The document discusses competitive dynamics and rivalry between firms. It defines key concepts like competitors, competitive behavior, and competitive actions/responses. It presents a model of competitive rivalry that examines factors like market commonality, resource similarity, and the drivers, likelihood, and outcomes of attack and response behaviors between firms competing in an industry. It also describes different types of competitive dynamics that can occur in slow, standard, or fast-cycle markets and how they influence competitive advantage.

1. Competitive Rivalry and Competitive Dynamics Chapter Six

2. The Strategic Management Process Chapter 5: Bus.-Level Strategy Chapter 6: Competitive Dynamics Chapter 7: Corp.-Level Strategy Chapter 8: Acquisition & Restructuring Chapter 9: International Strategy Chapter 10: Cooperative Strategy Strategy Formulation Strategic  Actions  Chapter 3: The External Environment Strategic Competitiveness Strategic Mission & Strategic Intent Strategic Objectives & Inputs Chapter 1: Strategic Management Ch. 2: Strat. Mgmt . & Performance Chapter 3: The External Environment Chapter 3: The External Environment Chapter 4: The Internal Environment Chapter 5: Bus.-Level Strategy Chapter 6: Competitive Dynamics Chapter 11: Corporate Governance Ch. 12: Org. Structure & Controls Chapter 13: Strategic Leadership Chapter 14: Org. Renewal & Innovation Strategy Implementation Strategic Competitiveness

3. Competitive Rivalry & Competitive Dynamics Knowledge Objectives: Define competitors, competitive rivalry, competitive behaviour, and competitive dynamics. Describe market community and resource similarity as the building blocks of a competitor analysis. Explain awareness, motivation, and ability as drivers of competitive behaviour. Discuss factors affecting the likelihood a competitor will take competitive actions. Discuss factors affecting the likelihood a competitor will respond to actions taken against it. Explain competitive dynamics in slow-cycle, fast-cycle, and standard-cycle markets.

4. Competitive Dynamics Results from a series of competitive actions and competitive responses among firms competing within a particular industry. Competitive Rivalry Exists when two or more firms jockey with one another in the pursuit of better market position.

5. From Competitors to Competitive Dynamics Competitive Dynamics Competitive actions and responses taken by all firms competing in a market Creates? Creates? Competitors Competitive rivalry Engage in Through competitive behavior - Competitive actions Competitive responses To gain an advantageous market position Why? How?

6. A Model of Competitive Rivalry Feedback Drivers of Competitive Behaviour Outcomes Interfirm Rivalry: Attack & Response Competitor Analysis

7. Competitor Analysis The first step the firm takes to be able to predict the extent and nature of it’s rivalry with each competitor.

8. A Model of Competitive Rivalry: Competitor Analysis Feedback Market Commonality Resource Similarity Drivers of Competitive Behaviour Outcomes Interfirm Rivalry: Attack & Response Competitor Analysis

9. Competitor Analysis Market Commonality The number of markets with which the firm and a competitor are jointly involved and the degree of importance of each market. Resource Similarity The extent to which the firm’s tangible & intangible resources are comparable to a competitors in terms of both type & amount.

10. Competitor Analysis Competitor Analysis Multipoint competition tends to reduce competitive interactions, but increases likelihood of response where interaction occurs. For example, airlines price flights similarly, but respond quickly when competitors introduce promotional prices. Market Commonality Do firms compete with each other in multiple markets? Resource Similarity Do competitors possess similar types or amounts of resources?

11. A Model of Competitive Rivalry: Drivers of Competitive Behaviour Feedback Market Commonality Resource Similarity Awareness Motivation Drivers of Competitive Behaviour Outcomes Interfirm Rivalry: Attack & Response Competitor Analysis

12. Drivers of Competitive Behaviour Drivers of Competitive Behaviour * Does the firm have appropriate incentives to attack or respond? Do managers understand key characteristics of competitors? Motivation Awareness

13. A Model of Competitive Rivalry: Likelihood of Attack Market Commonality Resource Similarity Awareness Motivation Feedback Likelihood of Attack First Mover Incentives Drivers of Competitive Behaviour Outcomes Interfirm Rivalry: Attack & Response Competitor Analysis

14. Factors Affecting Likelihood of Attack: First movers allocate funds for product innovation and development aggressive advertising advanced research and development First Mover Incentives 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 First mover incentives

15. Small firms are more likely to launch competitive actions to be quicker in doing so. Factors Affecting Likelihood of Attack: Size Small firms are perceived as nimble and flexible competitors relying on speed and surprise to defend their competitive advantages or develop new ones while engaged in competitive rivalry. Small firms have the flexibility needed to launch a greater variety of competitive actions. First mover incentives Size “ Think and act big & we’ll get smaller. Think & act small & we’ll get bigger.” - Herb Kelleher, Former CEO, Southwest Air.

16. Factors Affecting Likelihood of Attack: Product quality dimensions include: Performance Features Flexibility Durability Conformance Serviceability Aesthetics Perceived quality Quality Quality exists when the firm’s goods or services meet or exceed customers’ expectations. Quality First mover incentives Size

17. Quality Dimensions of Goods & Services Product Quality Dimensions: Performance Operating characteristics Features Important special characteristics Flexibility Meeting operating specifications over time Durability Amount of use before performance declines Conformance Match with pre-established standards Serviceability Ease and speed of repair or normal service Aesthetics How a product looks and feels Perceived Subjective assessment of characteristics (product image) quality

18. Quality Dimensions of Goods & Services Service Quality Dimensions: Timeliness Performed in promised period of time Courtesy Performed cheerfully Consistency Giving all customers similar experiences Convenience Accessibility to customers Completeness Fully serviced, as required Accuracy Performed correctly each time

