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Competitive Rivalry and Competitive Dynamics

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mason yang

on 8 July 2014

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Transcript of Competitive Rivalry and Competitive Dynamics

Discuss the factors affecting the likelihood a competitor will take competitive actions.

Likelihood of Attack
-In addition to market commonality, resource similarity and the drivers of awareness motivation, and ability, other factors affect the likelihood a competitor will use strategic actions and tactical actions to attack its competitors.
The other three major factors are First-Mover Incentives, Organizational Size and Quality.

Describe the factors affecting the likelihood a competitor will respond to actions taken against them

Likelihood of Response
-The success of a firm’s competitive action is affected by the likelihood that a competitor will respond to it as well as by the type and effectiveness of that response.
In addition to market commonality and resource similarity and awareness, motivation and ability, firms evaluate three other factors – types of competitive action, reputation, and market dependence – to predict how a competitor is likely to respond to competitive action.

Competitive dynamics: 3 market cycles
. Slow-cycle markets
-Markets in which the firm’s competitive advantages are shield from imitation for long periods of time, and in which imitation is costly.
Build a one-of-a-kind competitive advantage which creates sustainability

-Once a proprietary advantage is developed, competitive behavior should be oriented to protecting, maintaining, and extending that advantage.

-Organizational structure should be used to effectively support strategic efforts.

- Firms operating in the same market, offering similar products, and targeting similar customers.

Competitive Rivalry
- Ongoing set of competitive actions and competitive responses occurring between competitors as they contend with each other for an advantageous market position.

Competitive Behavior
-Sets of competitive actions and competitive responses the firm takes to build or defend its competitive advantages and to improve its market position.

Competitive Dynamics
- total set of actions and responses of all firms competing within a market.
Market Commonality and Resource Similarity

Market commonality
- is concerned with the number of markets with which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each.
Resource Similarity
- is the extent to which the firm’s tangible and intangible resources are comparable to a competitor’s in terms of both type and amount.
Market commonality and resource similarity
-determine the extent to which the firms are competitors.
Strategic Focus:
- Market Commonality and Resource Similarity in the Global Automobile Producer Industry

Market commonality and resource similarity
- influence drivers of competitive behavior, these drivers are awareness, motivation and ability.
Awareness refers to the extent to which
- competitors recognize the degree of their mutual interdependence that results from market commonality and resource similarity.
- relates to perceived gains and losses and concerns the firm’s incentive to take action or to respond to a competitors attack.
- relates to each firms resources and the flexibility that they provide the firm.
Resource Dissimilarity
- also influences competitive actions and responses between firms, in that the greater the resource imbalance between the acting firm and the competitors, the greater will be the delay in response.

- Competitors, competitive rivalry, competitive behavior, and competitive dynamics.

- Market commonality and resource similarity as the building blocks of a cimpetitor analysis.

-Awareness, motivation and ability as drivers of competitive behaviors.

-Factors affecting the likelihood a competitor will take competitive action.

-Factors affecting the likelihood a competitor will responds to actions taken against it.

-Competitive dynamics in each of slow-cycle
fast-cycle, and standard cycle

Competitive Rivalry and Competitive Dynamics
Connor McCulloh, Jayson Shieh,
Matt Freeman, Mason Young
& Questions
First Mover Incentive
A FIRST MOVER is a firm that takes an initial competitive action in order to build or defend its competitive advantages or improve its market position.
The benefits of being a successful first mover can be substantial.
A SECOND MOVER is a firm that responds to the first mover’s competitive action, typically through imitation.
A LATE MOVER is a firm that responds to a competitive action a significant amount of time after the first mover’s actions and the second mover’s response.
Organizational Size
An organization’s size affects the likelihood it will take competitive actions as well as the types and timing of those actions.
Small firms are more likely than large companies to launch competitive actions and tend to do it more quickly.
Large Firms, however, are likely to initiate more competitive actions along with more strategic actions during a given period.

QUALITY exist when the firm’s goods or services meet or exceed customers expectations.
In the eyes of customers, quality is about doing the right things relative to performance measures that are important to them.
If the quality of a competitor’s product is in decline, a firm a predict that the competitor likely won’t be aggressive in its competitive actions until its problems are resolved.

Types of Competitive Action
-Competitive responses to strategic actions differ from responses to tactical actions.
These differences allow the firm to predict a competitor’s likely response to a competitive action that has been launched against it.
In general, strategic actions elicit fewer total competitive responses because strategic responses such as market-based moves, involve a significant commitment of resources and are difficult to implement and reverse.

Actor’s Reputation
-In the context of competitive rivalry, an actor is the firm taking an action or a response while reputation is “the positive or negative attribute ascribed by one rival to another based on past behavior”.
Competitors are more likely to respond to strategic or tactical actions when they are taken by a market leader.
In contrast to a firm with a strong reputation, competitors are less likely to take responses against a company with a reputation for a competitive behavior that is risky, complex, and unpredictable.

Dependence on the Market
-Market dependence denotes the extent to which a firm’s revenues or profit are deprived from a particular market.
Competitors with high market dependence are likely to respond strongly to attack threatening their market position.
The threatened firm in these instances may not always respond quickly, even though an effective response to an attack on the firm’s position in a critical market is important.

. Fast-cycle markets
-Markets in which the firm’s capabilities that contribute to competitive advantages are not shielded from imitation and where imitation is often rapid and inexpensive.

Focus: learning how to rapidly and continuously develop new competitive advantages that are superior to those they replace (creating innovation)

Avoid loyalty to any one product, possibly cannibalizing their own current products to launch new ones before competitors learn how to do so through successful imitation.

Continually try to move on to another temporary competitive advantage before competitors can respond to the first one.

. Standard-cycle
-Markets where firm’s competitive advantages are moderately shield from imitation and where imitation is moderately costly.

-Competitive advantages partially sustained as quality is continuously upgraded.

-Seek to serve many customer and gain a large market share

-Gain brand loyalty through brand names

Careful operation control/ manage a consistent experience for the customer.
Full transcript