052 strategy competitors competitive rivalry competitive behavior and competitive dynamics

  rivalry, competitive behavior, and rivalry, competitive behavior, and

  S S TRATEGIC TRATEGIC competitive dynamics competitive dynamics

  A A CTIONS: CTIONS:

  S TRATEGY S TRATEGY F F ORMULATION ORMULATION

Strategic Management Strategic Management

  Management of Strategy Management of Strategy

  Competitiveness and Globalization: Competitiveness and Globalization:

  Concepts and Cases Concepts and Cases Seventh edition

  Concepts and Cases © © The University of West Alabama The University of West Alabama PowerPoint Presentation by Charlie Cook PowerPoint Presentation by Charlie Cook 2007 Thomson/South - 2007 Thomson/South - Western. Western. Concepts and Cases All rights reserved. Michael A. Hitt All rights reserved.

  • • R. Duane Ireland • Robert E. Hoskisson

  NOWLEDGE BJECTIVES NOWLEDGE BJECTIVES K O K O

Studying this chapter should provide you with the strategic

management knowledge needed to:

  

1. Define competitors, competitive rivalry, competitive behavior, a nd

  

1. Define competitors, competitive rivalry, competitive behavior, a nd

competitive dynamics. competitive dynamics.

  2. Describe market commonality and resource similarity as the

  2. Describe market commonality and resource similarity as the building blocks of a competitor analysis. building blocks of a competitor analysis.

  3.

  3. Explain awareness, motivation, and ability as drivers of competi Explain awareness, motivation, and ability as drivers of competi tive tive behavior. behavior.

  4. Discuss factors affecting the likelihood a competitor will take

  4. Discuss factors affecting the likelihood a competitor will take competitive actions. competitive actions.

  

5. Discuss factors affecting the likelihood a competitor will respo nd to

  

5. Discuss factors affecting the likelihood a competitor will respo nd to

actions taken against it. actions taken against it.

  6.

  6. Explain competitive dynamics in slow Explain competitive dynamics in slow - - - cycle, fast cycle, fast cycle, and cycle, and - © 2007 Thomson/South-Western. All rights reserved. - - standard standard cycle markets. cycle markets. 5

  © 2007 Thomson/South-Western. All rights reserved. 5 Definitions Definitions

  Competitors Competitors

  Firms operating in the same market, offering similar

  Firms operating in the same market, offering similar products and targeting similar customers. products and targeting similar customers.

  Competitive Rivalry Competitive Rivalry

  The ongoing set of competitive actions and responses

  The ongoing set of competitive actions and responses occurring between competitors. occurring between competitors.

  Competitive rivalry influences an individual firm

  Competitive rivalry influences an individual firm

  ’ ’ s

  s ability to gain and sustain competitive advantages. ability to gain and sustain competitive advantages.

  competitive advantages and to improve its market position. position.

  The total set of actions and responses taken by all

  Competitive Dynamics Competitive Dynamics

  Firms competing against each other in several product or geographic markets. product or geographic markets.

  Firms competing against each other in several

  Competition Competition

  Multimarket Multimarket

  competitive advantages and to improve its market

  responses the firm takes to build or defend its

  responses the firm takes to build or defend its

  The set of competitive actions and competitive

  The set of competitive actions and competitive

  Competitive Behavior Competitive Behavior

  © 2007 Thomson/South-Western. All rights reserved. 5 Definitions Definitions

  The total set of actions and responses taken by all firms competing within a market. firms competing within a market.

  © 2007 Thomson/South-Western. All rights reserved. 5 From Competitors to Competitive Dynamics From Competitors to Competitive Dynamics

  Competitors Competitors

  To gain an advantageous To gain an advantageous market position market position

  Competitive Behavior Competitive Behavior

  Competitive actions Competitive actions

  Competitive responses Competitive responses Competitive Dynamics Competitive Dynamics Competitive actions and responses taken Competitive actions and responses taken by all firms competing in a market by all firms competing in a market Engage in Why? How? What Results? What Results? Competitive Competitive Rivalry Rivalry

  © 2007 Thomson/South-Western. All rights reserved. 5 Figure Figure

  5.1

  From Competitors to Competitive Dynamics Source: Adapted from M.-J. Chen, 1996, Competitor analysis and interfirm rivalry: Toward a theoretical integration, Academy of Management Review, 21: 100 –134.

