Competitive Interaction
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Transcript of Competitive Interaction
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Competitive Interaction
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Hardball?
CompetitiveOutcomes
IndustryCharacteristics
OrganizationalCharacteristics
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Dethronement of the Leader
Market Share
1950 1960 1970 1980 1990 2000
Wal-MartSears
JC Penney
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Dethronement of the Leader
Market Share
1950 1960 1970 1980 1990 2000
McDonnell-Douglass
Boeing
Airbus
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Dethronement of the Leader
Market Share(U.S.)
1980 1990 2005
Adidas
Nike
Reebok
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King of the Hill – Fizzy Beverages
Market Share
1970 1980 1990 2000 2010 2020
Other ?Coke
Pepsi
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Simple Rivalry: Prisoner’s Dilemma
What to say to police?
Criminal 1
Criminal 2
Confess
Confess
Keep Quiet
Keep Quiet
Both Serve 1 Year in Jail
Both Serve 5 Years in Jail
#2 Serves 10 Years in jail
#1 Goes Free
#1 Serves 10 Years in Jail
#2 Goes Free
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Three Stooges
Larry, Moe, and Curley are in a 3-way duel and agree to take turns shooting each other, in that order
Accuracy statistics:– Larry hits target 20% of the time– Moe hits target 80% of the time– Curley hits target 100% of the time
When the duel starts, what should Larry do?
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Competitive Intelligence
A systematic and ethical program forgathering information about competitorsand general business trends to further yourown company’s goals
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Why CI?Play the Game Differently• New market opportunity• New customers• Develop/leverage new value
chain strengths• New strategies/tactics• New “flow” of the game
Figuring out what drives behavior• Environment/industry drivers• Organizational drivers• Managerial drivers
Playing the Game Better• Focus on existing
competitors/strategic position• Leverage value chain strengths• Incrementally improve existing
strategies/tactics
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Competitor Intelligence Pyramid
Sources of Data
Analysis of Data
Recommendations
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Competitor Intelligence Pyramid
• Industry experts/analysts• Industry publications• Trade shows/conferences• Advertisements/PR• University research centers• Financial• Court documents/patents• Suppliers/customers• Newspapers• Help wanted ads• Reverse engineering labs
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Your Rival’s News-based Competitive Actions July-October 2009
• Contract with Spike Lee for TV ad• Increase R&D budget by 30%• Buy warehouse facility near airport in Germany,
Re-tool with robotic material handling system• License Oracle’s newest technology• Cut prices on older version of product by 33%• Endorsement contract with famous World Cup
soccer athletes• Create multifunctional new product design team
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Reverse Engineering – Your Rival’s Product
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Competitor Intelligence Pyramid
• Value chain analysis• Ratio analysis• Benchmarking• Cost analysis• Trend analysis• Personality profiling• Wargaming or scenario planning• Competitive behavior analysis
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Competitor Intelligence Pyramid
• Track Existing Rivals• Anticipate New Rivals• Inform Strategy:
– Identify own/competitor’s strengths/weaknesses
–Early warning system–Plan of attack/retaliation
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The Cola Wars
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Cok
e’s
Mar
ket S
hare
MKT MKTPRICE PRODMKTCAP SIG PROD
Competitive Action RepertoireThe set of competitive actions carried out in a given time period
Repertoire
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Your Rival’s Competitive Actions
• Contract with famous movie director, Spike Lee, for TV ad
• Increase R&D budget by 30%• Buy warehouse facility near airport in Germany, Re-
tool with robotic material handling system• License Oracle’s newest technology• Cut prices on older version of product by 33%• Endorsement contract with famous U.S. Olympic
athletes• Create multifunctional new product design team
a b c d e
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Competitive Dynamics Analysis• Observe competitive moves• Organize competitive moves
–Action/response pairs–Action repertoires (year-end tallies)–Competitive attacks/sequences
• Measurement/Analysis of Characteristics– Action pattern characteristics that improve:
• Market share• Stock price• Profitability
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ActionPair 1
ActionPair 2
ActionPair 3
ActionPair 4
Coca-Cola
Pepsi
Action-Reaction “Pairs”
timeAction
Response
• Profits• Growth• Mkt. Share
a
cd
e
d d
a c
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Action “Repertoires”
time
• Profits• Growth• Mkt. Share
Year-EndTallies
• Total Actions• Complexity
Coca-Cola
Pepsi
a
c
e
cc
a
a c
d
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a b c d e f g h
Strategy and Adaptive Maneuvering
8
7
6
5
4
3
2
1
Chess:• Epaulette’s Mate• Sicilian Defense
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Sequence Applications...
LANGUAGE:
BOXING: DNA:
qcheaTiueissesne. hsiT si a cesneueq.
This is a sequence.
Jab...Jab…Uppercut
CA
GTA
CAT
AG
TAC
GAT
AC
GA
MUSIC:
COMPUTER PROGRAM:data actions2; subj = _n_; do i = 1 to max; output = matrix; end;run;
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abcde
ca bec a b de ca bd
Coke Pepsi
d
aa
b
e
c
e
b
a
d
b
c c
Observed Sequence Observed Sequence
Competitive Actions Over Time
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abcde
ca bec a b de ca bd
Coke Industry Norm
d
aa
b
e
c
e
b
a
d
b
c c
Observed Sequence Observed Sequence
Coke Strategic Non-Conformity
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abcde
ca beca b de cab d
Pepsi
d
aa
b
e
c
e
b
a
d
b
c c
Observed Sequence Observed Sequence
Pepsi Strategic Conformity
Industry Norm
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abcde
c ab eca bde ca bd
Coke in time1
de
b
aa a
d
bb
e
c cc
Coke in time2
Observed Sequence Observed Sequence
Coke Strategic Unpredictability
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abcd
e
ca beca bde ca bd
de
aa a
d
bb
e
c cc
Pepsi in time1 Pepsi in time2
b
Observed Sequence Observed Sequence
Pepsi Strategic Predictability
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King of the Hill – Fizzy Beverages
Market Share
1950 1960 1970 1980 1990 2000
Other ?Coke
Pepsi
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“Hardball” Competition• Total Actions
–More actions are better• Average Response Time
–Faster response time is better• Repertoire Complexity
–Complex repertoire is better• Attack [Un-]Predictability
–Unpredictability is better
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Group Exercise: Coke vs. Pepsi• Total Actions
–Count of total actions• Average Response Time
–Avg. number of time units between last competitive move in Coke’s attack and Pepsi’s first competitive response, etc.
• Repertoire Complexity–Extent to which entire pattern/repertoire is skewed/simple vs. balanced/complex
• Attack [Un-]Predictability–Recognizable repetition or action combinations in the sequence of actions?
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Scoring the Fight
Total Actions
Faster Responses
More Complex Repertoire
Unpredictable Attacks
Coke Pepsi
Who will win?
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Implications for CI:
Predict Future Behavior of Rivals
Rivals’ prior behavior• Patterns• Tendencies• Type & order of moves
• Proactiveness• Reactiveness
Drivers of Behavior• Management orientation• Decision-making• Financial constraints• Industry characteristics
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Implications for CI:
Monitor Your Own Behavior
• Objectively measures of competitive behavior• Safeguard against complacency, predictability, simplicity of your own company
• Keep rivals off balance / disruption / guessing• What combinations of moves are effective? …which are ineffective? …smoke signals or bluffs?