Chapter 8 Flashcards
Definition of competitive dynamics
Intense rivalry involving actions and responses among similar competitors vying for the same customers in a marketplace
Ex: aggressive price drops; imitating features (UA vs Delta)
What are the five ways to aggressively attack your rivals (hardball)
- Devastaing rivals’ profit sanctuaries
- Plagiarizing with pride
- Deceiving the competition
- Unleashing massive and overwhelming force
- Raising competitor’s cost
Explain “devasting rival’s profit sanctuaries”
Through focused attacks on a rival’s most profitable segments, a company can generate maximum leverage with relatively smaller-scale attacks
Ex: Walmart began to offer low priced extended warranties after learning rivals, Best Buy derived most of their profits from the extended warranties
Explain “Plagiarizing with pride”
Second movers can see how customers respond, make improvements, and launch a better version without all the market development costs
Ex: Samsung’s imitation of iPhone
Explain “deceiving the competition”
May cause the rivals to miss strategic shifts, spend money pursuing dead ends, or slow their responses
Ex: Craft beers owned by big breweries
Explain “unleashing massive and overwhelming force”
A firm commits significant resources to a major campaign to weaken rivals’ positions in certain markets
Ex: Coke’s entry into developing countries; De Beers
Explain “Raising competitors’ cost”
Steers its rivals into relatively higher cost/lower profit areans
Ex: Amazon forcing Walmart to adopt 2 day delivery
What is new competitive action and some reasons do companies enact it?
“An attack on competitive positions that can provoke a reaction”
- Improve market position
- Capitalize on growing demand
- Expand production capacity
- Provides an innovative new solution
- Obtain first-mover advantages
What is threat analysis and the two factors used to assess whether or not companies are close competitors?
Threat analysis: once a new competitive action becomes apparent, companies must determine how threatening it is to their business
- Market commonality
- Resource similarity
Explain “market commonality”
The extent to which competitors are vying for the same customers in the same markets
Ex: Trader Joes-Walmart vs. Lowe’s-Home Depot
Explain “resource similarity”
The extent to which rivals draw from the same types of strategic resources
Ex: IT firms in Silicon valley
What is a competitor’s motivation and capability to respond and what are some questions to ask?
How serious is the impact of the competitive attack to which they are responding?
What is the intent of the competitive response?
What strategic resources can be employed to fend off a competitive attack?
Must consider the role of the frim’s what?
Age and size; older and large incumbents might be
- More capable because of its experience and resources
- Less inclined to react because of complacence
What are the two types of competitive actions?
Strategic actions and tactical actions
Explain “Strategic actions”
Major commitments of distinctive and specific resources to strategic initiatives
-Requires significant planning and strategic resources and once initiated, is difficult to reverse
Ex: New market entry, new product introductions, capacity changes, M&A