    • How well it anticipates competitors

  How well the firm anticipates and responds to its

  s business

  ’ ’ s business

  Has the strongest influence on the firm

  Has the strongest influence on the firm

  Affects all types of strategies.

  Competitive rivalry: Competitive rivalry:

  ’ initial actions. initial actions.

  ’

  competitors

  competitors

  

How well the firm anticipates and responds to its

  responses to them. them.

  responses to

  ’

  ’

  How well it anticipates competitors

  ’ s initial competitive actions. s initial competitive actions.

  ’

  The firm

  The firm

  Success of a strategy is determined by: Success of a strategy is determined by:

  ’ ’ s Effect on Strategy s Effect on Strategy

  • Affects all types of strategies.
    • level strategy or strategies.

  © 2007 Thomson/South-Western. All rights reserved. 5 Competitive Rivalry Competitive Rivalry

  level strategy or strategies.

  s actions and responses.

  ’ ’ s actions and responses.

  Competitors feel each other

  Competitors feel each other

  responses from its competitors. responses from its competitors.

  ’ s competitive actions elicit competitive s competitive actions elicit competitive

  ’

  A firm

  A firm

  on its competitors. on its competitors.

  ’ s competitive actions have noticeable effects s competitive actions have noticeable effects

  ’

  A firm

  A firm

  Firms are mutually interdependent Firms are mutually interdependent

  © 2007 Thomson/South-Western. All rights reserved. 5 A Model of Competitive Rivalry A Model of Competitive Rivalry

  Marketplace success is a function of both Marketplace success is a function of both individual strategies and the consequences of individual strategies and the consequences of their use. their use. A Model of Competitive Rivalry A Model of Competitive Rivalry

  Drivers of Competitive Drivers of Competitive Competitive Analysis Competitive Analysis Behavior Behavior

  Market commonality Market commonality

  Awareness Awareness Resource similarity Resource similarity

  Motivation Motivation

  Ability Ability Feedback Feedback Interfirm Rivalry Interfirm Rivalry

  Likelihood of Attack Likelihood of Attack

  First mover incentives - - First mover incentives Outcomes Outcomes

  Organizational size Organizational size

  Market position Market position Quality Quality

  Financial Financial

  Likelihood of Response Likelihood of Response performance performance Type of competitive action Type of competitive action

  Reputation Reputation

  Market dependence Market dependence © 2007 Thomson/South-Western. All rights reserved. 5

  © 2007 Thomson/South-Western. All rights reserved. 5 FIGURE FIGURE

  5.2

  Source: Adapted from M.-J. Chen, 1996, Competitor analysis and interfirm rivalry: Toward a theoretical integration, Academy of Management Review, 21: 100 –134.

  © 2007 Thomson/South-Western. All rights reserved. 5 Competitor Analysis Competitor Analysis

  Competitor analysis is used to help a firm Competitor analysis is used to help a firm understand its competitors. understand its competitors.

  The firm studies competitors The firm studies competitors

  ’ ’ future objectives, future objectives, current strategies, assumptions, and capabilities. current strategies, assumptions, and capabilities.

  

With the analysis, a firm is better able to predict

With the analysis, a firm is better able to predict

competitors competitors

  ’ ’ behaviors when forming its behaviors when forming its competitive actions and responses. competitive actions and responses.

    • The degree of importance of the individual markets to

  © 2007 Thomson/South-Western. All rights reserved. 5 Market Commonality Market Commonality

  Market commonality is concerned with: Market commonality is concerned with:

  The number of markets with which a firm and a

  The number of markets with which a firm and a competitor are jointly involved. competitor are jointly involved.

  The degree of importance of the individual markets to each competitor. each competitor.

  Firms competing against one another in several

Firms competing against one another in several

or many markets engage in multimarket or many markets engage in multimarket competition. competition.

  A firm with greater multimarket contact is less likely to

  A firm with greater multimarket contact is less likely to

  initiate an attack, but more likely to more respond

  initiate an attack, but more likely to more respond aggressively when attacked. aggressively when attacked.

  resources are to a competitor

  Use similar strategies.

  Have similar strengths and weaknesses.

