F Ch05 Competitive Dynamics
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Transcript of F Ch05 Competitive Dynamics
© Dr. D. Bhattacharjee
Welcome To
A Session On
Competitive Dynamics
Welcome To
A Session On
Competitive Dynamics
© Dr. D. Bhattacharjee
Chapter 5Chapter 5Competitive DynamicsCompetitive Dynamics
Michael A. HittR. Duane Ireland
Robert E. Hoskisson
Michael A. HittR. Duane Ireland
Robert E. Hoskisson
Reference:
© Dr. D. Bhattacharjee
Chapter 3Chapter 3InternalInternal
EnvironmentEnvironment
Chapter 2Chapter 2ExternalExternal
EnvironmentEnvironmentThe StrategicThe StrategicManagementManagement
ProcessProcess
The StrategicThe StrategicManagementManagement
ProcessProcess
Strategic IntentStrategic Intent
Strategic MissionStrategic Mission
StrategicStrategicCompetitivenessCompetitivenessAbove AverageAbove Average
ReturnsReturnsFeedback
Strategy FormulationStrategy Formulation
Chapter 4Chapter 4Business-LevelBusiness-Level
StrategyStrategy
Chapter 5Chapter 5CompetitiveCompetitive
DynamicsDynamics
Chapter 6Chapter 6Corporate-LevelCorporate-Level
StrategyStrategy
Chapter 8Chapter 8InternationalInternational
StrategyStrategy
Chapter 9Chapter 9CooperativeCooperative
StrategiesStrategies
Chapter 7Chapter 7Acquisitions &Acquisitions &RestructuringRestructuring
Strategy ImplementationStrategy Implementation
Chapter 10Chapter 10CorporateCorporate
GovernanceGovernance
Chapter 11Chapter 11StructureStructure& Control& Control
Chapter 12Chapter 12StrategicStrategic
LeadershipLeadership
Chapter 13Chapter 13Entrepreneurship & InnovationEntrepreneurship & Innovation
Str
ateg
icIn
puts
Str
ateg
icA
ctio
ns
Str
ateg
ic
Ou
tcom
es
© Dr. D. Bhattacharjee
What is meant by competitive dynamics?
Competitive dynamics refers to firm’s changing strategies and their implementation that result from a series of competitive actions and competitive responses among firms competing within a particular industry.
What is meant by competitive rivalry?
© Dr. D. Bhattacharjee
What is meant by competitive rivalry?
Competitive rivalry exists when two or more firms jockey with one another in the pursuit of an advantageous market position.
What is meant by mutual interdependence ?
© Dr. D. Bhattacharjee
What is meant by mutual interdependence ?
Mutual interdependence among firms means that strategic competitiveness and above average returns result only when companies recognize that their strategies are not implemented in isolation from their competitor’s actions and responses.
© Dr. D. Bhattacharjee
Declining emphasis on single, domestic markets and Declining emphasis on single, domestic markets and increasing emphasis on global marketsincreasing emphasis on global markets
Advances in communication technology make Advances in communication technology make coordination easier across multiple marketscoordination easier across multiple markets
Advances in technology and innovation have increased Advances in technology and innovation have increased competitiveness of small and medium sized firmscompetitiveness of small and medium sized firms
National barriers are falling due to the number and scope of National barriers are falling due to the number and scope of trade agreements (GATT, NAFTA, EEC)trade agreements (GATT, NAFTA, EEC)
Factors Leading to More Complex RivalryFactors Leading to More Complex Rivalry
© Dr. D. Bhattacharjee
Actions and responses Actions and responses shape the competitive shape the competitive
positions of each firm’s positions of each firm’s business level strategybusiness level strategy
Actions taken by Actions taken by one firm elicit one firm elicit responses from responses from competitorscompetitors
A firm’s A firm’s strategic conduct is strategic conduct is dynamic in naturedynamic in nature
Competitive Competitive responses lead to responses lead to
additional actions additional actions from the firm that from the firm that
acted originallyacted originally
CompetitiveCompetitive Dynamics Dynamics
© Dr. D. Bhattacharjee
Relative SizeSpeed
InnovationQuality
Ability for Ability for Action and Action and ResponseResponse
OutcomesOutcomesDrivers of Drivers of
Competitive Competitive BehaviorBehaviorAwarenessMotivationCapability
Competitor Competitor AnalysisAnalysis
MarketCommonality
ResourceSimilarity
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackLikelihood of AttackFirst Mover Incentives
Likelihood of ResponseLikelihood of ResponseType of Competitive
Action
Dependence on theMarket
Resource Availability
Actor’s Reputation
CompetitiveCompetitive
Slow, Standardor Fast Cycle
Market TypesMarket Types
CompetitiveCompetitive
SustainedOutcomesOutcomes
CompetitiveAdvantageTemporaryAdvantageEvolutionaryEvolutionaryOutcomesOutcomes
Entrepreneurial
or Market-PowerGrowth-Oriented
ActionsFeedbackFeedback
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
© Dr. D. Bhattacharjee
Drivers of Drivers of Competitive Competitive
BehaviorBehavior
Motivation
Capability
Awareness
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Do managers understand the Do managers understand the key characteristics of key characteristics of competitors?competitors?
