When strategies collide: Divergent multipointstrategies within competitive triads

John W. Upson a,*, Annette L. Ranft b

aRichards College of Business, University of West Georgia, Carrollton, GA 30118-3030, U.S.A.bCollege of Business, Florida State University, Tallahassee, FL 32306-1110, U.S.A.

Business Horizons (2010) 53, 49—57

www.elsevier.com/locate/bushor

KEYWORDSCompetitive dynamics;Multipointcompetition;Blind spots;Competitive release

Abstract As market barriers fall and market boundaries blur, firms are becomingincreasingly broad in their scope of operations and markets. This expansion in a firm’sscope intensifies competition as the interaction between rivals spreads across manymarkets. To succeed as a firm, managers must then take a multi-market approach tocompetition. Critical to success is an understanding of how rival contact acrossmarkets can affect a firm’s competitive behavior. This understanding exists forcompetition between two firms; however, few firms face only one rival across multiplemarkets. We expand the focus on one competitor and explore configurations ofcompetitive triads. We explain why triadic competition is more dynamic and deviatessomewhat from dyadic competition, and set the foundation for exploring competitionamong a broader set of competitors.# 2009 Kelley School of Business, Indiana University. All rights reserved.

1. An inconvenient guest

Technological innovations and globalization contin-ue to change today’s competitive landscape (Hitt,Keats, & DeMarie, 1998). Among these changes,industry barriers have fallen, allowing for easy entryby new competitors. Witness how traditional insur-ance providers State Farm and Allstate were quickto enter the investment brokerage industry follow-ing a change in government regulations. Industryboundaries have become blurred and difficult todefine. One may find it difficult to precisely definethe boundaries of the cell phone, personal digital

* Corresponding author.E-mail addresses: jupson@westga.edu (J.W. Upson),

aranft@cob.fsu.edu (A.L. Ranft).

0007-6813/$ — see front matter # 2009 Kelley School of Business, Idoi:10.1016/j.bushor.2009.09.001

assistant (PDA), and portable music player indus-tries. The net effect of these landscape changes isthat firms are increasingly meeting rivals in moreand more markets (Korn & Baum, 1999).

From this trend a phenomenon known as multi-point competition has emerged, and it reveals howthe alignment of rivals across their respective mar-kets can affect firm behavior (Chen, 1996). In consid-ering multipoint competition, one must recognizethat a firm’s competitive moves are not isolatedwithin the markets where they occur, but ratherare part of the firm’s overall strategy to competewith its rivals across all the markets in which theymeet. One primary factor of multipoint competitionthat affects firms’ strategies is multimarket contact,or the degree to which firms meet competitors inmore than one distinct market (Korn & Baum, 1999).

ndiana University. All rights reserved.

50 J.W. Upson, A.L. Ranft

Studies have revealed that the level of multimarketcontact between two firms affects each firm’s behav-ior as they compete for position across markets(Baum&Korn, 1999; Haveman&Nonnemaker, 2000).

Much of what we currently know about multipointcompetition comes from analysis of dyadic, or twofirm, competition. However, one concern withstudying dyadic competition is that it assumes afirm’s competitive moves are all targeted at a par-ticular rival. Although dyadic competition occurs insome industries (e.g., in the soft drinks industrybetween The Coca-Cola Company and PepsiCo),firms normally face multiple rivals (Baum &Korn, 1999; Fu, 2003). For example, General Elec-tric Company, Rolls Royce, and Pratt & Whitney allcompete in the aircraft engine industry and meet inmany product markets within the industry. Omittingany one of these firms in a study of competitionwould severely limit the results and might riskassociating a competitive move with the wrongrival. To gain a better understanding of multipointcompetition and help managers formulate theirstrategies, we acknowledge that firms do not com-pete with just one rival across product markets.

The study of multiple rivals in a multimarketsetting is a complicated task. We take a first steptoward understanding this complex phenomenon byinvestigating competitive behaviors among threefirms, or triads, in competition. By triads, we meanthe study of a firm and its two most frequent rivalsacross all product markets in which the firm com-petes. Our decision to study triads was based on twofactors. First, managers define their main rivalsthrough a process of cognitive categorization (Reger& Huff, 1993). This is a form of sensemaking in whichmanagers assess organizational similarities to subjec-tively define their rivals (Porac & Thomas, 1990,1994). Previously, when managers have been askedto identify their number of competitors, responsesvaried widely yet averages generally fell no lowerthan two competitors (Clark & Montgomery, 1998;Gripsrud & Gronhaug, 1985; Hauser & Wernerfelt,1990; Narayana & Markin, 1975). This provided themotivation to move beyond the study of dyads andinclude greater numbers of competitors.