  Firms with similar types and amounts of Firms with similar types and amounts of resources are likely to: resources are likely to:

  s in terms of both types and amounts. and amounts.

  s in terms of both types

  ’

  ’

  resources are to a competitor

  s tangible and intangible

  s tangible and intangible

  ’

  ’

  How comparable the firm

  How comparable the firm

  Resource Similarity Resource Similarity

    • Have similar strengths and weaknesses.
    • Use similar strategies.

  © 2007 Thomson/South-Western. All rights reserved. 5 Resource Similarity Resource Similarity

  

Assessing resource similarity can be difficult if

Assessing resource similarity can be difficult if critical resources are intangible rather than critical resources are intangible rather than tangible. tangible.

  © 2007 Thomson/South-Western. All rights reserved. 5 FIGURE FIGURE

  5.3

  A Framework of Competitor Analysis Source: Adapted from M.-J. Chen, 1996, Competitor analysis and interfirm rivalry: Toward a theoretical integration, Academy of Management Review, 21: 100 –134.

  • Market commonality Market commonality

  © 2007 Thomson/South-Western. All rights reserved. 5 Drivers of Competitive Behavior Drivers of Competitive Behavior

  Awareness is Awareness is

  the extent to which

  the extent to which

  competitors recognize the

  competitors recognize the

  degree of their mutual

  degree of their mutual

  interdependence that

  interdependence that

  results from:

  results from:

  Resource similarity

  Resource similarity Awareness Awareness Drivers of Competitive Behavior (cont

  d) Drivers of Competitive Behavior (cont

  d) ’

  ’

  Awareness Awareness Motivation concerns

  Motivation concerns

  the firm s incentive to take the firm s incentive to take

  ’ ’ action action

  Motivation Motivation

  or to respond to a or to respond to a competitor s attack competitor s attack

  ’ ’

  • and relates to perceived

  and relates to perceived gains and losses gains and losses © 2007 Thomson/South-Western. All rights reserved. 5 Drivers of Competitive Behavior (cont

  d) Drivers of Competitive Behavior (cont

  d) ’

  ’

  Ability relates to

  Ability relates to

  Awareness Awareness

  • each firm s resources each firm ’ s resources ’
  • the flexibility these the flexibility these

  Motivation Motivation resources provide resources provide

  Without available

  Without available

  resources the firm lacks

  resources the firm lacks

  Ability Ability the ability to

  the ability to

  attack a competitor attack a competitor

  respond to the competitor s respond to the competitor s actions actions © 2007 Thomson/South-Western. All rights reserved. 5

  ’ ’

  • A firm is more likely to attack A firm is more likely to attack

  © 2007 Thomson/South-Western. All rights reserved. 5 Drivers of Competitive Behavior (cont Drivers of Competitive Behavior (cont

  ’ ’

  d)

  d)

  the rival with whom it has low the rival with whom it has low market commonality than the market commonality than the one with whom it competes in one with whom it competes in multiple markets. multiple markets.

  Given the strong competition Given the strong competition under market commonality, it is under market commonality, it is likely that the attacked firm will likely that the attacked firm will respond to its competitor respond to its competitor

  ’ ’ s s action in an effort to protect its action in an effort to protect its position in one or more position in one or more markets. markets.

  Awareness Awareness

  Motivation Motivation

  Market Market

  Commonality Commonality

  Ability Ability

  © 2007 Thomson/South-Western. All rights reserved. 5 Drivers of Competitive Behavior (cont Drivers of Competitive Behavior (cont

  ’ ’

  d)

  d)

  The greater the resource The greater the resource imbalance between the acting firm imbalance between the acting firm and competitors or potential and competitors or potential responders, the greater will be the responders, the greater will be the delay in response by the firm with a delay in response by the firm with a resource disadvantage. resource disadvantage.

  When facing competitors with When facing competitors with greater resources or more greater resources or more attractive market positions, firms attractive market positions, firms should eventually respond, no should eventually respond, no matter how challenging the matter how challenging the response. response.

  Awareness Awareness

  Motivation Motivation

  Resource Resource

  Dissimilarity Dissimilarity

  Ability Ability

  Market Market

  Commonality Commonality

    • A strategic or tactical action the firm takes to counter

  © 2007 Thomson/South-Western. All rights reserved. 5 Competitive Rivalry Competitive Rivalry

  Competitive Action Competitive Action

  A strategic or tactical action the firm takes to build or

  A strategic or tactical action the firm takes to build or

  defend its competitive advantages or improve its

  

defend its competitive advantages or improve its

market position. market position.

