Chapter 5: Understanding the Dynamics of Competitive Rivalry and Strategic Response

Question 1

refers to the ongoing actions and reactions between competing firms as they strive to gain an advantage.

Answer 1

Competitive rivalry

Question 2

Forms of Rivalry

Answer 2

o Price wars
o Advertising battles
o Product innovations
o Service improvements

Question 3

Key Characteristics of rivalry

Answer 3

Interdependence
Repetition
Escalation

Question 4

Each firm’s success is influenced by competitors’ moves.

Answer 4

Interdependence

Question 5

A move by a firm to improve its competitive position.

Answer 5

Action

Question 6

Competitive actions often lead to countermoves, creating cycles.

Answer 6

Repetition

Question 7

Rivalry can intensify over time, especially in mature markets.

Answer 7

Escalation

Question 8

Refers to the pattern and sequence of actions and reactions among firms engaged in competition.

Answer 8

competitive dynamics

Question 9

Three Key Aspects of competitive dynamics

Answer 9

1. Action
2. Response
3. Performance Outcomes

Question 10

A counter-move by a rival to defend or regain position.

Answer 10

Response

Question 11

The result of these competitive interactions in terms of market share, profitability, etc

Answer 11

Performance Outcomes

Question 12

Globalization’s Impact

Answer 12

o Increases the number of competitors.
o Brings new competitive threats from foreign firms.
o Encourages innovation and efficiency

Question 13

Global Competitive Strategies

Answer 13

o Standardization vs. adaptation
o Strategic alliances and mergers
o Entry into emerging markets

Question 14

Michael Porter’s model helps explain the nature of competition in an industry:

Answer 14

1. Rivalry Among Existing Competitors
2. Threat of New Entrants
3. Bargaining Power of Suppliers
4. Bargaining Power of Buyers
5. Threat of Substitute Products

Question 15

Firms must continuously evaluate these forces to adjust their competitive strategies effectively.

Answer 15

Strategic Insight

Question 16

Long-term, resource-intensive actions that reshape a firm’s competitive position.

Answer 16

Strategic Response

Question 17

Examples of strategic response

Answer 17

o Product development
o Mergers and acquisitions
o Global expansion

Question 18

Factors Influencing Strategic Response

Answer 18

o Resource availability
o Market position
o Competitive advantage

Question 19

Short-term, low-resource actions aimed at quick wins.

Answer 19

Tactical Response

Question 20

Examples of Tactical Response

Answer 20

o Discount promotions
o Public relations campaigns
o Temporary service upgrades

Question 21

= reactive, fast, low-cost

Answer 21

Tactics

Question 22

= proactive, planned, resource-heavy

Answer 22

Strategy

Question 23

Factors That Influence the Likelihood of a Rival’s Attack

Answer 23

1. Market Dependence
2. Resource Similarity
3. First-Mover Advantage
4. Organizational Motivation and Capability

Question 24

Firms heavily reliant on one market are more likely to attack competitors to maintain dominance.

Answer 24

Market Dependence

Question 25

Firms with similar resources are more likely to target each other.

Answer 25

Resource Similarity

Question 26

Rivals may attack to neutralize or overtake a market pioneer.

Answer 26

First-Mover Advantage

Question 27

Willingness and ability to initiate an attack.

Answer 27

Organizational Motivation and Capability

Question 28

Key Factors in a Rival’s Decision to Respond

Answer 28

1. Awareness 2. Motivation 3. Capability

Question 29

Does the firm know it’s being challenged?

Answer 29

Awareness

Question 30

Is the firm willing to respond?

Answer 30

Motivation

Question 31

Does it have the resources and flexibility to respond?

Answer 31

Capability

Question 32

Rival’s Decision to Respond Possible Responses:

Answer 32

o Ignore (not always recommended) o Match the competitor’s move o Overwhelm with a stronger counter-attack o Shift focus to a different market segment