Second, we limit our discussion to the number ofcompetitors that are likely to have the greatestimpact on competition. For guidance, we turned tothe United States computer related manufacturingand software industries, wherewe found that the topthree market share leaders within 139 product mar-kets collectively own 91% market share on average.Accordingly, we chose to focus on a firm and its twomost frequent multipoint rivals, or triads.

By considering three rather than two firms incompetition, we do not suggest that the third firm

is a recent entrant. Rather, the third firm is simply amultimarket rival that would be overlooked in adyadic study. Also, in studying triads, we do notsuggest that competition is limited to only threefirms. We accept that firms may have many rivals.Focusing on triads allows for simplification of analy-sis while providing relevant points of discussion thatare applicable to a broad range of managers. Next,we clarify the effects of competition between dyadsin a multipoint competitive setting, and then ex-plore triads.

2. One on one: Competitive dyads

Research in competitive dynamics generally ac-counts for firm level factors that affect competition(Hannan & Freeman, 1989; Porter, 1980). An under-lying theme of this research is that the interdepen-dence of firms is a key determinant of competition(DiMaggio & Powell, 1983). One firm’s success orfailure is affected by another firm. Multipoint com-petition research is unique however, in that itexplores the interdependence of firms across multi-ple product markets, and acknowledges that thecompetitive actions of rivals are not containedwithin a single product market but can spill overinto other common product markets.

Several studies have observed the effects ofmultimarket contact on the intensity at whichrivals compete, and have found three competitivestances: indifference, aggression, and forbearance.Indifference occurs where there are few productmarkets in which firms meet. In this case, firms tendto be less aware of or threatened by one another,and so they do not actively compete. However, asmultimarket contact increases, the likelihood ofaggression increases. Firms become aware of eachother, and fight aggressively to define their compet-itive positions and stake their claims in markets(Baum & Korn, 1999; Haveman & Nonnemaker,2000). Their competitive actions can include thosethat test a rival’s capabilities, as well as defensiveactions that display their firm’s unwillingness to bepushed around. At the highest levels of multimarketcontact, a unique phenomenon occurs: rivals reducetheir competition (Baum & Korn, 1999).

At these highest levels of multimarket contact,mutual forbearance results. Mutual forbearance is aform of tacit collusion through which firms decreasetheir level of competition and take a sort of ‘‘liveand let live’’ approach (Jayachandran, Gimeno, &Varadarajan, 1999). This collusion is beneficial toeach firm as they can realize increased performancein terms of higher prices, higher margins, and great-er market share stability (Evans & Kessides, 1994;

When strategies collide: Divergent multipoint strategies within competitive triads 51

Heggestad & Rhoades, 1978; Jans & Rosenbaum,1996). However, one must not mistake the decreasein competition and associated benefits as an indica-tion that firms ignore one another. Rather, firmsbecome intimately aware of their multipoint rivals’actions and intentions in order to mutually forbear.

There are two primary reasons that firms engagein mutual forbearance, and both center on the risksthat a firm incurs by initiating an attack on a rival.First, a firm that initiates an aggressive action to-ward a multipoint rival is uncertain as to where therival will retaliate; in other words, the rival’s pointof retaliation is unknown. The point of retaliationcould occur in a product market in which losses tothe aggressor are large, but losses to the retaliatorare small (Karnani & Wernerfelt, 1985; Porter,1980). Second, the aggressor is uncertain as tothe retaliation scope, or the number of productmarkets that will be affected by the rival’s retalia-tion. The scope of a rival’s retaliation could be farreaching. Aggression toward a rival in one productmarket could prompt a rival’s retaliation in severalproduct markets (Edwards, 1955). An underlyingconcern is that competition could escalate into anall-out war and severely damage one or both firms.