Do managers understand the Do managers understand the key characteristics of key characteristics of competitors?competitors?
AwarenessAwareness
© Dr. D. Bhattacharjee
Does the firm have Does the firm have appropriate incentives to appropriate incentives to attack or respond?attack or respond?
Drivers of Drivers of Competitive Competitive
BehaviorBehavior
MotivationMotivation
Capability
Awareness
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
© Dr. D. Bhattacharjee
Does the firm have the Does the firm have the necessary resources to attack necessary resources to attack or respond?or respond?
Drivers of Drivers of Competitive Competitive
BehaviorBehavior
Motivation
CapabilityCapability
Awareness
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
© Dr. D. Bhattacharjee
Relative SizeSpeed
InnovationQuality
Ability for Ability for Action and Action and ResponseResponse
OutcomesOutcomesDrivers of Drivers of
Competitive Competitive BehaviorBehaviorAwarenessMotivationCapability
Competitor Competitor AnalysisAnalysis
MarketCommonality
ResourceSimilarity
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackLikelihood of AttackFirst Mover Incentives
Likelihood of ResponseLikelihood of ResponseType of Competitive
Action
Dependence on theMarket
Resource Availability
Actor’s Reputation
CompetitiveCompetitive
Slow, Standardor Fast Cycle
Market TypesMarket Types
CompetitiveCompetitive
SustainedOutcomesOutcomes
CompetitiveAdvantageTemporaryAdvantageEvolutionaryEvolutionaryOutcomesOutcomes
Entrepreneurial
or Market-PowerGrowth-Oriented
ActionsFeedbackFeedback
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
© Dr. D. Bhattacharjee
Competitor Competitor AnalysisAnalysis
Resource Similarity
Market Commonality
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Do firms compete with each Do firms compete with each other in multiple markets?other in multiple markets?Do firms compete with each Do firms compete with each other in multiple markets?other in multiple markets?
Market Commonality
Market Commonality
© Dr. D. Bhattacharjee
Competitor Competitor AnalysisAnalysis
Resource Similarity
Market Commonality
Market Commonality
Multipoint competition tends to reduce Multipoint competition tends to reduce competitive interactions, but increases competitive interactions, but increases the likelihood of response where the likelihood of response where interaction occursinteraction occurs
For example, airlines price flights For example, airlines price flights similarly but respond quickly when similarly but respond quickly when competitors introduce promotional pricescompetitors introduce promotional prices
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
© Dr. D. Bhattacharjee
Competitor Competitor AnalysisAnalysis
Resource SimilarityResource Similarity
Do competitors possess similar Do competitors possess similar types or amounts of resources?types or amounts of resources?