  Competitive Response Competitive Response

  A strategic or tactical action the firm takes to counter

  the effects of a competitor

  the effects of a competitor

  ’

  ’ s competitive action. s competitive action.

    • Usually involves fewer resources.
    • Is relatively easy to implement and reverse.

  Usually involves fewer resources.

  strategy:

  strategy:

  tune a

  tune a

  based move that is taken to fine

  based move that is taken to fine

  A market

  Tactical Action (or Response) Tactical Action (or Response)

  A market

  commitment of organizational resources and is difficult to implement and reverse. difficult to implement and reverse.

  commitment of organizational resources and is

  based move that involves a significant

  based move that involves a significant

  A market

  A market

  Strategic Action (or Response) Strategic Action (or Response)

  © 2007 Thomson/South-Western. All rights reserved. 5 Strategic and Tactical Actions Strategic and Tactical Actions

  Is relatively easy to implement and reverse. Factors Affecting Likelihood of Attack Factors Affecting Likelihood of Attack

  • First movers allocate funds for:

  First movers allocate funds for: First First Mover • - Mover -

  Product innovation and Incentives Product innovation and

  Incentives development development

  Aggressive advertising Aggressive advertising

  First Mover

  A firm that takes an Advanced research and Advanced research and initial competitive action development development in order to build or

  First movers can gain: First movers can gain: defend its competitive

  The loyalty of customers who may

  • The loyalty of customers who may

  advantages or to become committed to the firm s become committed to the firm s

  ’ improve its market

  ’ goods or services. goods or services. position.

  Market share that can be difficult Market share that can be difficult for competitors to take during for competitors to take during future competitive rivalry. future competitive rivalry.

  © 2007 Thomson/South-Western. All rights reserved. 5 Factors Affecting Likelihood of Attack (cont

  d) Factors Affecting Likelihood of Attack (cont

  d) ’

  ’

  Second mover responds to the first Second mover responds to the first

  First Mover First Mover mover mover s competitive action, typically s competitive action, typically ’

  ’ through imitation: through imitation:

  Second Mover Second Mover

  Studies customers reactions to Studies customers reactions to

  ’ ’

  Incentives Incentives product innovations. product innovations.

  Tries to find any mistakes the first

  • Tries to find any mistakes the first mover made, and avoid them.

  mover made, and avoid them.

  • Can avoid both the mistakes and Can avoid both the mistakes and
    • the huge spending of the first
    • the huge spending of the first movers. movers.

  May develop more efficient May develop more efficient processes and technologies. processes and technologies.

  © 2007 Thomson/South-Western. All rights reserved. 5

  • Late mover responds to a Late mover responds to a

  © 2007 Thomson/South-Western. All rights reserved. 5 Factors Affecting Likelihood of Attack (cont Factors Affecting Likelihood of Attack (cont

  ’ ’

  d)

  d)

  competitive action only after competitive action only after considerable time has elapsed. considerable time has elapsed.

  Any success achieved will be slow Any success achieved will be slow in coming and much less than that in coming and much less than that achieved by first and second achieved by first and second movers. movers.

  Late mover Late mover

  ’ ’ s competitive action s competitive action allows it to earn only average allows it to earn only average returns and delays its returns and delays its understanding of how to create understanding of how to create value for customers. value for customers.

  First Mover First Mover

  Second Mover Second Mover

  Late Mover Late Mover Factors Affecting Likelihood of Attack (cont

  d) Factors Affecting Likelihood of Attack (cont

  d) ’

  ’

  Small firms are more likely: Small firms are more likely:

  First Mover First Mover

  • To launch competitive actions. To launch competitive actions.
  • To be quicker in doing so. To be quicker in doing so.

  Second Mover Second Mover

  Small firms are perceived as: Small firms are perceived as:

  Nimble and flexible competitors

  • Nimble and flexible competitors
  • Relying on speed and surprise to Relying on speed and surprise to

  Late Mover Late Mover defend competitive advantages or defend competitive advantages or develop new ones while engaged in develop new ones while engaged in Organizational competitive rivalry.