An example of a total war occurred in the early1980s when Braniff Airlines initiated a price waragainst American Airlines, a much larger competi-tor. The intensity of the price war escalated, withboth competitors firmly committed to holding theirpositions. The confrontation ended when Braniffwas forced to shut down, ending 54 years of service(Ketchen, Snow, & Hoover, 2004; Sloan, 2005). Be-cause there is a risk that an aggressive action couldaccidently escalate into an all-out war, firms refrainfrom even isolated battles with rivals of high multi-market contact (Porter, 1981).

In addition to multimarket contact, there is oneother primary factor that affects a firm’s competi-tive stance: firm scope, or the number of productmarkets in which a firm has presence. Scope isimportant because multimarket contact consistsof the number of product markets shared with rivalsdivided by firm scope (Gimeno& Jeong, 2001). Whenrivals have different scopes, although the number ofcommon product markets between them may beequal, their multipoint contact and resulting viewsof competition will differ.

For an example of the effects of scope on multi-point competition, consider the rivalry betweenHewlett-Packard (HP) and Dell. HP and Dell bothcompete in the desktop computer, laptop computer,and printer product markets, and also meet as rivalsin several other product markets. However, theirscopes differ. Dell’s scope is relatively narrow,and centers mainly on computers and peripherals.

HP’s scope is broad, and includes computers andperipherals like Dell, but also includes such productmarkets as calculators, business services, commer-cial printers, and networking solutions. Betweenthem, Dell meets HP in exactly the same numberof product markets that HP meets Dell.

However, differing scopes indicate a differencein multimarket contact. Given the number of com-mon product markets shared with Dell, Hewlett-Packard’s broad scope suggests that it has relativelylow multimarket contact with Dell. Dell’s multi-market contact with HP, on the other hand, isrelatively high because of Dell’s narrower scope.This affects competition because if Dell’s multi-market contact is sufficiently high, it will seekmutual forbearance with HP. Meanwhile, if HP’smultimarket contact is in themid-range, it will seekto compete aggressively against Dell. In summary,two rivals that share a given number of commonproduct markets can each have unique competitiveintentions based on their relative level of multi-market contact.

It is worth noting that larger firms tend to com-pete in more product markets than smaller firms. Alarge difference in rivals’ scope may indicate a largedifference in size, as well. If one firm is overlydominant, multimarket contact is of little conse-quence (Golden & Ma, 2003). While we highlightdifferences in scope and the resulting conflict ofstrategy between firms, we limit our discussion tosituations in which no difference in size or scope is solarge as to omit any effect of multimarket contact.

We have so far discussed the basics of competi-tion in a multipoint setting as they are currentlyunderstood from research on competitive dyads. Weseek next to enhance this knowledge by asking: Howdoes the consideration of greater numbers of multi-point rivals affect the previously observed relation-ships in dyadic competition? In answering thisquestion, we first discuss briefly some complexitiesof moving to a focus on triadic competition. Then weapply this knowledge to the study of specific con-figurations of triads.

3. No longer one on one: Considering athird player

Few competitive situations involve only two firms.The study of triads is important because it revealshow competition might change as the number ofmultipoint rivals increases above the traditionaldyad. Drawing from classic industry-level analysisof competition (Scherer & Ross, 1990), we expectthat triads will be more aggressive than dyadswhen their level of multimarket contact indicates

52 J.W. Upson, A.L. Ranft

aggression. We also expect that triads will seekmutual forbearance at lower levels of multimarketcontact than dyads.

In addition, triadic competition highlights phe-nomena within the competitive dynamics literaturethat may not likely occur within dyadic competition.Two rivalsmay engage in intense competition and failto monitor the third competitor. This occurred in thecomputer hardware industry, where InternationalBusiness Machines Corp. (IBM) and HP were lockedin intense competition and allowed Dell to gain sig-nificantmarket share (Mateyaschuk, 1998). Also, tworivals may tacitly collude to stand up to the thirdcompetitor. For example, Williamson Medical Centerand St. Thomas Health Services aligned forces tolobby the Health Services and Development Agencyin opposition to HCA’s proposed expansion in Nash-ville, Tennessee (Wood, 2006). In examining multi-market competition we suggest that eachcompetitive configurationbeconsidered individually,and considerations be made for the level of multi-market contact, firm scope, and respective firmstrategy.

