Competing For Advantage Part III – Creating Competitive Advantage Chapter 6 – Competitive...
-
Upload
meredith-newman -
Category
Documents
-
view
243 -
download
0
Transcript of Competing For Advantage Part III – Creating Competitive Advantage Chapter 6 – Competitive...
Competing For Advantage
Part III – Creating Competitive Advantage
Chapter 6 – Competitive Rivalry and Competitive Dynamics
The Strategic Management Process
Competitive Rivalry
Key Terms Competitors – firms operating in the same
market, offering similar products and targeting similar customers
Competitive Rivalry – ongoing set of competitive actions and competitive responses occurring between competitors as they contend with each other for an advantageous market position
Competitive Behavior – set of competitive actions and competitive responses the firm takes to build or defend its competitive advantages and to improve its market position
Competitive Rivalry
Key Terms Competitive Dynamics – total set of actions and
responses of all firms competing within a market Multimarket Competition – firms competing
against one another in several product or geographic markets
From Competitors to Competitive Dynamics
Model of Competitive Rivalry
Intensity of Rivalry
The total number of competitors
Market characteristics
Quality of individual firms' strategies
Drivers of competitive behavior
Competitor Determinants
Market CommonalityResource Similarity
Market Commonality
Key Terms
Market Commonality – number of markets with which the firm and a competitor are jointly involved, and degree of importance of the individual markets to each firm
Resource Similarity
Key Terms
Resource Similarity – extent to which the firm's tangible and intangible resources are comparable to competitors' resources in terms of both type and amount
Framework of Competitive Analysis
Drivers of Competitive Actions and Responses
Awareness Motivation Ability Resource Dissimilarity
Strategic and Tactical Actions
Key Terms Competitive Action – strategic or tactical
action the firm takes to build or defend its competitive advantages or improve its market position
Competitive Response – strategic or tactical action the firm takes to counter the effects of a competitor's action
Tactical Action (or Response) – market-based the firms takes in order to fine-tune a strategy
Differences Between Strategic and Tactical Actions/Responses
Strategic actions/responses – market-based moves (difficult to implement and reverse) that signify a significant commitment of organizational resources to pursue a specific strategy
Tactical actions/responses – market-based moves (easy to implement and reverse) that involve fewer resources to fine-tune a strategy that is already in place
Likelihood of Attack
First mover incentives
Organizational size
Quality
Timing of Competitive Behavior
Key Terms First Mover – firm that takes an initial competitive
action to build or to defend its competitive advantages or to improve its market position
Second Mover – firm that responds to first mover's competitive action, typically through imitation
Late Mover – firm that responds to competitive action, but only after time has elapsed since first mover's action and second mover's response
Timing of Competitive Behavior
Key Terms
Slack – buffer or cushion provided by actual or obtainable resources not currently used by an organization, resources in excess of the minimum those needed to produce a given level of output
First Mover – Characteristics
Often builds upon a strategic foundation of superior research and development skills
Tends to be aggressive and willing to experiment with innovation
Tends to take higher, yet reasonable, risks
Needs to have liquid resources (slack) that can be quickly allocated to support actions
First Mover – Benefits
Above-average returns
Customer loyalty
An early hold on market share
First Mover – Risks
Difficulty in accurately estimating potential returns
Substantial costs of product innovation, which reduce slack available for other opportunities
Lower likelihood of introducing (or converting to) the product that becomes the industry standard as the market evolves
Second Mover – Characteristics
Responds to first mover, typically through imitation Is more cautious than first movers Tends to study customer reactions to product
innovations Tends to learn from the mistakes of first movers,
reducing its risks Takes advantage of time to develop processes and
technologies that are more efficient than first movers, reducing its costs
Will not benefit from first mover advantages, lowering potential returns
Late Mover – Characteristics
Responds to market opportunities only after considerable time has elapsed since first and second movers have taken action
Has substantially reduced risks and returns
Organizational Size
Small firms
Act as nimble and flexible competitors
Rely on speed and surprise to defend their competitive advantage
Have greater variety of competitive behavior options available
Organizational Size
Large firms
Often have greater slack
Have greater likelihood to initiate competitive and strategic actions over time
Tend to rely on a limited variety of competitive actions, which can ultimately reduce their competitive success
Quality
Key Terms
Quality – customer perception that the firm's goods or services perform in ways that are important to customers, meeting or exceeding their expectations
Quality
Likelihood of Response
Types and effectiveness of the competitive action
Reputation of the firm that takes competitive actions
Dependence on the market
If the action significantly strengthens or weakens the firm's competitive position
Actor’s Reputation
Key Terms
Actor – firm taking an action or response (in the context of competitive rivalry)
Reputation – positive or negative attribute ascribed by one rival to another based on past competitive behavior
Dependence on the Market
Key Terms
Market Dependence – extent to which a firm's revenues or profits are derived from a particular market
Competitive Dynamics – Three Market Types
Slow-cycle markets
Fast-cycle markets
Standard-cycle markets
Slow-Cycle Markets
Key Terms
Slow-Cycle Markets – markets in which the firm's competitive advantages are shielded from imitation for long periods of time, and in which imitation is costly
Slow-Cycle Markets
Build a one-of-a-kind competitive advantage that is proprietary and difficult for competitors to understand (creating sustainability)
Once a proprietary advantage is developed, competitive behavior should be oriented to protecting, maintaining, and extending that advantage
Organizational structure should be used to effectively support strategic efforts
Slow-Cycle Markets
Fast-Cycle Markets
Key Terms
Fast-Cycle Markets – markets in which the firm's capabilities that contribute to competitive advantages are not shielded from imitation and where imitation is often rapid and inexpensive
Fast-Cycle Markets
Focus on learning how to rapidly and continuously develop new competitive advantages that are superior to those they replace (creating innovation)
Avoid loyalty to any of their products, possibly cannibalizing their own current products to launch new ones before competitors learn how to do so through successful imitation
Continually try to move on to another temporary competitive advantage before competitors can respond to the first one
Fast-Cycle Markets
Standard-Cycle Markets
Key Terms
Standard-Cycle Markets – markets in which the firm's competitive advantages are moderately shielded from imitation and where imitation is moderately costly
Standard-Cycle Markets
Have competitive advantages that can be partially sustained when their quality is continuously upgraded
Seek to serve many customers and gain a large market share
Gain brand loyalty through brand names Carefully control operations to manage a
consistent experience for the customer
Ethical Questions
When competing against one another, firms jockey for a market position that is advantageous, relative to competitors. In this jockeying, what are the ethical implications associated with the way competitor intelligence is gathered?
Ethical Questions
Second movers often respond to a first mover’s competitive actions through imitation. Is there anything unethical about a company imitating a competitor’s good or service as a means of engaging in competition?
Ethical Questions
The standards for competitive rivalry differ in countries throughout the world. What should firms do to cope with these differences? What guidance should a firm give to employees as they deal with competitive actions and competitive responses that are ethical in one country but unethical in others?
Ethical Questions
In slow-cycle markets, effective competitors are able to shield their competitive advantages from imitation by competitors for long periods of time. But this isn’t the case in fast-cycle markets. Do these conditions have implications in terms of ethical business practices? Can what is considered ethical in slow-cycle markets be different from what is considered ethical in fast-cycle markets?
Ethical Questions
A firm competes against another organization in several markets. Is it ethical for the firm to launch a competitive response in a market that differs from the one in which that competitor took a competitive action against the local firm? Why or why not?