Market Commonality
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
© Dr. D. Bhattacharjee
Competitor Competitor AnalysisAnalysis
Resource SimilarityResource Similarity
Market Commonality
Firms are less inclined to attack a firm Firms are less inclined to attack a firm that is likely to retaliatethat is likely to retaliate
Firms with dissimilar resources are Firms with dissimilar resources are more likely to attackmore likely to attack
Firms with similar resources are more Firms with similar resources are more likely to be aware of each other’s likely to be aware of each other’s competitive movescompetitive moves
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
© Dr. D. Bhattacharjee
Relative SizeSpeed
InnovationQuality
Ability for Ability for Action and Action and ResponseResponse
OutcomesOutcomesDrivers of Drivers of
Competitive Competitive BehaviorBehaviorAwarenessMotivationCapability
Competitor Competitor AnalysisAnalysis
MarketCommonality
ResourceSimilarity
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackLikelihood of AttackFirst Mover Incentives
Likelihood of ResponseLikelihood of ResponseType of Competitive
Action
Dependence on theMarket
Resource Availability
Actor’s Reputation
CompetitiveCompetitive
Slow, Standardor Fast Cycle
Market TypesMarket Types
CompetitiveCompetitive
SustainedOutcomesOutcomes
CompetitiveAdvantageTemporaryAdvantageEvolutionaryEvolutionaryOutcomesOutcomes
Entrepreneurial
or Market-PowerGrowth-Oriented
ActionsFeedbackFeedback
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
© Dr. D. Bhattacharjee
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackLikelihood of Attack
First Mover IncentivesLikelihood of ResponseLikelihood of Response
Type of CompetitiveAction
Dependence on theMarket
Resource Availability
Actor’s Reputation
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Likelihood of AttackLikelihood of Attack
First Mover IncentivesFirst Mover IncentivesFirst Mover advantage First Mover advantage can be substantialcan be substantial
© Dr. D. Bhattacharjee
First MoverFirst Mover
Firms that take an initial competitive actionFirms that take an initial competitive action
Generally possess the resources and capabilities that enable them to be pioneers in new products, new markets or new technologies
Generally possess the resources and capabilities that enable them to be pioneers in new products, new markets or new technologies
Can earn above average profits until competitors respondCan earn above average profits until competitors respond
Gain customer loyalty, helping to create a barrier to entry by competitorsGain customer loyalty, helping to create a barrier to entry by competitors
Advantage depends upon difficulty of imitationAdvantage depends upon difficulty of imitation
© Dr. D. Bhattacharjee
Second MoverSecond Mover
Firms that respond to a First Mover’s actionsFirms that respond to a First Mover’s actions
Second Movers frequently imitate First MoversSecond Movers frequently imitate First Movers
Speed of response often dictates successSpeed of response often dictates success
Should evaluate customers’ response before movingShould evaluate customers’ response before moving
“Fast” Second Movers can capture some of initial customers and develop some brand loyalty“Fast” Second Movers can capture some of initial customers and develop some brand loyalty
Avoid some of the risks associated with First MoveAvoid some of the risks associated with First Move
Must possess necessary capabilities to imitateMust possess necessary capabilities to imitate
© Dr. D. Bhattacharjee
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackLikelihood of Attack
First Mover IncentivesFirst Mover IncentivesLikelihood of ResponseLikelihood of Response
Type of CompetitiveType of CompetitiveActionAction
Dependence on theDependence on theMarketMarket
Resource AvailabilityResource Availability
Actor’s ReputationActor’s Reputation
Whether a competitor is Whether a competitor is likely to respond likely to respond depends on several key depends on several key factorsfactors
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
© Dr. D. Bhattacharjee
Likelihood of Attack and ResponseLikelihood of Attack and Response
What is competitive action?
A competitive action is a significant competitive move taken by a firm that is designed to gain a competitive advantage in a market.
How can you classify movers?
© Dr. D. Bhattacharjee
How can you classify movers? First mover is a firm that takes an initial action.
Second mover is a firm that responds to a first
mover’s competitive action, often through imitation or
a move designed to counter the effects of the action.
A late mover is a firm that responds to a competitive
action, but only after considerable time has elapsed
after the first mover’s action and second mover’s
response.
What is competitive response?
© Dr. D. Bhattacharjee
What is competitive response?
A competitive response is a move taken to counter effects of an action by a competition.
What are competitive actions?