In transitioning the focus of study from dyads totriads, one complexity that arises is with the calcu-lationofmultimarket contact. Indyadic competition,the gross number of common product markets iseasily identified. However, triads are more complex.A simplified look at competition between the threeUnited States automakers provides a good example.General Motors Corporation (GM), Ford Motor Com-pany, and Chrysler all offer vehicles in the coupe,sedan,crossover, andSUVproductmarkets.However,only GM and Ford compete in the product market forlargeSUVs,andonlyChrysler competes in theproductmarket forminivans. Thecomplexityarises as towhatqualifies as triadic multimarket contact.

One way to measure multimarket contact is toassume that each firm in a product market experi-ences the same degree of multimarket contact(Evans & Kessides, 1994; Hughes & Oughton,1993). However, as is evident by the automakerexample, each firm is actually unique in its multi-market contact with rivals. An alternative is toassume that each competitor within a product mar-ket has an equal impact on the focal firm (Gimeno &Woo, 1996). However, this measure is also incom-plete as competitors vary in many of their charac-teristics. Suggesting that each competitor is thesame dilutes the effects of any single rival.

Finally, as discussed previously, multimarket con-tact has been viewed as a property of the uniquerelationship between two firms, or dyad (Baum &Korn, 1999). Again, this can lead to incompletepredictions, as we demonstrate by revisiting theautomakers’ competition from the perspective of

Ford. Ford and GM compete in many of the sameproduct markets. Perhaps managers at Ford consid-er their multimarket contact with GM to be highenough to seek mutual forbearance. Turning toChrysler, it is unique in that it offers a minivan,which Ford does not; yet, Ford offers trucks, whichChrysler does not. Ford managers might considertheir multimarket contact with Chrysler to be me-dium, and then seek to compete aggressively. How-ever, in triadic competition across all their commonproduct markets, it would be difficult for Ford toaggressively compete against Chrysler and forbearagainst GM. Because of the spillover effects ofcompetition, Ford’s aggression toward Chryslermight disrupt its mutual forbearance against GM.

These complexities suggest that dyadic com-petition is important, but it must not be consideredin isolation. All of a firm’s dyadic relations areimportant but not independent. Triadic competitivescenarios must take into account the effects of eachdyadic relationship in the product market, and alsothe interaction between these dyadic relationships.Next, we take a first step in that direction byconsidering several triadic competitive scenarios.

4. Memorable games: Configurationsof triads

Being aware of the complexities involved in explain-ing competition among triads, we attempt to main-tain simplicity in two ways. First, we consider onlythree levels of multimarket contact (low, medium,and high), and, respectively, three associated com-petitive stances (indifference, aggression, and for-bearance). As discussed before, these relationshipshave been observed in dyadic competition and pro-vide the basis for our discussion on triads.

Second, we limit our discussion to only those tri-adic competitive configurations that are most likelyto differ from dyadic competition. In triadic compe-tition, there are ten unique competitive configura-tions that can exist among three competitors, eachcapable of having one of three competitive stances(Table1).Weinvestigatedfouroftheseconfigurationsas listed in the uppermost portion of the table. Theremaining six configurations were not considered,because at least one firm in each of these configu-rations realizes low multimarket contact, and subse-quently is indifferent to competition with the othertwo firms. Firms that are indifferent toward rivalshave little impact on competition (Haveman &Nonnemaker, 2000). In such situations, the level ofcompetition is likely driven by the remaining firms inthe triad, and these configurationswereappropriate-ly discarded. The four configurations thatwe focus on

When strategies collide: Divergent multipoint strategies within competitive triads 53

Table 1. Triadic competitive configurations

TriadicConfig Firm 1 Firm 2 Firm 3 Effects Example

1 Aggressive Aggressive Aggressive

Four configurations inwhich all three firmsare aware of eachother. Multimarketcontact is an importantfactor of competition.

Microsoft, Sony, and Nintendoare locked in intensecompetition over videogame consoles.

2 Forbearance Forbearance Forbearance

Proctor & Gamble,Johnson & Johnson, andKimberly-Clark refrainfrom entering certainproduct markets where oneof the rivals is present.

3 Forbearance Forbearance Aggressive

Smaller industry participantsSamsung and Motorolasimultaneously droppedprices in attempts to takemarket share from industryleader Nokia.

4 Forbearance Aggressive Aggressive

U-Haul and Budget TruckRental have been locked inintense competition, allowingPenske to grow its industrypresence without drawingserious retaliation.

5 Indifferent Aggressive Aggressive Three configurations inwhich only two firms arefocused on each other.Their competitiveintensity likely followspredictions from dyadicmultipoint competition.

