Competitive Dynamics Flashcards
What does high market commonality and resource simmilarity translte into?
- Serving the same customers and needs in the same way
- Likely to have similar or same Business Level Strategy
- Direct competition(which does not always mean intense rivalry)
What are the 3 important drivers of competitive behavior?
Awareness
Motivation
Ability
How do MC and RS affect awareness?
both increase it
How do MC/multimarket contact affect likelihood of response?
Both increase it, since many markets are at stake, there’s a high potential for loss, therefore they are more likely to retaliate.
How does first mover incentivizes the likelihood of attack?
- firms gain loyalty of customers when they move first
- gain market share that is hard for competitors to gain during rivalry
- tends to be aggressive and experiment with innovation
- tends to have slack resources(availability of resources
How does organizational size influence the likelihood of attack?
SMALL FIRMS:
- act as nimble and flexible competitors
- rely on speed and surprise to defend their competitive advantage
- have greater variety of competition behavior options available
LARGE FIRMS:
- greater slack
- have greater likelihood of initiating competitive and strategic actions over time
- have greater likelihood of launching greater number of actions
- rely on a limited set of actions
How does quality influence the likelihood of attack
Firms need to solve first quality problems before taking competitive actions
has to ensure that customer’s perceive that its products or service perform in ways valuable to the customers,
How is the likelihood of attack affected by MC AND RS?
Tends to reduce out of fear for counterattacks in other important markets (mutual forbearance)
How is the likelihood of response affected by he type and effectiveness of the competitive action?
Stratyegic actions elicit a fewer total compeititve responses because strategic responses involve a significant commitment of resources, are difficult to implement and reverse
How is the likelihood of response affected by the actor’s reputation?
To predict the response to a current or planned action, firms evaluate past responses
PAST BEHAVIOR IS ASSUMED TO BE A FUTURE BEHAVIOR
competitors are more likely to respond to strategic or tactitical acions when they are taken by a market leader
and less likely to respond to firms who are price predators (low credibility because once their objectives are reached, they increase prices)
How is the likelihood of response affected by the dependence on the market
a firm which is highly depend ont he firm is more likely to respond to attacks threatening their market positions
Does service quality tend to increase or decrease with mutual forbearance?
decrease cause compeititors might perceive it as an attack and may induce the to respond with price cuts or service improvement in other markets
What are the factors that dampen the effect of MMC on mutual forbearance in international settings?
gov policy
presence of domestic competitors(they might respond domestically)
cultural diversity across markets (complicates attacks and responses)
presence of single market competitors (they have nothing to loose)
How to deal with competition?
Create distraction
Don’t act and let other competitors fight it out
legally redirect competitive pressures (increase likelihood of MMC and mutual forbearance and encourage indirect competition)
What impedements do frims face when trying to determine what competitors are going to do?
-misreading actions
-limited information
-volatility of demand(harder to assess whether a decrease in sales is due to a price cut or a de mand in volatility
ESSENTIAL TO PEDICT RESPONSES BEFORE TAKING ACTIONS
