competitor that identifies its objectives and assumptions, its strategy, and its resources and capabilities in order to anticipate how the competitor might respond to rival actions. Examination of what Drives the Competitor (objectives and assumptions, and What the competitor is doing or is capable of doing (strategy & resources/capabilities)

Strategic Group

A set of companies that compete in similar ways with similar business models pursuing similar sets of customers ie Delta, American, United Airlines watch each other and their moves, and respond almost immediately.

Define the nash equilibrium used in game theory to predict the outcome of competitive interaction

A set of moves in a game that simultaneously maximize each firm's payoff, given the choices of rivals and from which no player has an incentive to defect. To find the Nash Equilibrium, think through what the player SHOULD do, under each possible move of its rival.

Nash equilibrium

A set of moves in a game that simultaneously maximize each firm's payoff, given which no player has an incentive to defect

Tit-for-tat

A strategy that responds in kind to the moves of rivals

Game Theory

A structured approach to analysis to competitor interaction that yields predictions about which strategic actions are most likely to be chosen by rivals.

Barrier to entry

Any factor that increases the costs, lowers the profit margins, or limits the market share of entrants to a market

Barrier to mobility

Any factor that limits the ability of a company to move between strategic groups. ie Delta can't move to compete with low-fare airlines. Delta would have to acquire many of the business characteristics of the low-fare carriers.

Why do firms in an oligopolistic environment often hesitate to make moves that will take them outside of the status quo?

Because rivals will detect their moves and respond accordingly (tit-for-tat)

What factors might limit a company's ability to switch strategic groups?

Companies in specific strategic groups choose particular ways to configure their activities and these activity systems do not change quickly or easily. It's difficult because it is hard and slow to reconfigure activities or activity systems. This creates barrier to mobility (inability to jump between groups)

What is the term used to encompass all competitive behaviors?

Competitive Dynamics- the total set of actions and responses taken by all firms competing within a market.

How would you define a competitor?

Firms operating in the same market with similar products targeting similar customers.

Name two frameworks for understanding the competitive landscape

Identify strategic groups and mobility barriers. -understand structure of competitive environment -Direct and indirect competitive groups within an industry should not be ignored.

How would you determine if a firm is an active competitor?

If a firm rates low on Market Commonality and Resource Similarity, then they are not considered active competitors. The higher a set of firms rate on these measures, the more intense we would generally expect the competition to be between the firms.

Dominant Strategy

In game theory, a set of actions that are always played no matter what a rival chooses to do

What are the three types of market structure?

Monopoly- a market of one firm or one highly dominant firm, such as Sirius XM, or Microsoft in word processing. Oligopoly- a market with few firms (2-5) which monitor and react to specific rival behavior. Perfect Competition- A market with may firms.

What types of strategies are most useful for firms operating in dynamic markets?

Reconfigure processes and capabilities to emphasize innovation and speed.

What do market commonality and resource similarity have in common?

The extent to which firms are direct, mutually-acknowledged competitors.

What is resource similarity?

The extent to which the firm's tangible and intangible resources are comparable to a competitor's in terms of both type and amount. Firms with resource similarity are likely to have similar strengths and weaknesses and to use similar strategies.

What is market commonality?

The number of markets with which a firm & a competitor are jointly involved. The degree of importance of the individual markets to each competitor.

How would you define competitive rivalry?

The ongoing set of competitive actions and competitive responses occurring between rivals as they compete against each other for an advantageous market position.

Market Structure

The way rivals in a market interact and bargain for advantage. In its simplest terms, it's the number of rivals in a particular market