Competitive Strategy Flashcards
Definition Competitor - direct & indirect
Direct: Firms operating in the same market, similar product and similar costumers
Indirect: Outside strategy group, different way to satisfy customer, same industry
Market Commonality
Number of markets in which the firm and its competitors meet each other and the degree of importance of individual markets to each
Resource Similarity
Extent to which firm’s tangible/ intangible resources are comparable to competitor’s type and amount
Framework to competitive analysis
MC and RS and their implication on direct or indirect competition with triangles and squares
Competitive Action
- Strategic - Significant Commitment, difficult to implement and to reverse
- Tactical - “fine-tuning”, easy to implement and reverse
look for hiring or ad activities, new supplier - gather info
Competitive Dynamics
Strategy is dynamic in nature. Actions by one firm lead to responses by the competitor. All these actions shape the competitive position for the BLS.
- Total set of actions and responses of all firms competing within one market
Competitive Asymmetry
Wikipedia:
Asymmetric competition refers to forms of business competition where firms are considered competitors in some markets or contexts but not in others. In such cases a firm may choose to allocate competitive resources and marketing actions among its competitors out of proportion to their market share. Asymmetric competition can be visualized using techniques such as multidimensional scaling and perceptual mapping.
–>Concerns the Multimarket Contract of firm A and B and the Market Commonality from firm A point of view and firms B point of view.
->A has two markets in which Firm B both is competing as well.
–>Firm B has 4 markets and only competes in 2 out of 4 markets with firm A.
–>Therefore Firm A has a higher Market commanlity than Firm B.
Competitive Behavior
Set of competitive actions and responses a firm takes to build or defend a competitive advantage.
Serve to position the firm with regards to five forces
Competitive Rivalry
Ongoing set of competitive actions between competitors
Multimarket Competition
Firms competing in several product or geographic markets
Drivers of competitive behavior
- Awareness
- prerequisite to any action
- recognition of the degree of mutual interdependence driven by MC and RS
- MC and RS increase awareness - Motivation
- firm’s incentive to take action
- MC and RS reduce the likelihood of attack but increases the likelihood of response - Ability
- firms resources that allow competitive action and responsiveness
- similar resources - similar ability
- imbalance may lead to delay in response
Drivers of likelihood to attack
- First-mover Advantage
- learning curve
- loyalty gain by moving first
- gain market share
Characteristics: superior R&D, aggressive, higher but reasonable risk, slack resource - Organizational size
- larger firms are more likely to attack because of their resources, but slower due to bureaucracy
2.1. Small firms
> act as nimble and flexible competitors
> rely on speed and surprise
> have greater variety of competitive behavior options available
2.2. Large firms
> often greater slack
> greater likelihood to initiate competitive actions over time and launch a greater number of actions
> limited variety of actions - Quality
- customer perception, than product perform in ways that are important to customers
- Solve quality first, then action
- and then even more aggressive
Drivers of likelihood of response
- Types and effectiveness of competitive action
- strategic vs. tactical - Actor’s reputation
- more or less likely to trigger response
- market leader will respond but firms who constantly change price will not be taken seriously by the costumer - Dependence on market
Market Cycles
- Slow-Cycle market
> Imitation is slow and costly due to shielded resources due to historical conditions, causal ambiguity and patents
> Competitive Advantage is sustainable in this market - Fast-Cycle market
> Rapid imitation
> Competitive Advantage is not sustainable - Standard-Cycle Market
> Imitation is faster and less costly than in SCM but vice versa with FCM
> Competitive Advantage is partially sustainable
Multimarket Contact and Competitive Behavior
- competition in distinct geographical markets
- increases interdependence
- MMC leads to mutual forbearance
- MMC increases likelihood of responses
- several factors dampen effect of mutual forbearance
- > cultual diversity across markets
- > presence of domestic competitors
- > government regulations
- > presence of single market competitors
> Mutual forbearance requires full observability and effective internal coordination!
- violations need to be detected and punished