6 Indifferent Forbearance Forbearance

7 Indifferent Forbearance Aggressive

8 Indifferent Indifferent AggressiveTwo configurations inwhich only one firm isfocused on the others.The effects ofmultimarket contactare likely minor.

9 Indifferent Indifferent Forbearance

10 Indifferent Indifferent Indifferent

One configuration inwhich no firm is focusedon the others.Multimarket contact haslittle effect oncompetition.

offer insight as to how triadic competition differsfrom dyadic competition. These are discussed next.

4.1. Playing for keeps

Studies of dyadic competition have observed thatwhen two firms meet in several but not all productmarkets, they compete aggressively (Baum & Korn,1999). The firms’ competitive actions are ameans ofdefining their competitive positions and staking

claims to particular product markets (Haveman &Nonnemaker, 2000). A third firm, also experiencingmedium multimarket contact, is likely a threat to,and threatened by, its two rivals. Tit-for-tat attacksincrease as each firm tests the viability of the other.This effectively increases competition because eachfirm has an interest in establishing its presence inrelation to its two rivals, and attempts to gain asuperior position across their common product mar-kets.

54 J.W. Upson, A.L. Ranft

Applying the effects of triads to the relationshipbetween multimarket contact and competitiveintensity indicates that when all three firms realizemedium multimarket contact, the peak of competi-tive intensity is higher for triads than it would be fordyads. This is consistent with traditional argumentsfrom industrial organization economics in that themore competitors, the greater the competition(Scherer & Ross, 1990). Further, it would appearplausible that any increase in the number of com-petitors, also with an aggressive competitive stance,would increase the peak of competitive intensity.

The dynamics of three aggressive multipoint ri-vals can be seen in the videogame industry, whereMicrosoft, Sony, and Nintendo are locked in intensecompetition over videogame consoles. Triadic levelcompetition has risen to a high level, with each firmattempting to create blockbuster console releases.The intense competition has even affected theiralliance relationships, and further increased com-petition. For example, software publishers are be-coming less willing to sign exclusive deals with anyof the videogame console manufacturers. Becausethere is no dominant console manufacturer, theincome opportunities available to software devel-opers are limited in exclusive relationships. Soft-ware publishers instead seek to make their gamescompatible with all console systems. The effect ofthis will be to increase competition among consolemanufacturers even further, as it will become moredifficult for any firm to differentiate itself based onits selection of games.

4.2. A friendly match

Dyadic competitive studies have observed that tworivals experiencing high multimarket contact arereluctant to compete aggressively. Consequently,the firms mutually forbear. A third rival, alsoexperiencing high multimarket contact, will causecompetition to decrease further because each firmhas more product markets at risk in triadic compe-tition than in dyadic competition. For example,consider the competition between Proctor &Gamble (P&G), Johnson & Johnson (J&J), and Uni-lever. In dyadic competition, P&G encounters J&J insome product markets. By also considering its prod-uct market overlap with Kimberly-Clark, P&G hasadditional product markets at risk. Kimberly-Clark isin some of the product markets where both P&G andJ&J are present, and is also present in productmarkets where P&G is present but J&J is not. Intotal, the number of product markets P&G hasexposed to its rivals in triadic competition isgreater than the number exposed to either rivalin dyadic competition. If P&G chooses to initiate

an aggressive action, it risks receiving retaliationin any product market that it shares with J&J,Kimberly-Clark, or both. This increased risk causestriads characterized by high multimarket contact tobe more adverse to aggression than dyads.

The increased pressure to seek forbearance ef-fectively causes firms in triadic competition to en-gage in mutual forbearance at lower levels ofmultimarket contact than they would in dyadiccompetition. In its product market overlap withrivals, a firm may not experience dyadic marketcommonality high enough to seek forbearance withany one rival. However, the combined effects of tworivals’ multimarket contact with a focal firm in-creases the firm’s risk of escalated confrontationacross its product markets, and causes the firm tobecome less aggressive at high multimarket contactthan it would in dyadic competition.

