Universitas Muhammadiyah Jakarta

Competitive Rivalry and Dynamics

Dr. DJONIERI, SE, Ak, MBA, CA

Competitors, Competitive Rivalry, Competitive Behavior,
and Competitive Dynamics
 Competitors are firms operating in the same market, off
ering similar products, and targeting similar customers.
 Competitive rivalry is the ongoing set of competitive acti
ons and competitive responses that occur among firms
as they maneuver for an advantageous market position.
 Competitive behavior is the set of competitive actions a
nd competitive responses the firm takes to build or defe
nd its competitive advantages and to improve its market
position.
 Competitive dynamics refer to all competitive behaviors-
that is, the total set of actions and responses taken by a
ll firms competing within a market.
Competition
A Model of Competitive Rivalry
Competitor Analysis

 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 mark
ets each.
 Resource similarity is the extent to which the
firm’s tangible and intangible resources are
comparable to a competitor’s in terms of bo
th type and amount.
Framework of Competitor Analysis
Drivers of Competitive Actions and Responses

 Awareness
 Refers to the extent to which competitors recognize the de
gree of their mutual interdependence that results from mar
ket commonality and resource similarity.
 Motivation
 The firm’s incentive to take action or to respond to a comp
etitor’s attack.
 Ability
 Firm’s resources and flexibility to respond or attack competi
tor.
Competitive Rivalry

Strategic and Tactical Actions

 A competitive action is a strategic or tactical action the firm ta
kes to build or defend its competitive advantages or improve it
s market position.
 A competitive response is a strategic or tactical action the firm
takes to counter the effects of a competitor’s competitive actio
n.
 A strategic action or a strategic response is a market-based m
ove that involves a significant commitment of organizational re
sources 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.
Likelihood of Attack
First-Mover Incentives

 A first mover is a firm that takes an initial competitive action in order to build
or defend its competitive advantages or to improve its market position.
 A second mover is a firm that responds to the first mover’s competitive action,
typically through imitation.
 A late mover is a firm that responds to a competitive action a significant amou
nt of time after the first mover’s action and the second mover’s response.

Organizational Size

 An organization’s size affects the likelihood it will take competitive actions as we

ll as the types and timing of those actions. In general, small firms are more likel
y than large companies to launch competitive actions and tend to do it more
quickly.
Quality
 Quality exists when the firm’s goods or services meet or exceed customers’ expe
ctations.
Quality Dimensions of Goods and Services
Likelihood of Response
Type of Competitive Action
 Competitive responses to strategic actions differ from responses to ta
ctical actions. These differences allow the firm to predict a competitor
s’ likely response to a competitive action that has been launched agai
nst it. Strategic actions commonly receive strategic responses and tact
ical actions receive tactical responses. In general, strategic actions elici
t fewer total competitive responses because strategic responses, such
as market-based moves, involve a significant commitment of resource
s and are difficult to implement and reverse.

Actors’ Reputation
 An actor is the firm taking an action or a response while reputation is
the positive or negative attribute ascribed by one rival to another bas
ed on past competitive behavior.

Dependence on the Market

 Market dependence denotes the extent to which a firm’s revenue or p
rofits are derived from a particular market.
Competitive Dynamics
Slow-Cycle Markets
 Slow-cycle markets are those in which the firm’s competitive
advantages are shielded from imitation commonly for long peri
ods of time and where imitations is costly.
Fast-Cycle Markets
 Fast-cycle markets are markets in which the firm’s capabilities
that contribute to competitive advantages aren’t shielded from
imitation and where imitation is often rapid and inexpensive.
Standard-Cycle Markets
 Standard-cycle markets are markets in which the firm’s competi
tive advantages are moderately shielded from imitation and
where imitation is moderately costly.
Gradual Erosion of a Sustained Competitive Advantage
Developing Temporary Advantage to Create Sustained Advantag
e