© Dr. D. Bhattacharjee
Strategic Action
Tactical Action
Types of Competitive ActionsTypes of Competitive ActionsTypes of Competitive ActionsTypes of Competitive Actions
© Dr. D. Bhattacharjee
Strategic action is macro-oriented (for all of you econ buffs) with an emphasis on the big picture and long term goals and objectives, usually in 3 to 5 year increments. This type of action guides the fundamental (i) decisions and (ii) actions that will shape the long term direction of a business and one’s personal development. It focuses on the core of Who (you are), What (you want to accomplish) and Why (do you want to accomplish the what) of organizations and people. Strategic decision includes areas like (i) business’ market share; (ii) professional career path; (iii) life and/or business vision; (iv) investment goals; (v) personal and/or professional opportunity costs; (vi) mission; and (v) the allocation of resources.
Strategic ActionStrategic Action
© Dr. D. Bhattacharjee
Tactical action is micro-oriented and focused short term S.M.A.R.T. goals, which usually have 1 to 18 month time frames. This type of short term action is all about the How (i.e., process) of getting things doing. The focus is on operations, which includes creating and executing effective, efficient action plans.
Areas that are covered in tactical action include (i) monthly or quarterly sales goals; (ii) improving customer service in specific areas, (iii) reducing the number of your outside commitments so that you can simplify your life and (iv) creating action plans for your strategic (big picture) objectives.
Tactical ActionTactical Action
© Dr. D. Bhattacharjee
TacticalTacticalActionsActionsTacticalTacticalActionsActions
Major AcquisitionMajor AcquisitionExampleExample
Features of strategic and tactical actionsFeatures of strategic and tactical actionsFeatures of strategic and tactical actionsFeatures of strategic and tactical actions
Strategic Strategic ActionsActionsStrategic Strategic ActionsActions
Price cutPrice cutExampleExample
Significant commitments of specific and distinctive organizational resourcesSignificant commitments of specific and distinctive organizational resources
Difficult to implementDifficult to implement
Difficult to reverseDifficult to reverse
Relatively easy to implementRelatively easy to implementRelatively easy to implementRelatively easy to implement
Relatively easy to reverseRelatively easy to reverseRelatively easy to reverseRelatively easy to reverse
Undertaken to “fine tune” strategyUndertaken to “fine tune” strategyUndertaken to “fine tune” strategyUndertaken to “fine tune” strategy
© Dr. D. Bhattacharjee
Distinction between strategic action and Distinction between strategic action and tactical actiontactical action
Since upper managers generally have a better understanding of the organization as a whole than lower level managers do, upper management generally takes the strategic actions, while generally the lower level managers takes the tactical actions as lower level managers generally have better understanding of the day to day organizational operations. Strategic action emphasizes the future, and tactical action emphasizes the everyday functioning of the organization. Strategic actions are based primarily on a prediction of the future, while tactical actions are based on known circumstances that exist within the organization.
© Dr. D. Bhattacharjee
Distinction between strategic action and Distinction between strategic action and tactical actiontactical action
Strategic actions cover a relatively long period of time whereas tactical plans cover a relatively short period of time.
Despite their differences, tactical and strategic actions are integrally related. Tactical actions should focus on what to do in the short term to the organization, strategic actions aims at achieving the long term objectives determined by strategic planning.
