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MGMT 490 Chapt 5

Terms in this set (83)

Competitors Def
are firms operating in the same market, offering similar products, and targeting similar customer
optimal decisions
when considering how to compete against their rivals to earn above average returns
Competitive rivalry
is the ongoing set of competitive actions and responses that occur among firms as they maneuver for an advantageous market position.
Firm Level Rivalry
results from firms initiating their own competitive actions and then responding to actions taken by competitors
Competitive behavior
is the set of competitive actions and response a given firm takes to build or defend its competitive advantages and to improve its market position.
The use of Competitive Rivalry
each firms seeks to successfully position itself relative to the 5 forces of competition and to defend its current competitive advantages while building advantages for the futures.
Increasing competitors engage in
competitive actions and responses in more than one market.
Multimarket competition
occurs when firm compete against each other in several product or geographic markets
Competitive dynamics
refers to all competitive behaviors that is the total set of actions and responses taken by all firms competing within a market.
Competitive rivalries affect a firm's strategies
as shown by the facts that a strategy's success is determined not only
by the firm's intimal actions, but also by how it anticipates responses and how well the firm anticipates and responds to its competitor's initial actions (attacks)
A competitor analysis
is the first step the firm takes to be able to predict the extent and nature of its rivalry with each competitor
market commonality
The number of markets firms compete against each other
The 2 dimensions determine the extent to which firms are competitors.
Competitor analysis and Market Commonality
The drivers of competitive behavior influence
the intensity of rivalry
Being able to predict rivals competitive actions and responses
helps the firm avoid situations in which it is unaware of competitor's objectives, strategies, assumptions, and capabilities: competitive blind spots
Firms competing in several of the same markets have
the potential to respond to a competitor's actions not only within the market in which a given set of actions are taken, but also in other markets where they compete with the rival.
The potential to respond to a competitors action creates
a mosaic in which the competitive actions or responses a firm takes in one market may be designed to affect the outcome of this rivalry with a particular competitor in a second market.
multimarket competition reduces
competitive rivalry, but some firms will still compete when the potential
rewards are high.
Resource Similarity
Is the extent to which the firm's tangible and intangible resources are comparable to a competitors in terms of both type and amount
Firms with similar types and amounts of resources are likely to have similar
strengths and weaknesses and use similar strategies on the basis of their strengths to pursue what may be similar opportunities in the external environment.
When performing a competitor analysis,
a firm analyzes each of its competitors with respect to market commonality and resource similarity.
A framework of competitor analysis
The intersections indicate the extent to which the firm and those with which it compares itself are competitors.
The mapping of competitive relations
is fluid as companies enter and exit markets and as rivals' resources change in type and amount, meaning that the companies with which a given firms is a direct competitor change over time.
Drivers of Competitive Behavior
Market commonality, Awareness, Motivation, ability
Awareness def
a prerequisite to any competitive action or response taken by a firm, refers the extent to which competitor recognize the degree of their mutual interdependence that results from market commonality and resource similarity
A lack of awareness can lead to
excessive competition, resulting in a negative effect on all competitors performance
Awareness tends to be greatest when
firms have highly similar resources (types and amounts) to use while competing
against each other in multiple markets
A firm may be aware of competitors but may not be motivated to engage in rivalry with them if
it perceive that its position will not improve or that its market position won't be damaged if it doesn't response
Motivation def
which concerns the firm's incentive to take action or to response to a competitors attack, relates to
perceived gains and losses.
Market commonality affects
the firm's perceptions and resulting motivation
A firm is more likely to attack the rival whom it has
low market commonality than one it competes in multiple markets-the reason is the high stakes involved in trying to gain a more advantageous poison over a rival whom the firm shares many markets
Multimarket competition can result in a
competitor responding the firms actions in a market different from one which that action was taken (both firm lose)
When a firm faces a competitor with similar resources,
careful study of a possible attack before initiating it is essential because the similarly resourced competitor is likely to respond to that action.
Resource dissimilarity influences
competitive actions and responses between firms, in that the more significant the difference between resources owned by the acting firm and who it has taken action, the longer is the delay by the firm with a resource disadvantage.
When facing competitors with greater resources (ability) or more attractive market positions, firms should
eventually respond (or it results in failure)
Competitive Rivalry
The ongoing competitive action/response sequence b/w a firm and a competitor
Competitive Rivalry affects
the performance of both firms. It's important for companies to carefully analyze and understand the competitive rivalry present in the markets in which they compete
The value of the final set of predictions the firm develops about competitors' action and responses is enhanced by studying
the "likelihood of attack" factors (1st mover advt.)
Evaluating of factors allows the firm to
refine the predictions it makes about actions/resp.
Likelihood of Attack Depends on
First Mover Benefits, Organizational Size, Quality
First Mover Benefits
A firm that takes an initial competitive action in order to build or defend its competitive advantages or to improve its market position
the first movers emphasize
R&D to develop innovative goods and services that customer will value
The benefits of R&D can be substantial
specially in fast cycle markets- critical to a firm's success in industries experience rapid technological developments and relatively short product life cycles