19. A Model of Competitive Rivalry: Likelihood of Response Market Commonality Resource Similarity Awareness Motivation Feedback Likelihood of Attack First Mover Incentives Drivers of Competitive Behaviour Outcomes Interfirm Rivalry: Attack & Response Competitor Analysis Likelihood of Response Competitive Action Type Dependence on Market Resource Availability Actor’s Reputation

20. Factors Affecting Likelihood of Response Firms study three factors to predict how a competitor is likely to respond to competitive actions: - type of competitive action - reputation - market dependence

21. Competition Competitive Dynamics competitive dynamics concerns the ongoing actions and responses taking place among all firms competing within a market for advantageous positions Competitive Rivalry building and sustaining competitive advantages are at the core of competitive rivalry competitive advantages are the link to an advantageous market position

22. Factors Affecting Likelihood of Response: Strategic actions receive strategic responses Tactical responses are taken to counter the effects of tactical actions Strategic actions elicit fewer total competitive responses A competitor likely will respond quickly to a tactical action The time needed to implement and assess a strategic action delays competitors’ responses Type of Competitive Action Type of competitive action

23. Factors Affecting Likelihood of Response: An actor is the firm taking an action or response Reputation is the positive or negative attribute ascribed by one rival to another based on past competitive behavior The firm studies responses that a competitor has taken previously when attacked to predict likely responses Reputation Type of competitive action Reputation

24. Factors Affecting Likelihood of Response: Market dependence is: the extent to which a firm’s revenues or profits are derived from a particular market In general, firms can predict that competitors with high market dependence are likely to respond strongly to attacks threatening their market position Market Dependence Market dependence Type of competitive action Reputation

25. A Model of Competitive Rivalry: Outcomes Likelihood of Attack First Mover Incentives Likelihood of Response Competitive Action Type Dependence on Market Resource Availability Actor’s Reputation Feedback Market Position Financial Performance Market Commonality Resource Similarity Awareness Motivation Drivers of Competitive Behaviour Outcomes Interfirm Rivalry: Attack & Response Competitor Analysis

26. Outcomes * * Financial Performance Better position should lead to better financial performance Market Position Is the firm creating a sustained competitive advantage Outcomes

27. A Model of Competitive Rivalry: Competitive Dynamics / Feedback Competitive Dynamics: Slow, Standard & Fast Cycle Markets Likelihood of Attack First Mover Incentives Likelihood of Response Competitive Action Type Dependence on Market Resource Availability Actor’s Reputation Feedback Market Position Financial Performance Market Commonality Resource Similarity Awareness Motivation Drivers of Competitive Behaviour Outcomes Interfirm Rivalry: Attack & Response Competitor Analysis

28. Competitive Dynamics Competitive Market Types Slow, Standard, Fast Cycle Feedback Slow cycle markets are frequently shielded by monopoly power or very strong brand loyalties A lack of interfirm rivalry may lead to sustained competitive advantage Slow , Standard, Fast, Cycle * *

29. Competitive Dynamics Competitive Market Types Slow, Standard, Fast Cycle Feedback Slow, Standard , Fast Cycle Firms with multi-market competition may dampen rivalry somewhat Sustained competitive advantage is a possible outcome in this instance Standard cycle markets often lead to highly competitive pressures despite world class products

30. Competitive Dynamics Competitive Market Types Slow, Standard, Fast Cycle Feedback Slow, Standard, Fast Cycle Fast cycle markets are intensely dynamic and a 1 st mover advantage is often unsustainable. Firms may cannibalize older generation product while introducing new innovative premium ones. Sustainable competitive advantage is unlikely.

31. Competitive Advantage Which Eventually Erodes Time (years) 5 Launch Exploitation Counterattack Returns from a Competitive Advantage

32. Obtaining Temporary Advantages to Create Sustained Advantage Time (years) 10 Launch Exploitation Counterattack Returns from a Competitive Advantage 5 15

33. Obtaining Temporary Advantages to Create Sustained Advantage Time (years) 10 Launch Exploitation Counterattack Returns from a Sustained Competitive Advantage 5 15 Firm has already moved on to Advantage No. 2

34. Obtaining Temporary Advantages to Create Sustained Advantage Time (years) 10 Launch Exploitation Counterattack Returns from a Sustained Competitive Advantage 5 15 Firm continues to move on to the next Advantage

35. A Model of Competitive Rivalry: Detailed Model Competitive Dynamics: Slow, Standard & Fast Cycle Markets Likelihood of Attack First Mover Incentives Likelihood of Response Competitive Action Type Dependence on Market Resource Availability Actor’s Reputation Feedback Market Position Financial Performance Market Commonality Resource Similarity Awareness Motivation Drivers of Competitive Behaviour Outcomes Interfirm Rivalry: Attack & Response Competitor Analysis

36. The Strategic Management Process Chapter 5: Bus.-Level Strategy Chapter 6: Competitive Dynamics Chapter 7: Corp.-Level Strategy Chapter 8: Acquisition & Restructuring Chapter 9: International Strategy Chapter 10: Cooperative Strategy Strategy Formulation Strategic  Actions  Chapter 3: The External Environment Strategic Competitiveness Strategic Mission & Strategic Intent Strategic Objectives & Inputs Chapter 1: Strategic Management Ch. 2: Strat. Mgmt . & Performance Chapter 3: The External Environment Chapter 3: The External Environment Chapter 4: The Internal Environment Chapter 5: Bus.-Level Strategy Chapter 6: Competitive Dynamics Chapter 11: Corporate Governance Ch. 12: Org. Structure & Controls Chapter 13: Strategic Leadership Chapter 14: Org. Renewal & Innovation Strategy Implementation Strategic Competitiveness