PUJA

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

COMPETITIVE RIVALRY

The ongoing competitive action/response sequence between a firm and a competitor affects the performance of both firms.

Understanding a competitor’s awareness, motivation, and ability helps the firm predict the likelihood of an attack and response to actions initiated by the firm or other competitors.

The predictions drawn from studying competitors in terms of awareness, motivation, and ability are grounded in market commonality and resource similarity.

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

COMPETITIVE RIVALRY

STRATEGIC AND TACTICAL ACTIONS

Strategic Action (or Response)

A market-based move that involves a significant commitment of organizational resources and is difficult to implement and reverse

Tactical Action (or Response)

A market-based move that is taken to fine-tune a strategy

Usually involves fewer resources

Is relatively easy to implement and reverse

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

LIKELIHOOD OF ATTACK

In addition to:

● Market commonality

● Resource similarity

● Awareness

● Motivation

● Ability

Other factors also affect the likelihood that a competitor will use strategic and tactical actions to attack its competitors:

● First-mover incentives

● Organizational size

● Quality

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

LIKELIHOOD OF ATTACK

First-Mover Incentives

First Mover A firm that takes an initial competitive action in order to build or defend its competitive advantages or to improve its market position

First movers allocate funds for:

Product innovation and development

Aggressive advertising

Advanced research and development

First movers can gain:

The loyalty of customers who may become committed to the firm’s goods or services

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

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

LIKELIHOOD OF ATTACK

First-Mover Incentives

Second Mover

Second mover responds to first mover, typically through imitation

Is more cautious than first movers

Tends to study customer reactions to product innovations

Tends to learn from the mistakes of first movers, reducing its risks

Takes advantage of time to develop processes and technologies that are more efficient than first movers, reducing its costs

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

Will not benefit from first mover advantages, lowering potential returns

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

LIKELIHOOD OF ATTACK

First-Mover Incentives

Second Mover

Late Mover

Late mover responds to a competitive action only after considerable time has elapsed since first and second movers have taken action

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

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

Has substantially reduced risks and returns

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

LIKELIHOOD OF ATTACK

First-Mover Incentives

Second Mover

Late Mover

Organizational Size - Small

Small firms are more likely:

To launch competitive actions

To be quicker

To be nimble and flexible competitors

To rely on speed and surprise to defend their competitive advantage

To have flexibility needed to launch a greater variety of competitive actions

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

LIKELIHOOD OF ATTACK

First-Mover Incentives

Second Mover

Late Mover

Organizational Size - Large

Large firms are more likely to initiate competitive as well as strategic actions over time

Large organizations often have greater slack resources

They tend to rely on a limited variety of competitive actions, which can ultimately reduce their competitive success

Think and act big and we’ll get smaller. Think and act small and we’ll get bigger. Herb Kelleher Former CEO, Southwest Airlines

Walmart has the flexibility required to take many types of competitive actions that few—if any—of its competitors can undertake, and does it at a reduced cost

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

LIKELIHOOD OF ATTACK

First-Mover Incentives

Second Mover

Late Mover

Organizational Size

Quality (Product)

Quality exists when the firm’s goods or services meet or exceed customers’ expectations

Product quality dimensions include:

Performance

Features

Flexibility

Durability

Conformance

Serviceability

Aesthetics

Perceived quality

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

LIKELIHOOD OF ATTACK

First-Mover Incentives

Second Mover

Late Mover

Organizational Size

Quality (Service)

Service quality dimensions include:

Timeliness

Courtesy

Consistency

Convenience

Completeness

Accuracy

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

COMPETITIVE DYNAMICS

Slow-Cycle Markets

Competitive advantages are shielded from imitation for long periods of time and imitation is costly.

Competitive advantages are sustainable in slow-cycle markets.

Build a unique and proprietary capability that yields competitive advantage, creating sustainability (i.e., proprietary and difficult for competitors to imitate).

Once a proprietary advantage is developed, competitive behavior should be oriented to protecting, maintaining, and extending that advantage.

Organizational structure should be used to effectively support strategic efforts.

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

COMPETITIVE DYNAMICS

Slow-Cycle Markets

Fast-Cycle Markets

The firm’s competitive advantages are not shielded from imitation.

Technology is non-proprietary.

Imitation is rapid and inexpensive.

Competitive advantages are not sustainable.

Reverse engineering.

Market volatility.

Focus: Learning how to rapidly and continuously develop new competitive advantages that are superior to those they replace (creating innovation).

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

COMPETITIVE DYNAMICS

Slow-Cycle Markets

Fast-Cycle Markets

Avoid loyalty to any one product, possibly cannibalizing on own current products to launch new ones before competitors learn how to do so through successful imitation.

Continually try to move on to another temporary competitive advantage before competitors can respond to the previous one.

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

COMPETITIVE DYNAMICS

Slow-Cycle Markets

Fast-Cycle Markets

Standard-Cycle Markets

Firm’s competitive advantages are moderately shielded from imitation

Imitation is moderately costly

Competitive advantages partially sustainable if quality is continuously upgraded

Firms

Seek large market shares; mass markets

Develop economies of scale

Gain customer loyalty through brand names

Carefully control operations

Manage a consistent experience for the customer

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

COMPETITIVE DYNAMICS

Slow-Cycle Markets

Fast-Cycle Markets

Standard-Cycle Markets

IMITATION

COMPETITIVE ADVANTAGE

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.