chapter 6 ppt

1. Competing For Advantage
Part III – Creating Competitive Advantage
Chapter 6 – Competitive Rivalry and
Competitive Dynamics

2. The Strategic
Management
Process

3. Competitive Rivalry
 Key Terms
 Competitors – firms operating in the same
market, offering similar products and targeting
similar customers
 Competitive Rivalry – ongoing set of competitive
actions and competitive responses occurring
between competitors as they contend with each
other for an advantageous market position
 Competitive Behavior – set of competitive
actions and competitive responses the firm
takes to build or defend its competitive
advantages and to improve its market position

4. Competitive Rivalry
 Key Terms
 Competitive Dynamics – total set of actions and
responses of all firms competing within a market
 Multimarket Competition – firms competing
against one another in several product or
geographic markets

5. From Competitors to Competitive Dynamics

6. Model of
Competitive
Rivalry

7. Intensity of Rivalry
 The total number of competitors
 Market characteristics
 Quality of individual firms' strategies
 Drivers of competitive behavior

8. Competitor Determinants
Market Commonality
Resource Similarity

9. Market Commonality
 Key Terms
 Market Commonality – number of
markets with which the firm and a
competitor are jointly involved, and
degree of importance of the individual
markets to each firm

10. Resource Similarity
 Key Terms
 Resource Similarity – extent to which the
firm's tangible and intangible resources
are comparable to competitors' resources
in terms of both type and amount

11. Framework of Competitive Analysis

12. Drivers of Competitive Actions and Responses
 Awareness
 Motivation
 Ability
 Resource Dissimilarity

13. Strategic and Tactical Actions
 Key Terms
 Competitive Action – strategic or tactical
action the firm takes to build or defend its
competitive advantages or improve its
market position
 Competitive Response – strategic or
tactical action the firm takes to counter the
effects of a competitor's action
 Tactical Action (or Response) – market-
based the firms takes in order to fine-tune
a strategy

14. Differences Between Strategic and
Tactical Actions/Responses
 Strategic actions/responses – market-based
moves (difficult to implement and reverse)
that signify a significant commitment of
organizational resources to pursue a specific
strategy
 Tactical actions/responses – market-based
moves (easy to implement and reverse) that
involve fewer resources to fine-tune a
strategy that is already in place

15. Likelihood of Attack
 First mover incentives
 Organizational size
 Quality

16. Timing of Competitive Behavior
 Key Terms
 First Mover – firm that takes an initial competitive
action to build or to defend its competitive
advantages or to improve its market position
 Second Mover – firm that responds to first mover's
competitive action, typically through imitation
 Late Mover – firm that responds to competitive
action, but only after time has elapsed since first
mover's action and second mover's response

17. Timing of Competitive Behavior
 Key Terms
 Slack – buffer or cushion provided by
actual or obtainable resources not
currently used by an organization,
resources in excess of the minimum
those needed to produce a given
level of output

18. First Mover – Characteristics
 Often builds upon a strategic foundation of
superior research and development skills
 Tends to be aggressive and willing to
experiment with innovation
 Tends to take higher, yet reasonable, risks
 Needs to have liquid resources (slack) that
can be quickly allocated to support actions

19. First Mover – Benefits
 Above-average returns
 Customer loyalty
 An early hold on market share

20. First Mover – Risks
 Difficulty in accurately estimating
potential returns
 Substantial costs of product innovation,
which reduce slack available for other
opportunities
 Lower likelihood of introducing (or
converting to) the product that becomes
the industry standard as the market
evolves

21. Second Mover – Characteristics
 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
 Will not benefit from first mover advantages,
lowering potential returns

22. Late Mover – Characteristics
 Responds to market opportunities only
after considerable time has elapsed
since first and second movers have
taken action
 Has substantially reduced risks and
returns

23. Organizational Size
 Small firms
 Act as nimble and flexible competitors
 Rely on speed and surprise to defend
their competitive advantage
 Have greater variety of competitive
behavior options available

24. Organizational Size
 Large firms
 Often have greater slack
 Have greater likelihood to initiate
competitive and strategic actions over
time
 Tend to rely on a limited variety of
competitive actions, which can
ultimately reduce their competitive
success

25. Quality
 Key Terms
 Quality – customer perception that
the firm's goods or services perform
in ways that are important to
customers, meeting or exceeding
their expectations

26. Quality

27. Likelihood of Response
 Types and effectiveness of the
competitive action
 Reputation of the firm that takes
competitive actions
 Dependence on the market
 If the action significantly
strengthens or weakens the firm's
competitive position

28. Actor’s Reputation
 Key Terms
 Actor – firm taking an action or response
(in the context of competitive rivalry)
 Reputation – positive or negative
attribute ascribed by one rival to another
based on past competitive behavior

29. Dependence on the Market
 Key Terms
 Market Dependence – extent to
which a firm's revenues or profits
are derived from a particular
market

30. Competitive Dynamics
– Three Market Types
 Slow-cycle markets
 Fast-cycle markets
 Standard-cycle markets

31. Slow-Cycle Markets
 Key Terms
 Slow-Cycle Markets – markets in
which the firm's competitive
advantages are shielded from
imitation for long periods of time,
and in which imitation is costly

32. Slow-Cycle Markets
 Build a one-of-a-kind competitive
advantage that is proprietary and difficult
for competitors to understand (creating
sustainability)
 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

33. Slow-Cycle Markets

34. Fast-Cycle Markets
 Key Terms
 Fast-Cycle Markets – markets in
which the firm's capabilities that
contribute to competitive advantages
are not shielded from imitation and
where imitation is often rapid and
inexpensive

35. Fast-Cycle Markets
 Focus on learning how to rapidly and
continuously develop new competitive
advantages that are superior to those
they replace (creating innovation)
 Avoid loyalty to any of their products,
possibly cannibalizing their 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 first one

36. Fast-Cycle Markets

37. Standard-Cycle Markets
 Key Terms
 Standard-Cycle Markets – markets
in which the firm's competitive
advantages are moderately
shielded from imitation and where
imitation is moderately costly

38. Standard-Cycle Markets
 Have competitive advantages that can be
partially sustained when their quality is
continuously upgraded
 Seek to serve many customers and gain
a large market share
 Gain brand loyalty through brand names
 Carefully control operations to manage a
consistent experience for the customer

39. Ethical Questions
When competing against one another, firms
jockey for a market position that is advantageous,
relative to competitors. In this jockeying, what are
the ethical implications associated with the way
competitor intelligence is gathered?

40. Ethical Questions
Second movers often respond to a first mover’s
competitive actions through imitation. Is there
anything unethical about a company imitating a
competitor’s good or service as a means of
engaging in competition?

41. Ethical Questions
The standards for competitive rivalry differ in countries
throughout the world. What should firms do to cope with
these differences? What guidance should a firm give to
employees as they deal with competitive actions and
competitive responses that are ethical in one country but
unethical in others?

42. Ethical Questions
In slow-cycle markets, effective competitors are able to shield
their competitive advantages from imitation by competitors for
long periods of time. But this isn’t the case in fast-cycle markets.
Do these conditions have implications in terms of ethical business
practices? Can what is considered ethical in slow-cycle markets
be different from what is considered ethical in fast-cycle markets?

43. Ethical Questions
A firm competes against another organization in several
markets. Is it ethical for the firm to launch a competitive
response in a market that differs from the one in which that
competitor took a competitive action against the local firm?
Why or why not?