•Ability–Ability relates to each firm’s resources and the flexibility they provide•Key resources include financial capital and people–A competitor with similar resources to you has a similar ability to attack and respond–Examples of firms with limited ability:•Small firms•Foreign firms with limited local relationships•Firms with limited slack (unutilized resources)•Firms with dissimilar resources•Competitive Analysis–Step One: Map current or potential competitors
–Step Two: Assess the key drivers of competitive behavior–Step Three: Assess the likelihood of attack and response•Likelihood of a Competitor to Attack–Their history as first, second, or late mover–Organizational size–Quality of products / services and the ability of the competitor to improve quality•Competitors with poor quality products or services are unlikely to attack or respond•First Mover Advantage–First mover advantage can be significant: •in fast-cycle markets (e.g. rapid technological change and obsolescence)•If customer loyalty can be built•If market share gained is “sticky”–Being a first mover requires allocation of funds for: •Product innovation and development•Aggressive advertising•Advanced research and development–First movers therefore require sufficient resources / slack resources –Being a first mover is risky; some firms are better at being first movers•Second Mover–More cautious than first mover–Learns from first mover•May enable avoidance of mistakes and reduction of costs•Has more time than first mover to improve efficiency or provide greater value•Late Mover–Late mover firms respond only after significant time has elapsed from the initial action taken by first and second movers–Not typically a winning strategy (average returns), unless …… the late mover builds a truly differentiated product•Firm Track Records–First movers •Nimble, innovative•Risk tolerant•May have high returns if successful –Second movers•Very aware•Good at market analysis, process management•May have high returns if good second movers–Late movers•Tend to be industry laggards•Small, risk averse•Average returns•First, Second, Late–Firms can develop competitive “personalities”
–Each strategy (first mover, second mover, late mover) requires different resources and capabilities–Once a firm is “wired” to behave in a certain way, it will have a tendency to compete in a predictable way–Look at a competitor’s history to assess their future behavior•Examples–First mover•Apple: iTunes, iPod•Coca-Cola•Procter & Gamble: disposable diapers (Pampers)•Kleenex–Second mover•Microsoft Excel (Lotus 1-2-3)–Late mover•Google: by some accounts, it was the 11thsearch engine (others: Netscape, Explorer, etc.)•Likelihood of a Competitor to Respond–Increased likelihood of a response if:•Action leads to improvement in the competitors competitive position•Action damages the initiating firm’s advantage•It weakens the ability of the initiating firm to defend its position–In other words, it is perceived that:•
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