Competitive Dynamics

Question 1

What are the 4 phases of competitive interaction?

Answer 1

1. Discovery and competitive new action
2. Customer reaction
3. Competitor reaction
4. Evaluation of action and reaction effectiveness

Question 2

What is a strategic action in competitive rivalry and how is it different from a tactical action?

Answer 2

Strategic action: involves significant commitment of resources and is difficult to implement and reverse
Tactical action: it fine tunes a strategy and uses fewer resources, is relatively to implement and reverse

Question 3

What are 5 offensive moves that cause industry change?

Answer 3

1. Reconceive product (eg. Cirque de Soleil)
2. Reconfigure value chain (eg. Netflix)
3. Redefine areas (eg. McDonalds and McCafe)
4. Rescale industry (eg. microbreweries)
5. Reconsider competitive mindset (eg. IBM and complementing competitors)

Question 4

What are the 4 actions in the framework of new market creation?

Answer 4

1. Eliminate
2. Reduce
3. Raise
4. Create/Add

Question 5

What are the 7 defensive moves that incumbents do when caught off guard in a competitive environment?

Answer 5

1. Absorb them (buy)
2. Avoid them (move on from that industry)
3. Contain (eg. Loblaw’s and Walmart)
4. Counter (improve own offer)
5. Countervail (enter attackers other market)
6. Lock out (through patents, government regulations, etc.)
7. Shape (control development of entrant)

Question 6

When is a first mover better off than a fast follower?

Answer 6

1. They achieve absolute cost advantage
2. Reputation and image advantages are hard to copy
3. Customers are locked in (ie. high switching costs)
4. Scale of first move makes imitation unlikely

Question 7

What is a fast follower better off than a first mover?

Answer 7

1. Rapid technological advances allow you to leapfrog the first mover
2. The first mover’s offering is flawed
3. First mover lacks a key complement that you have (eg. channel access)
4. First mover costs are greater than the advantages

Question 8

What are the 5 options for creating future competitive advantage?

Answer 8

1. Waiting to invest (for better market info)
2. Growth (creates follow-up projects)
3. Flexibility (eg. build 2 plants to decrease risks of external conditions)
4. Exit (when info tells you it’s smart)
5. Learning (through initial investments and learning what to do next - eg. increase capacity?)

Question 9

What are the 5 R’s of offensive moves that cause industry change?

Answer 9

1. Reconceive products (Cirque)
2. Reconfigure value chain (Netflix and Amazon)
3. Redefine arenas (McDonald’s)
4. Rescale industry (microbrewery)
5. Reconsider competitive mindset (IBM and complementing competitors)