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 competitive responses occurring between competitors
as they compete against each other for an advantageous
market position. The outcomes of competitive rivalry influence
the firm’s ability to sustain its competitive advantages
as well as the level (average, below average, or above average)
of its financial returns.
• For the individual firm, the set of competitive actions and
responses it takes while engaged in competitive rivalry is
called competitive behavior. Competitive dynamics is the set
of actions and responses taken by all firms that are competitors
within a particular market.
• Firms study competitive rivalry in order to be able to
predict the competitive actions and responses that each of
their competitors likely will take. Competitive actions are
either strategic or tactical in nature. The firm takes competitive
actions to defend or build its competitive advantages
or to improve its market position. Competitive responses
are taken to counter the effects of a competitor’s competitive
action. A strategic action or a strategic response
requires a significant commitment of organizational
resources, is difficult to successfully implement, and is
difficult to reverse. In contrast, a tactical action or a tactical
response requires fewer organizational resources and is
easier to implement and reverse. For an airline company,
for example, entering major new markets is an example
of a strategic action or a strategic response; changing its
prices in a particular market is an example of a tactical action
or a tactical response.
• A competitor analysis is the first step the firm takes to be able
to predict its competitors’ actions and responses. In Chapter 2,
we discussed what firms do to understand competitors. This
discussion was extended in this chapter as we described what
the firm does to predict competitors’ market-based actions.
Thus, understanding precedes prediction. Market commonality
(the number of markets with which competitors are jointly
involved and their importance to each) and resource similarity
(how comparable competitors’ resources are in terms of type
and amount) are studied to complete a competitor analysis.
In general, the greater the market commonality and resource
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 competitive responses occurring between competitors
as they compete against each other for an advantageous
market position. The outcomes of competitive rivalry influence
the firm’s ability to sustain its competitive advantages
as well as the level (average, below average, or above average)
of its financial returns.
• For the individual firm, the set of competitive actions and
responses it takes while engaged in competitive rivalry is
called competitive behavior. Competitive dynamics is the set
of actions and responses taken by all firms that are competitors
within a particular market.
• Firms study competitive rivalry in order to be able to
predict the competitive actions and responses that each of
their competitors likely will take. Competitive actions are
either strategic or tactical in nature. The firm takes competitive
actions to defend or build its competitive advantages
or to improve its market position. Competitive responses
are taken to counter the effects of a competitor’s competitive
action. A strategic action or a strategic response
requires a significant commitment of organizational
resources, is difficult to successfully implement, and is
difficult to reverse. In contrast, a tactical action or a tactical
response requires fewer organizational resources and is
easier to implement and reverse. For an airline company,
for example, entering major new markets is an example
of a strategic action or a strategic response; changing its
prices in a particular market is an example of a tactical action
or a tactical response.
• A competitor analysis is the first step the firm takes to be able
to predict its competitors’ actions and responses. In Chapter 2,
we discussed what firms do to understand competitors. This
discussion was extended in this chapter as we described what
the firm does to predict competitors’ market-based actions.
Thus, understanding precedes prediction. Market commonality
(the number of markets with which competitors are jointly
involved and their importance to each) and resource similarity
(how comparable competitors’ resources are in terms of type
and amount) are studied to complete a competitor analysis.
In general, the greater the market commonality and resource
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