CHAPTER 5 COMPETITIVE RIVALRY AND COMPETITIVE DYNAMICS

Competitors are the 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 it's a set of competitive actions and responses affirms takes to build or defend its
competitive advantage and to impose its market position.

Competitive dynamics refer to all competitive behaviors that is, the total set of actions and responses taken
by all firms competing within a market.

A Model of Competitive Rivalry

Competitive rivalry evolves from the pattern of actions and responses as the one firms’ competitive
actions have noticeable effects on competitors, eliciting competitive responses from them. this pattern
suggests that firms are mutually interdependent, that they are affected by each other's actions and
responses, in that marketplace success is a function of both individual strategies and the consequences
of their use.

Competitor Analysis

Competitor analysis it's the first step the firm takes to be able to predict the extent and nature of its
rivalry with each competitor. Competitor analysis are especially important when entering they're foreign
market because firms doing so need to understand the local competition and foreign competitors
currently operating in that market. Without such analysis they are less likely to be successful.

The number of markets in which firms compete against each other is called market commonality while
the similarity in their resources is called resource similarity. These two dimensions of competition
determine the extent to which the firm are competitors. Firms with high market commonality and highly
similar resources are directed and mutually acknowledged competitors. The drivers of a competitive
behavior-as well as factors influencing the likelihood that a competitor will initiate competitive actions
and will respond to its competitors actions-influence the intensity of rivalry.
 Market commonality is concerned with the number of market with which the firm and a competitor
are jointly involved and the degree of importance of each individual markets to each.

Resource similarity is the extent to which the firm's tangible and intangible resources are comparable
to the competitors in terms of both type and amount. umm

Drivers of Competitive Behavior

Market commonality and resource similarity influence the drivers (awareness, motivation, and ability) of
competitive behavior. in turn the drivers influence the firm’s actual competitive behavior, as revealed by the
actions and responses it takes while engaged in competitive rivalry.

Awareness, which is a prerequisite to any competitive actions or response taken by a firm, refers to the
extent to which competitors recognize the degree of their mutual interdependence that results from
market commonality and resource similarity, awareness affects the extent to which the firm understands
the consequences of each competitive actions and responses. A lack of awareness can lead to excessive
competition, resulting in a negative effect on all competitors performance.

Motivation, which concerns the firms incentive to take action or to respond to a competitor's attack,
relates to perceived gains and losses. Thus, a firm may be aware of competitors but may not be motivated
to engage in rivalry with them if it perceives that its position will not improve or that its market position
won't be damaged if it doesn't respond.

Ability relates to each firm's resources and flexibility they provide. without available resources, the film
it's not able to attack a competitor or respond to its action.

Competitive rivalry

The ongoing competitive action/response sequence between a firm and a competitor affects the performance of
both firms. Because of this, it is important for companies to carefully analyze and understand the competitive
rivalry present in the markets in which they compete.

Strategic and tactical actions

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 it strategic or tactical action the fi firm takes to counter the effects of a
competitors competitive action.

A strategic action or a strategic response is a market based move that involves a significant
commitment of organizational resources and it's 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.
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 technical actions to attack its
competitors.

A first mover is a firm that takes an initial competitive action in order to build or defend its competitive
advantage or to improve its market position.

A second mover is a firm that respond to the first mover competitive action, typically through imitation.

A late mover it's a firm that responds to a competitive action a significant amount of time after the first
movers action and the second movers response.

Quality

Quality has many definitions including well established ones relating it to the production of goods or services
with zero defects and a cycle of continuous improvement. From a strategic perspective, we consider quality to
be the outcome of how a firms competes through its value chain activities and support functions. Thus, quality
exist when the firm's goods or services meet or exceed customers expectations.

Product quality dimension

1. Performance
2. Features
3. Flexibility
4. Durability
5. Conformance
6. Serviceability
7. Aesthetics
8. Perceived quality

Service quality dimensions

1. Timeliness
2. Courtesy
3. Consistency
4. Convenience
5. Completeness
6. Accuracy

Likelihood of response

The success of firms competitive action is affected by the likelihood that a competitor will respond to it as well
as by the type (tactical or strategic) the effectiveness of that response. in general a firm is likely to respond to
a competitor's action when either:
- the action leads to better use of competitors capabilities to develop a stronger competitive advantage or an
improvement in its market position
- the action damaged the firm's ability to use its core competencies to create or maintain an advantage or
- the firms market positions became harder to defend
In addition the market commonality and resource similarity, and awareness, motivation, and ability, firms
evaluate three factors:
1. The type of competitive action
2. Actors reputation
3. Market dependence

Type of competitive action

Competitive responses to strategic actions differ from responses to tactical actions. These differences allow
the firm to predict the competitors likely response to a competitive action that has been launched against it.
Strategic actions commonly receive strategic response and tactical actions receive tactical responses. In
general, strategic actions elicit fewer total competitive responses because strategic responses, such as
market based moves, involve a significant commitment of resources and are difficult to implement and
reverse.

Actors reputation
In the context of competitive rivalry, an actor is the film taking an action or a response, while reputation is
the positive or negative attribute ascribed by one rival to another based on past competitive behavior. A
positive reputation may be source of above average returns, Especially for consumer goods producers. Thus,
a positive corporate reputation is of strategic value and affects competitive rivalry. To predict the likelihood
of competitors response to a current or planned action, firms evaluate the responses that the competitor has
taken previously when attacked past behavior is assumed to be predictor of future behavior.

Market dependence
Market dependence denotes the extent to which a firm revenues or profits are derived from a particular
market. In general, competitors with high market dependence are likely to respond strongly to attack
threatening their market positions. Interestingly, the threatened firm in these instances may not always
respond quickly, even though an effective response to an attack on the film's position in a critical market is
important.

Competitive dynamics

Whereas competitive rivalry concerns the ongoing actions and response between the firms and its direct
competitors for an advantageous market positions, competitive dynamics concerns the ongoing actions and
responses among all firms competing within a market for advantageous positions.

To explain competitive dynamics we explored the effects of varying rates of competitive speed in different
markets (called low-cycle, fast-cycle, and standard-cycle markets) on the behavior of all competitors within a
given market.

Slow-cycle markets are markets in which the firms competitive advantages are shielded from imitation,
commonly for long periods of time, and where imitation is costly.

Fast-cycle markets are markets in which the firms capabilities that contribute to a competitive
advantages aren't shielded from imitation and where imitation is often rapid and inexpensive.

Standard-cycle markets are markets in which the firms competitive advantages are partially shielded
from imitation and imitation is moderately costly.