Inspection of any supermarket inventory will re-veal signs ofmutual forbearance between Johnson &Johnson, Proctor & Gamble, and Kimberly-Clark.J&J, known as the ‘‘baby company,’’ does not makediapers, whereas P&G has its well-known Pampersbrand and Kimberly-Clark has its Huggies brand.P&G, known as the ‘‘soap and shampoo company,’’does not make baby shampoo, yet J&J and Kimberly-Clark do (D’Aveni, 2002). Finally, Kimberly-Clark hasonly a limited line of adult shampoo, whereas J&Jand P&G have extensive lines. These firms overlapconsiderably in the other product markets wherethey compete, and have effectively reduced theirlevel of aggressiveness to respect their rival’s pres-ence in certain product markets.

In both of the cited competitive configurations,three aggressive rivals and three forbearing rivals,general predictions from dyadic competition hold toa greater degree: firms aggressively compete undermedium multimarket contact and forebear underhigh multimarket contact. The next two competitiveconfigurations discussed highlight unique situationsthat may only arise with more than two competitors.In these cases, competitors pursue divergent strate-gies: some forebear and some are aggressive.

4.3. Two play friendly and the third wantsto battle

In dyadic competition, two rivals meeting in a rela-tively high percent of product markets will mutuallyforbear (Haveman & Nonnemaker, 2000). However,the presence of a third firm, having medium multi-market contact and a preference for aggression,will likely increase competition for two reasons.First, the high level of competition from the aggres-sive firm will cause the two forbearers to increasetheir aggression in order to defend themselves and

When strategies collide: Divergent multipoint strategies within competitive triads 55

maintain their positions. Second, firms engaged inmutual forbearance tend to be very familiar withone another and their respective capabilities. Mu-tual forbearance is, after all, a form of tacit collu-sion. Facing a common rival, the two forbearers maypool their competitive efforts and gang-up on theaggressor.

The phenomenon of gang-up has traditionallybeen presented as collusion between large marketshare owners that have little reason to competedirectly, and instead seek an outlet for competi-tion, or competitive release (Barnett, Greve, &Park, 1994). This outlet comes in the form of aninferior, smaller firm that acts as a target for thetwo dominant firms. But perhaps size is not the onlyfactor. Firm scopemight also determinewhen gang-up occurs.

For a given number of common product markets,smaller-scope firms may seek to forbear whilelarger-scope firms may seek aggression. This aggres-sion from a larger-scope firm is likely not welcomedby the two smaller-scope forbearers. Having exten-sive knowledge of each other and the ability totacitly collude, the forbearers may retaliate againstthe aggressor. By coordinating their efforts, theforbearers become a greater threat to the aggressor,because their combined scope is broader than eitherscope alone and allows for more points of attackagainst the aggressive firm. By targeting the aggres-sor and not each other, the forbearers mightsucceed in repelling the aggressor, thereby bringingabout the stable environment they both seek. Suchgang-up has occurred in the cell phone industry,where smaller industry participants Samsung andMotorola simultaneously dropped prices in attemptsto take market share from industry leader Nokia.

4.4. Two clash and the third plays friendly

From the study of dyads, we understand that tworivals experiencing medium multimarket contactfiercely compete in order to establish superiority(Baum & Korn, 1999). The presence of a third firm,which realizes high multimarket contact and seeksforbearance, will not notably affect competition fortwo reasons. First, the forbearer behaves so as notto draw attention from the two aggressors. Second,the two aggressors are not threatened by theforbearer because the forbearer presents less of arisk across product markets to the aggressors thanvice versa. The reason is that for a given number ofcommon product markets between firms, thosefirms that compete in few product markets realizehigher multimarket contact than those firms thatcompete in many product markets. This indicatesthat the two aggressors have greater scopes than

the forbearer. In turn, due to its high level of multi-market contact, the forbearer has a greater percentof product markets at risk to retaliation than theaggressors, which only experience medium multi-market contact.

However, in configurations of two aggressors andone forbearer, there might be an opportunity for theforbearer to increase aggression without consider-ably increasing risk. Because the two aggressors arelocked in intense competition, they may overlooksome of the forbearer’s actions. This provides anopportunity for the forbearer to take advantage ofthe aggressors’ blind spots (Zajac & Bazerman,1991). Blind spots are judgmental mistakes resultingfrom strategic decision makers’ poor identificationand faulty assumptions about competitors (Zahra &Chaples, 1993). Blind spots cause firms to inaccu-rately perceive the significance of events, perceiveevents incorrectly, or perceive them very slowly(Porter, 1980).

