5 - Competitive Rivalry and Competitive Dynamics

Question 1

competitors

Answer 1

firms operating in the same market, offering similar products and targeting similar customers

Question 2

from competitors to competitive dynamics

Answer 2

competitors engage in competitive rivalry

• why? to gain advantageous market position
• how? competitive behaviour (individual)

competitive dynamics = total set of actions of all firms competing within a market

Question 3

model of competitive rivalry

Answer 3

1. competitor analysis
2. drivers of competitive behaviour
3. competitive/inter-firm rivalry
4. outcomes

Question 4

assumptions of model of competitive rivalry

Answer 4

• firms are mutually interdependent
• firms take competitive actions
• rivalry is dynamic + complex
• foundation of success: CA

Question 5

1. competitor analysis

Answer 5

market commonality: n of markets in which firms compete in

resource similarity: extent to which the firm’s in/tangible resources compare to a competitor’s in terms of type and amount

= influence drivers of competitive behaviour

note: if both are high = direct competitor

Question 6

2. drivers of competitive behaviour

Answer 6

awareness (recognize their interdependence)

motivation (incentive to act/react)

ability (resources that allow for actions + flexibility)

= important to determine likelihood of an attack/response

Question 7

strategic vs tactical actions/responses

Answer 7

strategic: signify a significant commitment of organizational resources to pursue a specific strategy
- difficult to implement + reverse

tactical: involve fewer resources to fine tune a strategy already in place
- easy to implement + reverse

Question 8

competitive action vs competitive response

Answer 8

action: to build/defend its CA or improve market position
response: to counter effects of competitor’s action
- can both be strategic or tactical

Question 9

3. competitive/inter-firm rivalry

Answer 9

likelihood of attack
likelihood of response

= evaluated in order to refine predictions about competitors’ actions + responses

Question 10

likelihood of attack factors

Answer 10

• first mover incentives
• organizational size
• quality

Question 11

first mover incentives

Answer 11

firm that takes an initial competitive action

• aggressive + innovative
• higher risk
• gain customer’s loyalty
• larger market share

Question 12

organizational size

Answer 12

small:
- faster actions (rely on speed)
- nimble competitors
- have greater variety of competitive actions

large:

• greater slack
• greater likelihood to initiate competitive actions over time
• limited variety of competitive actions

Question 13

likelihood of response factors

Answer 13

type of competitive action (if strategic or tactical)

actor’s reputation (see previous reactions + positioning)

market dependence (competitors w/ higher market shares tend to respond strongly to attacks threatening their position)

Question 14

competitive dynamics: different market cycles

Answer 14

slow
standard
fast

Question 15

slow cycle markets

Answer 15

• CA is shielded (imitation is expensive)
• CA is sustainable (launch, exploitation, counterattack)
• competitive behaviour is oriented around protecting CA + position

Question 16

standard cycle markets

Answer 16

• CA is moderately shielded
• CA is partially sustained

initiate competitive actions/responses to:

• seek large market shares
• gain customer loyalty through brand names
• careful operational control = consistency for customer

Question 17

fast cycle markets

Answer 17

• CA not shielded (imitation is rapid + inexpensive)
• continuously move on to other CA (when in counterattack phase)
• avoid loyalty to one product

Question 18

4. outcomes

Answer 18

market position

financial performance