In addition to above average returns until competitors respond, a first mover can gain:
1. The loyalty of customer who may become committed to the goods or services of the firm that first made them available
o Market share that can be difficult for competitors to take during future rivalry
o Tend to be aggressive and willing to experiment with innovation and take higher risks
significantly invest in R&D as well as to rapidly and successfully produce and market a stream of innovation products
The firm must have readily available resource to
Organization slack makes it possible- slack:
the buffer or cushion provided by actual or obtainable resources that aren't currently in use and are in excess of the minimum resources needed to produce a given level of organizational output
Slack can quickly be allocated to
support competitive actions and aggressive marketing campaigns that lead to first
mover advantage (liquid asset)
Slack and the ability to be a first mover allows the firm to predict
that a first mover competitor likely has available
slack and will probably take aggressive competitive actions to ctn. Introduce products- and competitors will try to gain
market share and customer loyalty
Risks of First Movers
It's difficult to accurately estimate the returns that will be earned from introducing product innovations to the
marketplace
The cost to develop a product innovation
can be substantial, reducing the slack available to support further innovation
Second mover:
is a firm that responds to the first mover's competitive action, typically through imitation
Second Mover studies
customers' reactions to product innovation, tries to find mistakes made and avoid
Time to develop processes and technologies of second movers are
more efficient that first mover, or that create additional value
for customer (don't act too fast nor too slow)
A first mover can expect
a successful second mover competitor to study its market entries and to respond w/a new
entry into the market within a short time period
As a second mover, competitors will try
to respond with a product that provides greater customer value- most successful are able to rapidly and meaningfully interpret market feedback to respond quickly yet successfully to the first movers successful innovations (Angie's List)
Late mover:
a firm that responds to a competitive action a significant amount of time after the first mover's action
and the second mover's response
On occasion, a late mover can
be successful if they develop a unique way to enter the market and compete
The firm competing against a late mover can predict
that the competitor will likely enter a particular market only after both the first and second movers have achieve success in that market
The late mover will earn average returns
only after the time require for it to understand how to create at least as much customer value as that offered by the first and second movers' products
An organizations size affects
the likelihood it will take competitive actions as well the types and timing of those actions
Small firms are more likely than large companies to launch
competitive actions and tend to do it more quickly
Small firms are more
nimble and flexible competitors who rely on speed and surprise to defend their competitive advantages or develop new ones while engaged in competitive rivalry, especially with large companies, to gain advantageous market positions- variety in comp. action
Large firms are likely to initiate more
competitive actions along with more strategic actions during a given period- the firm should use a measurement such as total sales revenue or total number of employees when studying competitors
When engaging in competitive rivalry, Firms prefer
to be able to have the capabilities required to take a large number of unique competitive actions
A firms needs to have the amount
of slack resources that a large, successful company typically holds if it is to be able to launch a greater number of competitive actions
Firms needs to be
flexible when considering competitive actions and Reponses it may take if it's to be able to launch a greater variety of competitive actions
Firms are best served competitively when size permits them to
take an appropriate number of unique or divers
competitive actions and responses
Quality:
exist when the firm's goods or services meet or exceed customers' expectations
Evidence suggest that quality may be
the most critical component in satisfying the firm's customer
Product quality dimensions
Performance, features, Flexibility, Durability, Conformance , aesthetics, Perceived Quality
Service Quality dimensions
Timeliness, Courtesy, Consistency, convenience, completeness, Accuracy
Quality is possible only when
top-level managers support it and when its importance is institutionalized throughout the entire organization and its value chain
Quality is a universal then in
the global economy, and is necessary but insufficient condition for competitive success
Without quality, a firm's products lack
credibility, meaning that customer don't think of them as viable options
Quality affects competitive rivalry
The firm evaluating a competitor whose product suffer from poor quality can
predict declines in the competitor's sales revenue until the quality issues are resolved.
Likelihood of response

1.
The success of firm's competitive action is affected by the likelihood that a competitor will respond to it, as well as by the type (strategic or tactical) and effectiveness of that response.
In general, a firm is likely to respond to a competitor's action when
1. The action leads to better use of the competitor's capabilities to develop a stronger competitive advantage or an improvement in its market position
2. The action damages the firm's ability to use it core competencies to create or maintain an advantage
3. The firm's market position becomes harder to defend
Type of Competitive Action
Competitive responses to strategic actions differ from those to tactical actions
The differences in competitive action
allow the firm to predict a competitors likely response to a competitive action that been launched against it
Strategic actions commonly
receive strategic reposes (tactical receive tactical responses)
In general, strategic actions elicit fewer total competitive response because strategic
Reponses such as market-
based moves, involve a significant commitment of resources and are difficult to implement and reserve
Another reason is that the time needed to implement a strategic action and to assess its effectiveness
can delay
the competitor's response that action
A competitor
will likely respond quickly to a tactical action
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