  Organizational competitive rivalry.

  Size Small - Size Small -

  • Having the flexibility needed to Having the flexibility needed to

  launch a greater variety of launch a greater variety of competitive actions. competitive actions.

  © 2007 Thomson/South-Western. All rights reserved. 5

  Large Large

  Size

  Organizational Size

  Second Mover Organizational

  First Mover Second Mover

  Former CEO, Southwest Airlines Former CEO, Southwest Airlines First Mover

  Herb Kelleher Herb Kelleher

  ’ ’ ll get ll get smaller. Think and act small and smaller. Think and act small and we we

  ’ ’ ll get bigger. ll get bigger.

  Think and act big and we Think and act big and we

  Large organizations commonly Large organizations commonly have the slack resources required have the slack resources required to launch a larger number of total to launch a larger number of total competitive actions competitive actions

  Large firms are likely to initiate Large firms are likely to initiate more competitive actions as well as more competitive actions as well as strategic actions during a given time strategic actions during a given time period period

  d)

  d)

  ’ ’

  © 2007 Thomson/South-Western. All rights reserved. 5 Factors Affecting Likelihood of Attack (cont Factors Affecting Likelihood of Attack (cont

  Late Mover Late Mover Factors Affecting Likelihood of Attack (cont

  d) Factors Affecting Likelihood of Attack (cont

  d) ’

  ’ First Mover

  First Mover

  Quality exists when the firm s

  Quality exists when the firm s

  ’

  ’

  goods or services meet or

  goods or services meet or

  Second Mover exceed customers Second Mover exceed customers

  ’

  ’

  expectations

  expectations

  Product quality dimensions

  Product quality dimensions

  Late Mover Late Mover include:

  include:

  • Performance Conformance Performance Conformance

  Organizational Organizational

  Size Size

  Features Serviceability   Features Serviceability  

  • Flexibility Aesthetics

  Flexibility Aesthetics  

  Quality Quality

  • Durability Durability Perceived Perceived

  (Product) (Product) © 2007 Thomson/South-Western. All rights reserved. quality quality 5 Table Quality Dimensions of Goods and Services Table

  5.1

  Product Quality Dimensions

  1. Performance —Operating characteristics

  2. Features —Important special characteristics

  3. Flexibility —Meeting operating specifications over some period of time

  4. Durability —Amount of use before performance deteriorates

  5. Conformance —Match with preestablished standards

  6. Serviceability —Ease and speed of repair

  7. Aesthetics —How a product looks and feels

  8. Perceived quality —Subjective assessment of characteristics (product image) © 2007 Thomson/South-Western. All rights reserved. Press; D. Garvin, 1988, Managed Quality: The Strategic and Competitive Edge, New York:The Free Press. Paul, MN:West Publishing Company; H.V. Roberts & B. F. Sergesketter, 1993, Quality Is Personal, New York:The Free SOURCES: Adapted from J.W. Dean, Jr., & J. R. Evans, 1994, Total Quality: Management, Organization and Society, St. 5 Factors Affecting Likelihood of Attack (cont

  d) Factors Affecting Likelihood of Attack (cont

  d) ’

  ’ First Mover

  First Mover

  Second Mover Second Mover

  Service quality dimensions

  Service quality dimensions

  include:

  include:

  • Timeliness Timeliness

  Late Mover Late Mover

  • Courtesy Courtesy

  Consistency Consistency

  Organizational Organizational

  • Convenience

  Size  Convenience Size

  • Completeness Completeness

  Quality Quality

  • Accuracy

  Accuracy (Service)

  (Service) © 2007 Thomson/South-Western. All rights reserved. 5

  5.1

  5.1 Table Quality Dimensions of Goods and Services (cont

  d) Table Quality Dimensions of Goods and Services (cont

  d) ’ ’

  Service Quality Dimensions

  1. Timeliness —Performed in the promised period of time

  2. Courtesy —Performed cheerfully

  3. Consistency —Giving all customers similar experiences each time

  4. Convenience —Accessibility to customers

  5. Completeness —Fully serviced, as required

  6. Accuracy —Performed correctly each time © 2007 Thomson/South-Western. All rights reserved. Press; D. Garvin, 1988, Managed Quality: The Strategic and Competitive Edge, New York:The Free Press. Paul, MN:West Publishing Company; H.V. Roberts & B. F. Sergesketter, 1993, Quality Is Personal, New York:The Free SOURCES: Adapted from J.W. Dean, Jr., & J. R. Evans, 1994, Total Quality: Management, Organization and Society, St. 5

  defensible.

