Competitive rivalry and competitive dynamics

1. Competitive dynamics
a. Factor affecting competitive rivalry
i. During recession
1. Customer change buying behavior
2. Look for ways to escape daily negative environment
b. Competitors
i. Firm operating in same market
ii. Offering similar product
iii. Targeting similar customer
c. Competitive rivalry
i. Ongoing set of competitive action and competitive response
1. Between incumbent to gain advantageous market position
d. Competitive behavior
i. Set of competitive action to build defensive mechanism by creating
competitive advantage and to improve market position
e. Multimarket competition
i. Competing against one another in several product or geographic market
f. Model of competitive rivalry
i. Competitive action/reaction  dynamic and complex
ii. Firms are mutually interdependent
iii.

2. Market commonality and resource similarity [competitor analysis]

a. 2 components to assess: market commonality and resources similarity
i. However, direct competition does not always imply intense rivalry
1. # of market competing against
ii. Market commonality
1. Segmentation similarity  focus on competitor competing in same
segment
iii. Resource similarity
 1. Competitive advantage, resources, position similarity
a. Both competing in operational efficiency or cost reduction

iv.
3. Competitive actions: awareness, motivation, and ability
a. Awareness
i. Aware of strategy and offering to determine responsiveness of reactive
strategy
b. Motivation
i. Company’s policy, management, competition are the driver for taking
action and to respond to competitors’ attack
c. Ability
i. Firm resources that allow competitive action and flexibility in
responsiveness
4. Strategic and tactical action
a. Market-based moves: significant commitment of organizational resources to
pursue specific strategy  difficult to implement and reverse
5. Tactical action/response: involve fewer resources to fine-tune strategy that is already in
place  easy to implement
a. Competitive action: build or defend its competitive advantage or improve its
market position
6. Factor driving competitor’s competitive action likelihood of attack
a. First mover incentive
i. Take initial competitive action to defend its competitive advantage
1. Innovation, aggressive price discount
2. Build up from foundation of superior research and development
skill
a. Tend to be aggressive and willing to experiment with
innovation
ii. Key criteria – must have readily available resources
1. Slack: buffer or cushion provided by actual resources used by
organization needed to produce a given level of output
 a. Need to have slack to quickly allocated to support
action
iii. Second mover
1. Respond by imitation [copy and paste]
a. More cautious than first mover
i. By studying customer reaction to product
innovation
ii. Learn from mistakes from first movers
iii. Tend to study customer reaction to product
innovation
b. Less reputational than first movers
i. But gain benefit of improving processes and
technologies to be more efficient
iv. Late mover
1. Respond to market opportunities only after considerable time
a. Has substantially reduced risks and return
b. Organizational size
i. Small firms
1. Nimble and flexible competitors
2. Rely on speed and surprise [niche] to defend their competitive
advantage
ii. Large firms
1. Have great slack
a. Greater likelihood to initiate competitive and strategic
action
2. Tend to rely on limited variety of competitive action  reduce
competitive success [lower agility]
c. Quality
i. Customer perception toward goods perform in a way whether to meet or
exceed their expectation
d. Additional factor affecting likelihood a firm will respond to competitor
action
i. Type and effectiveness of competitive action
1. Strategic VS. Tactic action and time
2. Actor’s reputation
a. Actor: firm taking an action or response
i. Competitive rivalry
b. Reputation: positive or negative attribute based on past
competitive behavior
3. Dependence on the market
a. How much revenue or profit of firm derived from particular
market