Ability Ability relates to each firms resources and the flexibility they

Ability ability relates to each firms resources and

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AbilityAbility relates to each firm’s resources and the flexibility they provideKey resources include financial capital and peopleA competitor with similar resources to you has a similar ability to attack and respondExamples of firms with limited ability:Small firmsForeign firms with limited local relationshipsFirms with limited slack (unutilized resources)Firms with dissimilar resourcesCompetitive AnalysisStep One: Map current or potential competitors
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Step Two: Assess the key drivers of competitive behaviorStep Three: Assess the likelihood of attack and responseLikelihood of a Competitor to AttackTheir history as first, second, or late moverOrganizational sizeQuality of products / services and the ability of the competitor to improve qualityCompetitors with poor quality products or services are unlikely to attack or respondFirst Mover AdvantageFirst mover advantage can be significant: in fast-cycle markets (e.g. rapid technological change and obsolescence)If customer loyalty can be builtIf market share gained is “sticky”Being a first mover requires allocation of funds for: Product innovation and developmentAggressive advertisingAdvanced research and developmentFirst movers therefore require sufficient resources / slack resources Being a first mover is risky; some firms are better at being first moversSecond MoverMore cautious than first moverLearns from first moverMay enable avoidance of mistakes and reduction of costsHas more time than first mover to improve efficiency or provide greater valueLate MoverLate mover firms respond only after significant time has elapsed from the initial action taken by first and second moversNot typically a winning strategy (average returns), unless …… the late mover builds a truly differentiated productFirm Track RecordsFirst movers Nimble, innovativeRisk tolerantMay have high returns if successful Second moversVery awareGood at market analysis, process managementMay have high returns if good second moversLate moversTend to be industry laggardsSmall, risk averseAverage returnsFirst, Second, LateFirms can develop competitive “personalities”
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Each strategy (first mover, second mover, late mover) requires different resources and capabilitiesOnce a firm is “wired” to behave in a certain way, it will have a tendency to compete in a predictable wayLook at a competitor’s history to assess their future behaviorExamplesFirst moverApple: iTunes, iPodCoca-ColaProcter & Gamble: disposable diapers (Pampers)KleenexSecond moverMicrosoft Excel (Lotus 1-2-3)Late moverGoogle: by some accounts, it was the 11thsearch engine (others: Netscape, Explorer, etc.)Likelihood of a Competitor to RespondIncreased likelihood of a response if:Action leads to improvement in the competitors competitive positionAction damages the initiating firm’s advantageIt weakens the ability of the initiating firm to defend its positionIn other words, it is perceived that:
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  • Spring '10
  • PETRACHRISTMANN
  • Management, Revenue, Profit margin, Earnings before interest and taxes, gross profit margin

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