5. Firm-Level Strategies
Microsoft Pay brings out i Xbox 360 video-game Next drops prices and increases monthly cell phone minutes; Station 3. Sprint Verizon strikes back with a faster network and lower prices and more min events. Starbucks Coffee and nearby locally-run coffeehouses respond opens a store, by improving service, increasing portions, and holding the line on prices. Attack and respond, respond and attack. Firm-level strategy addresses the question "How should we compete against a particular firm?" Let's find out more about firm-level strategies (direct competition between companies) by reading about 5.1 the basics of direct competition, and 5.2 the strategic moves involved in direct competition between companies
5.1 Direct Competition of competition in an Although Porter's five industry forces indicate the overall level induce industry, t companies do compete directly with all the firms in their not for example, McDonald's and Red Lobster are both in the restaurant business, no one would them as competitors. McDonald's offers low-cost, characterize Lobster offers mid while Red convenient fast food in a seat yourself restaurant, bar. Priced, sit down seafood dinners complete with servers and bar
Instead of competing with industry, most firms compete two company few companies within it Direct competition is the rivalry between rivals nixes offering similar products and services that acknowledge each other as take offensive and defensive positions as they act and react to each other's strategic actions. Two factors determine the extent to which firms will be in direct competition with each other: market commonality and resource similarity. Market commonality is the degree to which two companies have overlapping products, services, or customers in multiple markets. The more markets in which here is product, service, or customer overlap, the more intense the direct com- petition between the companies. Resource similarity is the extent to which two a competitor has similar amounts and kinds of resources, that is, similar assets, processes, information, and knowledge used to create and sustain a capabilities, advantage over competitors. From a competitive standpoint, resource similarity means that direct competitors can probably match the strategic actions that your company takes.
Exhibit 5.8 shows how market commonality and resource similarity interact to determine when and where companies are in direct competition. 2 The overriding area in each quadrant (between the triangle and the rectangle, or between the differently colored rectangles) depicts market com- morality, the larger the overlap, the greater the market commonality. Shapes depict resource similarity, with rec- tangles representing one set of competitive resources and triangles representing another. Quadrant I shows two companies in direct competition because they have similar resources at their disposal and a high degree of market commonality. These companies try to sell similar products and services to similar customers. McDonald's and Burger King would clearly fit here as direct competitors.
In Quadrant II, the overlapping parts of the triangle and rectangle show two companies going after similar customers with some similar Products or services but with different competitive resources. McDonald's and Wendy's restaurants would fit here. Wendy's is after the same lunchtime and dinner crowds that McDonald's is Nevertheless, with its hamburgers, fries, more expensive shakes, and salads, Wendy's is less of direct McDonald's than is a competitor to Burger King. Wendy's Garden Sensation salads (using fancy lettuce varieties, grape tomatoes, and mandarin oranges) bring in customers who would have eaten at more expensive casual dining restaurants like Applebee's