Chapter 13 Flashcards
Strategy:
Objectives and a set of actions to achieve those objectives
Competitive dynamics:
The actions and responses undertaken by competing firms
Perfect competition:
A market with many small buyers and sellers
Dominant firms:
Firms with the market power to significantly influence the rules of the game in its
industry
Monopsony:
A market with only one buyer
Monopoly:
A market with only one seller
Oligopoly:
A market structure with only a handful of competing firms
Co-opetition:
Simultaneously rivalry and cooperation between two firms
Attack:
An initial set of actions to gain competitive advantage
Counterattack:
A set of actions in response to an attack
AMC framework:
A conceptual framework of awareness, motivation, capability indicating when
firms are likely to attack and counterattack each other
Competitor intelligence:
The process of analyzing rival’s resources and strategies to be able to
predict their future actions
Collusion:
Collective attempts between competing firms to reduce competition
Explicit collusion:
Firms directly negotiate output, fix pricing or division of markets
Cartel:
An entity that engages in output- or price-fixing, involving multiple competitors
Tacit collusion:
Firms indirectly coordinate actions by signalling their intention to reduce output
or maintain pricing above competitive levels
Prisenors’ dilemma:
In game theory, a type of game in which the outcome depends on two
parties deciding whether to cooperate or to deficit
Game theory:
A theory on how agents interact strategically to win
Repeated game:
A game plays over several periods of time
Tit-for-tat:
A strategy of matching the competitors’ move being either aggressive or
accommodative
Concentration ratio:
The percentage of total industry sales accounted for by the top 4, 8 or 20
firms
Price leader:
A firm that has a dominant market share and sets ‘acceptable’ prices and margins
in the industry
Barriers to entry:
Costs or other obstacles that prevent new competitors from easily entering an
industry or market segment
Cross-market retaliation:
The ability of a firm to expand in a competitor’s market if the
competitor attacks in its original market
Market commonality:
The overlap between two rivals’ markets
Mutual forbearance:
Behaviour of rivals respecting each other’s spheres of influence in certain
markets, leading to tacit collusion
Signalling:
Firms sending each other indirect messages about their intentions
Anti-trust policy:
US term for competition policy
EU Competition Commissioner:
The person in the EU Commission responsible for competition
policy
Collusive price setting:
Price setting colluding firms at a higher than competitive level
Leniency programs:
Programmes that give immunity to members of a cartel that first report the
cartel to the authorities
Market division collusion:
A collusion too divide markets among competitors
Anti-competitive practices (by a dominant firm):
Business practices by a dominating firm that
make it more difficult for competitors to enter or survive
Predatory pricing:
An attempt to dominate a market by setting prices below costs and intending
to raise prices to cover losses in the long run after eliminating rivals
Dumping:
An exporter selling bowl cost abroad and planning to raise prices after eliminating local
rivals
Patent race:
A competition of R&D units where the first one to patent a new technology gets to
dominate a market
Survival strategies:
A strategy designed to ensure survival by ensuring liquidity and positive cash
flow
Economic forecasting:
A technique using econometric models to predict the likely future value of
key economic variables
Scenario planning:
A technique generating multiple scenarios of possible future states of the
industry
Contingency plans:
Plans devised for specific situations when things could go wrong
Blue ocean strategy:
A strategy of attack that avoids direct confrontations with incumbents
Defender strategy:
This strategy centres on leveraging local assets in areas in which MNEs are
weak
Extender strategy:
This strategy centres on leveraging home-grown competencies abroad
Industries primed for collusion tend to have:
(1) a smaller number of rivals,
(2) a price leader,
(3)homogeneous products,
(4) high entry barriers and
(5) high market commonality.
