#4 MNC Multi-Market Rivalry Flashcards
What are the causes of rivalry?
- Several equally strong players
- Low growth in the market, or no growth
- High fixed costs
- Excess production capacities
- Little opportunities for differentiation
- High strategic stakes
- Major barriers to exit
Multipoint competition
Competition between two companies in multiple markets
Competitive asymmetry
Competitive relationships of market commonality and resource similarity are directional and need not be symmetrical. Two implications: 1) If A is B’s primary competitor, it does not necessarily follow that B is A’s primary competitor. 2) If A is a major competitor of B, and B is a major competitor of C, it does not follow that A is a major competitor of C.
Competitors
Firms operating in the same industry, offering similar products and targeting similar customers
Market
Geography-based, customer-based or product-based
Market commonality
Degree of presence of a competitor in markets that overlap with the focal firm. Impacted both by the strategic importance of the market and the competitor’s strengths in the shared market.
Resource similarity
The degree to which competitor possesses resources similar, in terms of type and amount, to those of the focal firm. Here, each firm differs from others in degrees along a continuum of resource similarity.
Attack:
A competitive move initiated by a firm that may lead to the firm’s acquiring its rivals’ market shares or reducing their anticipated returns
Response:
A specific countermove, prompted by a rival’s attack, that a firm takes to defend or improve its share of profit position in the industry
Which is the best predictor of rivalry: market commonality or resource similarity?
Market commonality
What is resource similarity’s effect on the likelihood of attacks and responses?
Resource similarity reduces the likelihood of an attack but increases likelihood of response.
Why do market commonality reduce the likelihood of an attack?
A competitor will be less likely to attack, because a possible retaliation would be impose worse damage with greater market commonality.
Why do resource similarity reduce the likelihood of an attack?
Because firms with similar resources will be those most likely to respond to the types of attack the firm is capable of enacting.
Why do market commonality increase the likelihood of a response?
Because retaliation is more effective as a threat if market commonality is large. A key motivation for retaliation is to impose a credible threat, preventing attacks.
Why do resource similarity increase the likelihood of a response?
Because this type of firm is likely to be capable of reacting.
