week 8 Flashcards
(12 cards)
What are competitive actions and retaliatory moves?
Firms engage in strategic moves often without fully considering competitor responses. This can lead to counter-moves, competitive disequilibrium, and escalation of commitment where firms persist with poor strategies out of pride or sunk costs.
What is escalation of commitment?
A phenomenon where firms continue to invest in a failing strategy due to overconfidence, prior investment, or belief in eventual success, often worsening outcomes.
What do IFE and EFE matrices evaluate?
- IFE Matrix evaluates internal factors: strengths and weaknesses
* EFE Matrix evaluates external factors: opportunities and threats
They use weighted scores to determine how well a firm aligns with its strategic environment.
What frameworks help identify internal and external factors for IFE/EFE?
- Internal (IFE): SWOT analysis, resource and capability evaluation
* External (EFE): PEST analysis for macro trends, Porter’s Five Forces for industry dynamics
What is Porter’s Five Forces framework?
- Threat of new entrants
2. Bargaining power of suppliers 3. Bargaining power of buyers 4. Threat of substitutes 5. Industry rivalry
What is the Red Queen Hypothesis in business strategy?
Firms must continuously evolve to remain competitive because rivals are also adapting. Stagnation = extinction. Strategy is an ongoing race, not a static achievement.
What is the truth about first-mover advantage (FMA)?
While FMAs may offer learning curve benefits and network effects, later entrants often win by learning from early movers’ mistakes (e.g., Google, Apple). Rapid tech or market change weakens FMAs (Suarez & Lanzolla, 2005).
What is the Mutual Forbearance Hypothesis?
In multimarket competition, firms avoid intense rivalry due to:
* Familiarity with competitors’ actions * Deterrence from mutual harm
This leads to tacit collusion where firms coordinate implicitly to reduce competition.
What is transient advantage (McGrath, 2013)?
- Competitive advantages are short-lived
* Firms must move quickly: launch, ramp-up, exploit, reconfigure, disengage * Success depends on dynamic capabilities like agility, experimentation, and timing
What happened in the Dollar Shave Club vs Gillette case?
DSC disrupted Gillette’s market with low-cost subscriptions. Despite Gillette’s dominance, it lost share. P&G (Gillette owner) responded by launching its own shave club. Unilever acquired DSC for $1bn.
What are McKinsey’s Competitive Arenas?
High-growth, high-dynamism sectors expected to dominate GDP by 2040 (e.g., cloud, EVs, biopharma). Firms should anticipate, target, and pivot into these arenas for future success.
What does Harold Hotelling’s Law explain?
A game theory model where competitors tend to cluster in the middle of a market to maximise shared customers, often resulting in limited differentiation.
