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Chapter 5

Chapter 5 - Chapter 5 Competitive Rivalry and Competitive...

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Chapter 5 Competitive Rivalry and Competitive Dynamics A strategy’s success is determined not only by the firm’s initial competitive actions, but also by how well it anticipates competitors’ responses to them and by how well the firm anticipates and responds to its competitor’s initial actions (also called attacks). Some important definitions: Firms operating in the same market with similar products targeting similar customers are competitors . Competitive rivalry is the ongoing set of competitive actions and competitive responses occurring between rivals as they compete against each other for an advantageous market position. Competitive behavior is the set of competitive actions and competitive responses the firm takes to build or defend its competitive advantages and to improve its market position. Firms competing against each other in several product/geographic markets are in multimarket competition. All competitive behavior—that is, the total set of actions and responses taken by all firms competing within a market—is called competitive dynamics. Note : Firms must learn to compete differently if they are to achieve strategic competitiveness. To provide an idea of what this means, new ways of competing may include the following: bringing new goods and services to market more quickly the use of new technologies (e.g., Amazon.com) diversifying the product line (e.g., Barnes and Noble into music as a catalyst for growth) shifting product emphasis (e.g., U-haul’s focus on accessory sales) consolidation (e.g., the merger of Hewlett Packard and Compaq) combining online selling with physical stores (e.g., Sears’s acquisition of Lands’ End) The focus of this chapter is on competitive dynamics , the series of competitive actions and competitive responses among firms competing within a particular industry. Expanding geographic scope contributes to the increasing intensity in competitive rivalry among firms. That is, firms trying to predict competitive rivalry should anticipate that they will meet a larger number of increasingly diverse competitors in the future; thus, competitive rivalry will affect their strategies more than in the past. A MODEL OF COMPETITIVE RIVALRY Competitive rivalry exists when firms jockey with one another to pursue an advantageous market position. When one or more firms competing in an industry feels pressure to act or perceives an opportunity to improve their competitive position, competitive rivalry occurs as various firms initiate a series of actions and responses. Research findings showing that intensified rivalry within an industry results in decreased average profitability for firms competing in it supports the importance of understanding these effects.
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Note : Competitive rivalry exists because of competitive asymmetry , which describes the fact that firms differ from one another in terms of their resources, capabilities, core competencies, and the opportunities and threats in their competitive environments and industries.
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Chapter 5 - Chapter 5 Competitive Rivalry and Competitive...

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