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
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