Competitive Rivalry and Competitive Dynamics
fast-cycle markets
1.Define competitors, competitive rivalry, competitive behavior, and competitive dynamics.
2.Describe market commonality and resource similarity as the building blocks of a competitor analysis.
3.Explain awareness, motivation, and ability as drivers of competitive behavior.
4.Discuss factors affecting the likelihood a competitor will take competitive actions.
5.Discuss factors affecting the likelihood a competitor will respond to actions taken against it.
6.Explain competitive dynamics in slow-cycle, fast-cycle, and standard-cycle markets
Competitive Rivalry and Competitive Dynamics
•Competitors are firms operating in the same market, offering similar products, and targeting similar customers.
•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 competitive responses the firm takes to build or defend its competitive advantages and to improve its market position.
Competitive Rivalry and Competitive Dynamics
•Multimarket competition occurs when firms compete against each other in several product or geographic markets.
•Competitive dynamics refer to all competitive behaviors—that is, the total set of actions and responses taken by all firms competing within a market.
From Competitors to Competitive Dynamics
A Model of Competitive Rivalry
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.
•Firms competing against one another in several or many markets engage in multimarket competition.
Competitor Analysis
•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.
•The greater is the resource imbalance (Dissimilarity) between the acting firm and competitors or potential responders, the greater will be the delay in response.
A Framework of Competitor Analysis
Case study
Dell clip
Questions
1.What was the core competency that Dell uses to compete with its rivals?
•If you are a HP manager, what is the strategy to compete with Dell?
2.What is the core competency that HP uses to compete with Dell?
Drivers of Competitive Actions and Responses
Awareness
•Awareness tends to be greatest when firms have highly similar resources (in terms of types and amounts) to use while competing against each other in multiple markets.
Motivation
•A firm may be aware of competitors but may not be motivated to engage in rivalry with them if it perceives that its position will not improve.
Drivers of Competitive Actions and Responses
Ability
•Without available resources (such as financial capital and people), the firm lacks the ability to attack a competitor or respond to its actions.
Competitive Rivalry
•Strategic and Tactical Actions
–A competitive action is a strategic or tactical action the firm takes to build or defend its competitive advantages or improve its market position.
–A competitive response is a strategic or tactical action the firm takes to counter the effects of a competitor’s competitive action.
Competitive Rivalry
•Strategic and Tactical Actions
–A strategic action or a strategic response is a market-based move that involves a significant commitment of organizational resources and is difficult to implement and reverse.
–A tactical action or a 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.
Likelihood of Attack
First-Mover Incentives
•A 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.
•In general, first movers allocate funds for product innovation and development, aggressive advertising, and advanced research and development.
Likelihood of Attack
First-Mover Incentives (cont.)
•A second mover is a firm that responds to the first mover’s competitive action, typically through imitation.
•A 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.
Likelihood of Attack
Organizational Size
•In general, small firms are more likely than large companies to launch competitive actions and tend to do it more quickly.
•The organization has the amount of slack resources held by a large firm to launch a greater number of competitive actions and a small firm’s flexibility to launch a greater variety of competitive actions.
Likelihood of Attack
Quality
•Quality has many definitions, including well-established ones relating it to the production of goods or services with zero defects and seeing it as a never-ending cycle of continuous improvement.
•From a strategic perspective, we consider quality to be an outcome of how the firm completes primary and support activities
•Quality exists when the firm’s goods or services meet or exceed customers’ expectations.
Quality Dimensions of Goods and Services
Product Quality Dimensions
1.Performance—Operating characteristics
2.Features—Important special characteristics
3.Flexibility—Meeting operating specifications over some period of time
4.Durability—Amount of use before performance deteriorates
Quality Dimensions of Goods and Services
Product Quality Dimensions (cont.)
5.Conformance—Match with pre-established standards
6.Serviceability—Ease and speed of repair
7.Aesthetics—How a product looks and feels
8.Perceived quality—Subjective assessment of characteristics (product image)
Quality Dimensions of Goods and Services
Service Quality Dimensions
1.Timeliness—Performed in the promised period of time
2.Courtesy—Performed cheerfully
3.Consistency—Giving all customers similar experiences each time
4.Convenience—Accessibility to customers
5.Completeness—Fully serviced, as required
6.Accuracy—Performed correctly each time
Likelihood of Response
Type of Competitive Action
•In general, strategic actions receive strategic responses and tactical actions receive tactical responses.
Likelihood of Response
Type of Competitive Action
•In general, strategic actions receive strategic responses and tactical actions receive tactical responses.
Likelihood of Response
Actor’s Reputation
•Competitors are more likely to respond to strategic or tactical actions when they are taken by a market leader.
Dependence on the Market
Competitive Dynamics
•Slow-cycle markets are those in which the firm’s competitive advantages are shielded from imitation commonly for long periods of time and where imitation is costly.
•Competitive advantages are sustainable in slow-cycle markets.
•Major strategic actions in these markets, such acquisitions, usually carry less risk than in faster cycle markets.
Gradual Erosion of a Sustained Competitive Advantage
Competitive Dynamics
•Fast-cycle markets are markets in which the firm’s capabilities that contribute to competitive advantages aren’t shielded from imitation and where imitation is often rapid and inexpensive.
•Competitive advantages aren’t sustainable in fast-cycle markets.
•Competitive dynamics in fast-cycle markets often result in rapid product upgrades as well as quick product innovations.
Developing Temporary Advantages to Create Sustained Advantage
Competitive Dynamics
•Standard-cycle markets are markets in which the firm’s competitive advantages are moderately shielded from imitation and where imitation is moderately costly.
•Competitive advantages are partially sustainable in standard-cycle markets, but only when the firm is able to continuously upgrade the quality of its capabilities, making the competitive advantages dynamic.