Traditionally, blind spots have been observed inlarger firms and exploited by smaller firms. A primeexample occurs when larger market share owners ofa concentrated industry become complacent, tacit-ly collude, and lose their competitive edge. Thiscreates weaknesses that are not apparent to them,but are visible to other smaller firms. However, thisphenomenon may also occur between firms of largeand small scope. In our case, two medium multi-market contact firms will focus their attention onone another because of their reciprocal aggressivecompetitive stances. This provides the opportunityfor a third firm with smaller scope to identify andexploit potentially lucrative blind spots.

This competitive configuration is present in thetruck rental and leasing industry. Leaders U-HaulInternational Inc. and Avis Budget Group, Inc.(Budget Truck Rental) have been locked in intensecompetition. Each has diversified into self-storagefacilities,moving supplies, and supply chainmanage-ment, thereby increasing their scope. Meanwhile,Penske, with a limited scope, has been able to growits presence in the industry without drawing seriousretaliation from either industry leader.

5. Avoid leaving the court

As we have discussed, changes in the competitivelandscape are breaking down barriers and changingcompetition. As competition becomes increasinglycomplex, both opportunities and threats await. It isimportant that managers understand the dynamicsof competition so that they can use these changes totheir advantage as they face more and differentcompetitors.

56 J.W. Upson, A.L. Ranft

Unfortunately, thosefirmswhosemanagers cannotmanage the complexity will be forced out of a prod-uct market. To survive within a product market,managers can benefit by considering three importantfactors. First, competition is not limited to a partic-ular product market, but extends to every pointwhere rivals meet. Managers should therefore devel-op their firm’s strategy in any one product market aspart of an overall strategy against its rivals acrossproduct markets. In formulating this strategy, itis important for managers to know which productmarkets aremost critical to thefirm’soverall success.Some considerations may be the product marketswhere the firm has the greatest share, product mar-kets that allow the firm to exploit its core competen-cies, or product markets that have the greatestpotential for future growth. Also important is knowl-edge as to which rivals a firm meets most frequentlyacross productmarkets. These rivals likely know a lotabout the firm, and vice versa. Therefore, they posesignificantmutual threats to each other. Finally,man-agers shouldbecognizantof thepresenceofkey rivalsin critical product markets. This may be especiallyconcerning, but canalsobeanopportunity formutualforbearance.

The second factor that managers should consideris the reciprocal strategies of each rival, becauseone firm’s strategy affects another’s. By appreciat-ing the perspective of one’s rival, managers can gaininsight into its strategy and use this knowledge inthe creation of their own strategy. By correctlyanticipating rival behavior and correctly modifyingthe firm’s strategy, managers can stay one stepahead of rivals.

Third, although the cognitive limits of managersmay control the extent to which they monitorrivals, we recommend that managers focus onmore than one rival, and then consider the syner-gies with the rivals’ strategies. Because rivals mayenter and leave product markets frequently, man-agers must continuously scan the competitivelandscape to maintain a current understandingof product market participants and the threatsthey pose. However, the awareness should notend here. Managers must also take a collectiveview of their rivals’ strategies, and attempt toidentify opportunities that may only exist betweenmultiple competitors. We have highlighted gang-up and blind spots as two opportunities that multi-competitor multipoint competition can present.These phenomena illustrate just two of the manyways in which competition between multiple firmsmay result in opportunities for those firmsthat take a holistic view of the product markets.The bottom line is that managers must learn toweave their firm’s strategy within and around

their collective rivals’ strategies so as to gainthe most benefit.

6. Final thoughts

The multipoint competition philosophy of competi-tive dynamics has gained many adherents. However,multipoint competition has been limited in itsapplicability to firms, especially when analyzingtheir competitor base. By considering multiple com-petitors, great opportunities await managers whoare vigorous in their analysis.

Given the challenges in today’s competitiveproduct markets, it is imperative that firms care-fully analyze their specific competitive positions toverify that their current strategy toward a rival in aproduct market is in line with the firm’s overallstrategy against its many rivals acrossmany productmarkets. Without commitment and an understand-ing of the associated challenges and requirements,managers may be better off focusing their effortsand resources elsewhere. Managers must also seri-ously consider their potential to change as an orga-nization. Awareness of one’s competitors will dolittle unless managers are able to coordinate thefirm’s actions across different product markets andinternal divisions. Those firms that are dedicated tocompetitor analysis and strategy alignment willgain the most.

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