5.-IE-ELEC-102-CHAPTER-5.docx - CHAPTER 5 COMPETITIVE...

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CHAPTER 5: COMPETITIVE RIVALRY AND COMPETITIVE DYNAMICS Competitors – firms operating in the same market, offering similar products, and targeting similar customers Competitive rivalry – is the ongoing set of competitive actions and competitive responses that occur among firms as they maneuver for an advantageous market position Competitive behavior – is the set of competitive actions and responses the firm takes to build or defend its competitive advantages and to improve its market position Multimarket competition – engaged by firms competing against each other in several product or geographic markets Competitive dynamics – refer to all competitive behaviors—is the total set of actions and responses taken by all firms competing within a market Competitive rivalry’s effect on the firm’s strategies is shown by the fact that 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 firms anticipates and responds to its competitors’ initial actions (also called attacks ) Types of strategies affected by competitive rivalry: Corporate-level Acquisition International A Model of Competitive Rivalry Competitive rivalry – evolves from the pattern of actions and responses as one firm’s competitive actions have noticeable effects on competitors, eliciting competitive responses from them This figure presents a straightforward model of competitive rivalry at the firm level; this type of rivalry is usually dynamic and complex The model presents the sequence of activities commonly involved in competition between a particular firm and each of its competitors Companies can use the model to understand how to be able to predict competitors’ behavior ( actions and responses ) and reduce the uncertainty associated with competitors’ actions Competitor Analysis Competitor analysis – is the first step the firm takes to be able to predict the extent and nature of its rivalry with each competitor Determines the extent to which firms are competitors : Market commonality Resource commonality Market Commonality Market commonality – is concerned with the number of markets with which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each Research suggests that “a firm with greater multimarket contact is less likely to initiate an attack, but more likely to move (respond) aggressively when attacked.” Resource Similarity Resource similarity – is the extent to which the firm’s tangible and intangible

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