  ’ s market position becomes less s market position becomes less

  ’

  Makes the firm

  Makes the firm

  s ability to use its capabilities to create or maintain an advantage. create or maintain an advantage.

  ’ ’ s ability to use its capabilities to

  Damages the firm

  Damages the firm

  gain or produce stronger competitive advantages or an improvement in its market position. an improvement in its market position.

  gain or produce stronger competitive advantages or

  s capabilities to

  s capabilities to

  ’

  ’

  Leads to better use of the competitor

  Leads to better use of the competitor

  ’ ’ s action are taken s action are taken when the action: when the action:

  Responses to a competitor Responses to a competitor

  © 2007 Thomson/South-Western. All rights reserved. 5 Likelihood of Response Likelihood of Response

  defensible.

  © 2007 Thomson/South-Western. All rights reserved. 5 Factors Affecting Likelihood of Response Factors Affecting Likelihood of Response

  

Firms study three other factors to predict how a

Firms study three other factors to predict how a

competitor is likely to respond to competitive competitor is likely to respond to competitive actions: actions:

  Type of competitive action

  Type of competitive action

  Reputation

  Reputation

  Market dependence

  Market dependence Factors Affecting Strategic Response Factors Affecting Strategic Response

  Type of Type of

  Strategic actions receive

  Strategic actions receive

  Competitive Competitive strategic responses

  strategic responses

  Action Action

  • Strategic actions elicit fewer total Strategic actions elicit fewer total competitive responses. competitive responses.
  • The time needed to implement and

  The time needed to implement and assess a strategic action delays assess a strategic action delays competitor competitor s responses. s responses.

  ’ ’

  Tactical responses are taken to

  Tactical responses are taken to

  counter the effects of tactical

  counter the effects of tactical

  

actions

  actions

  A competitor likely will respond A competitor likely will respond quickly to a tactical actions quickly to a tactical actions © 2007 Thomson/South-Western. All rights reserved. 5

  • An actor is the firm taking an An actor is the firm taking an
  • Reputation is the positive or Reputation is the positive or

  a competitor has taken

  ’ ’ s s

  Actor Actor

  Action Action

  Competitive Competitive

  Type of Type of

  previously when attacked to predict likely responses. predict likely responses.

  previously when attacked to

  a competitor has taken

  The firm studies responses that

  The firm studies responses that

  one rival to another based on past competitive behavior. past competitive behavior.

  negative attribute ascribed by negative attribute ascribed by one rival to another based on

  action or response

  action or response

  d)

  d)

  ’ ’

  © 2007 Thomson/South-Western. All rights reserved. 5 Factors Affecting Strategic Response (cont Factors Affecting Strategic Response (cont

  Reputation Reputation

  • Market dependence is the Market dependence is the

  competitors with high market

  Reputation Reputation

  ’ ’ s s

  Actor Actor

  Action Action

  Competitive Competitive

  Type of Type of

  threatening their market position. position.

  threatening their market

  respond strongly to attacks

  respond strongly to attacks

  dependence are likely to

  dependence are likely to

  competitors with high market

  In general, firms can predict that

  In general, firms can predict that

  revenues or profits are derived from a particular market. from a particular market.

  revenues or profits are derived

  s

  s

  ’

  ’

  extent to which a firm

  extent to which a firm

  d)

  d)

  ’ ’

  © 2007 Thomson/South-Western. All rights reserved. 5 Factors Affecting Strategic Response (cont Factors Affecting Strategic Response (cont

  Dependence Dependence on the market on the market

  © 2007 Thomson/South-Western. All rights reserved. 5 Competitive Dynamics versus Rivalry Competitive Dynamics versus Rivalry

  Competitive Dynamics Competitive Dynamics

  Ongoing actions and responses taking place Ongoing actions and responses taking place between between all firms all firms competing within a market competing within a market for advantageous positions. for advantageous positions.

