COMPETITIVE RIVALRY Competitive rivalry is the ongoing set of competitive actions and responses occurring between competing firms for an advantageous market position. Because the ongoing competitive action/response sequence between a firm and a competitor affects the performance of both firms, it is important for companies to carefully study competitive rivalry to successfully use their strategies. Strategic and Tactical Actions Firms use both strategic and tactical actions when forming their competitive actions and competitive responses in the course of engaging in competitive rivalry. A competitive action is a strategic or tactical action the firm takes to build or defend its competitive advantages or improve its market position. A competitive response is a strategic or tactical action the firm takes to counter the effects of a competitor’s competitive action. A strategic action or a strategic response is a market-based move that involves a significant commitment of organizational resources and is difficult to implement and reverse. A tactical action or a tactical response is a market-based move that is taken to fine-tune a strategy; it involves fewer resources and is relatively easy to implement and reverse. Hyundai Motor Co.’s expenditures on research and development and plant expansion to support the firm’s desire to be one of the world’s largest carmakers by 2010 are strategic actions . Tactical actions are easily reversed – pricing decisions are often taken by these firms to increase demand in certain markets during certain periods. 4 Discuss factors affecting the likelihood a competitor will take competitive actions. LIKELIHOOD OF ATTACK In addition to market commonality, resource similarity, and the drivers of awareness, motivation, and ability, other factors affect the likelihood a competitor will use strategic actions and tactical actions to attack its competitors. Three of these factors — first-mover incentives, organizational size, and quality — are described below. First-Mover Incentives First movers are the firms that take an initial competitive action, either strategic or tactical. First movers are firms that have the resources, capabilities, and core competencies that enable them to gain a competitive advantage through innovative and entrepreneurial competitive actions. By being early, the first mover hopes to: earn above-average returns until competitors respond effectively BUSINESS POLICY LEARNING NOTES
Chapter 5: Competitive Rivalry and Competitive Dynamics 5-4 gain customer loyalty, thus creating a barrier to entry by competitors gain market share that can be difficult for competitors to take in the future The firm trying to predict its rivals ’ competitive actions might conclude that they will take aggressive strategic actions to gain first movers’ benefits. However, while a firm’s competitor s might be motivated to be first movers, they may lack the ability to do so. First movers tend to be aggressive and willing to experiment with innovation and take higher, yet reasonable, levels of risk.
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- Summer '12
- Business, competitive actions, competitive action