#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.
What is market commonalities effect on likelihood of attacks and responses?
Market commonality reduces the likelihood of an attack but increases likelihood of response.
What are the drivers of rivalry?
- Awareness of competitive relationship and/or competitors’ initiatives
- Motivation: Market commonality affects motivation for attacking or responding
- Capability: Resource similarity influences capability of attacking and responding
What are other key factors affecting the likelihood of competitive attack?
- Global MNC: The MNC is global rather than multi-domestic
- Managers’ international experience: Better knowledge of other markets
- Wholly-owned subsidiaries: rather than partner agreements, such as licensing, franchising etc.
- First and second-mover advantages* (Chen & Stucker 1997; C4)
○ If a firm has a first-mover advantage, other firms are more motivated to respond
The existence of potential 2nd mover advantage - i.e. Substantial potential for learning for the mistakes of the 1st mover - increases capability of responding
What are key factor influencing the speed of competitive responses:
Geographical distance
Government Constraints
Subsidiary Control
Explain how distance impact the speed of competitive responses
Geographic distance between home and host country will constrain capability to act in that country
When attack occurs in geographically distant country, awareness and motivation to respond is smaller.
Explain how subsidiary control impact the speed of competitive responses
Strong subsidiary control increase an MNEs motivation and capability to respond in a given host country
Explain how government constraints impact the speed of competitive responses
Host country constraints decrease motivation and capability of an MNE to respond
MNE home government increase motivation and capability to respond
What is a slow cycle market
Slow-cycle markets are markets in which the firm’s competitive advantages are shielded from imitation for what are commonly long periods of time and where imitation is costly. Thus competitive advantages are sustainable in slow-cycle markets
What is a fast cycle market
Fast-cycle markets are markets in which the firm’s competitive advantages aren’t shielded from imitation and where imitation happens quickly and perhaps somewhat inexpensively.
Competitive advantages aren’t sustainable.
Reverse technology is used by competitor to gain the knowledge required to imitate or improve the firm’s products