  Competitive Rivalry Competitive Rivalry

  Ongoing actions and responses taking place Ongoing actions and responses taking place between between an individual firm an individual firm and its and its competitors competitors for advantageous market for advantageous market position. position.

  market

  cycle

  ) )

  Market speed (slow

  cycle, fast

  cycle, fast

  cycle, and

  cycle, and

  standard

  standard

  cycle

  ( (

  Effects of market

  Effects of market

  speed on actions and

  speed on actions and

  responses of all

  responses of all

  competitors in the

  competitors in the

  market

  All firms All firms

  Competitive Dynamics Competitive Dynamics

    • Market commonality
    • Market speed (slow

  size and quality

  © 2007 Thomson/South-Western. All rights reserved. 5 Competitive Dynamics versus Rivalry (cont Competitive Dynamics versus Rivalry (cont

  ’ ’

  d)

  d)

  Competitive Rivalry Competitive Rivalry

  ( (

  Individual firms Individual firms

  ) )

  Market commonality

  and resource similarity

  and resource similarity

  Awareness, motivation

  Awareness, motivation

  and ability

  and ability

  First mover incentives,

  First mover incentives,

  size and quality

  • Competitive advantages are Competitive advantages are

  All firms concentrate on

  Cycle Cycle

  Slow Slow

  and extend proprietary competitive advantage. competitive advantage.

  and extend proprietary

  responses to protect, maintain

  responses to protect, maintain

  competitive actions and

  competitive actions and

  All firms concentrate on

  cycle markets.

  sustainable in slow

  sustainable in slow

  Competitive advantages are

  Competitive advantages are

  periods of time and imitation is costly. costly.

  periods of time and imitation is

  shielded from imitation for long

  shielded from imitation for long

  • cycle markets.

  © 2007 Thomson/South-Western. All rights reserved. 5 Competitive Dynamics Competitive Dynamics

  Markets Markets

  © 2007 Thomson/South-Western. All rights reserved. 5 FIGURE FIGURE

  5.4

  Gradual Erosion of a Sustained Competitive Advantage SOURCE: Adapted from I. C. MacMillan, 1988, Controlling competitive dynamics by taking strategic initiative, Academy of Management Executive, 11(2): 111 –118.

  • -

  • Non Non
FIGURE FIGURE

  Competitive advantages aren

  Competitive advantages aren

  ’

  ’

  t

  t sustainable. sustainable.

  Competitors use reverse engineering Competitors use reverse engineering to quickly imitate or improve on the to quickly imitate or improve on the firm firm

  ’ ’ s products s products

  proprietary technology is

  proprietary technology is

  diffused rapidly

  diffused rapidly Slow

  Slow

  Cycle Cycle

  Markets Markets

  Fast Fast

  Cycle Cycle

  somewhat expensively

  somewhat expensively

  Imitation happens quickly and

  ’

  © 2007 Thomson/South-Western. All rights reserved. 5 Competitive Dynamics (cont Competitive Dynamics (cont

  ’ ’

  d)

  d)

  The firm

  

The firm

  ’

  s competitive

  Imitation happens quickly and

  s competitive

  advantages aren

  advantages aren

  ’

  ’

  t shielded from

  t shielded from imitation.

imitation.

  Markets Markets

  5.5

  Developing Temporary Advantages to Create Sustained Advantage Advantage © 2007 Thomson/South-Western. All rights reserved. taking strategic initiative, Academy of Management Executive, 11(2): 111 Source: Adapted from I. C. MacMillan, 1988, Controlling competitive dynamics by –118. 5 Competitive Dynamics (cont

  d) Competitive Dynamics (cont

  d) ’

  ’

  Moderate cost of imitation may

  Moderate cost of imitation may

  • Slow Cycle
  • Slow Cycle shield competitive advantages.

  shield competitive advantages.

  Markets Markets

  Competitive advantages are

  Competitive advantages are

  partially sustainable if their quality partially sustainable if their quality Fast - Cycle

  • Fast Cycle is continuously upgraded.

  is continuously upgraded.

  Markets Markets

  Firms

  Firms

  • Seek large market shares

  Seek large market shares

  • Standard Cycle
  • Standard Cycle

  Gain customer loyalty through brand Gain customer loyalty through brand

  Markets Markets names names

  Carefully control operations Carefully control operations © 2007 Thomson/South-Western. All rights reserved. 5

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