• The type of action (strategic or tactical) the firm took, the
competitor’s reputation for the nature of its competitor
behavior, and that competitor’s dependence on the market
in which the action was taken are studied to predict a
competitor’s response to the firm’s action. In general, the
number of tactical responses taken exceeds the number
of strategic responses. Competitors respond more
frequently to the actions taken by the firm with a reputation
for predictable and understandable competitive behavior,
especially if that firm is a market leader. In general, the firm
can predict that when its competitor is highly dependent for
its revenue and profitability in the market in which the firm
took a competitive action, that competitor is likely to launch
a strong response. However, firms that are more diversified
across markets are less likely to respond to a particular
action that affects only one of the markets in which they
compete.
• Competitive dynamics concerns the ongoing competitive
behavior occurring among all firms competing in a market
for advantageous positions. Market characteristics affect the
set of actions and responses firms take while competing in