© Dr. D. Bhattacharjee
Gauging the Likelihood of ResponseGauging the Likelihood of Response
Actor’s ReputationActor’s Reputation
Market leaders are more likely to be copiedMarket leaders are more likely to be copiedMarket leaders are more likely to be copiedMarket leaders are more likely to be copied
““Risk taking” firms are less likely to be copiedRisk taking” firms are less likely to be copied““Risk taking” firms are less likely to be copiedRisk taking” firms are less likely to be copied
““Price Predators” are less likely to be copied Price Predators” are less likely to be copied ““Price Predators” are less likely to be copied Price Predators” are less likely to be copied
© Dr. D. Bhattacharjee
Market DependenceMarket Dependence
Competitor ResourcesCompetitor Resources
Smaller firms are more likely to respond to tactical actionsSmaller firms are more likely to respond to tactical actionsSmaller firms are more likely to respond to tactical actionsSmaller firms are more likely to respond to tactical actions
Limited resources may lead to alternatives such as Strategic Limited resources may lead to alternatives such as Strategic AlliancesAlliancesLimited resources may lead to alternatives such as Strategic Limited resources may lead to alternatives such as Strategic AlliancesAlliances
Gauging the Likelihood of ResponseGauging the Likelihood of Response
Firms that are more dependent on a single industry are more likely to respond than are diversified firmsFirms that are more dependent on a single industry are more likely to respond than are diversified firms
Industry dependent firms will likely respond to either strategic or tactical actionsIndustry dependent firms will likely respond to either strategic or tactical actions
© Dr. D. Bhattacharjee
Relative SizeSpeed
InnovationQuality
Ability for Ability for Action and Action and ResponseResponse
OutcomesOutcomesDrivers of Drivers of
Competitive Competitive BehaviorBehaviorAwarenessMotivationCapability
Competitor Competitor AnalysisAnalysis
MarketCommonality
ResourceSimilarity
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackLikelihood of AttackFirst Mover Incentives
Likelihood of ResponseLikelihood of ResponseType of Competitive
Action
Dependence on theMarket
Resource Availability
Actor’s Reputation
CompetitiveCompetitive
Slow, Standardor Fast Cycle
Market TypesMarket Types
CompetitiveCompetitive
SustainedOutcomesOutcomes
CompetitiveAdvantageTemporaryAdvantageEvolutionaryEvolutionaryOutcomesOutcomes
Entrepreneurial
or Market-PowerGrowth-Oriented
ActionsFeedbackFeedback
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
© Dr. D. Bhattacharjee
Relative Size
Quality
Innovation
Speed
Ability for Ability for Action and Action and ResponseResponse
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Relative SizeRelative SizeFirm size can have Firm size can have opposing effects on opposing effects on competitive dynamicscompetitive dynamics
Firm size can have Firm size can have opposing effects on opposing effects on competitive dynamicscompetitive dynamics
© Dr. D. Bhattacharjee
Quality
Speed
Large firms may exert market power Large firms may exert market power over rivals and erect barriers to entry over rivals and erect barriers to entry against smaller competitorsagainst smaller competitors
However, smaller competitors may be However, smaller competitors may be more nimble and innovativemore nimble and innovative
Ability for Ability for Action and Action and ResponseResponse
Relative SizeRelative Size
Innovation
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
““Think and act big and we’ll get Think and act big and we’ll get smaller. Think and act small and smaller. Think and act small and we’ll get bigger.”we’ll get bigger.”
-- Herb Kelleher, CEO, Southwest Airlines-- Herb Kelleher, CEO, Southwest Airlines
© Dr. D. Bhattacharjee
Relative Size
Quality
Innovation
SpeedSpeed
Quick response is crucial Quick response is crucial to both the first mover to both the first mover and the fast second and the fast second movermover
Ability for Ability for Action and Action and ResponseResponse
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
© Dr. D. Bhattacharjee
Consistent innovation is Consistent innovation is required for market required for market leadership in many leadership in many dynamic industries dynamic industries
Ability for Ability for Action and Action and ResponseResponse
Relative Size
Quality
InnovationInnovation
Speed
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
© Dr. D. Bhattacharjee
Exceeding customer Exceeding customer expectations is a necessity to expectations is a necessity to compete in the 21st centurycompete in the 21st century
Ability for Ability for Action and Action and ResponseResponse
Relative Size
QualityQuality
Innovation
Speed
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
© Dr. D. Bhattacharjee
What is meant by quality?
Quality involves meeting or exceeding customer expectations in the goods an/or services offered.
© Dr. D. Bhattacharjee
Quality Dimensions of Goods Quality Dimensions of Goods
ProductProduct Quality Dimensions: Quality Dimensions:
Perceived quality Perceived quality Subjective assessment of characteristics Subjective assessment of characteristics (product image)(product image)
Performance Performance Operating characteristicsOperating characteristics
Features Features Important special characteristicsImportant special characteristicsFlexibility Flexibility Meeting operating specifications over timeMeeting operating specifications over time
Durability Durability Amount of use before performance Amount of use before performance deterioratesdeteriorates
Conformance Conformance Match with pre-established standardsMatch with pre-established standards
Serviceability Serviceability Ease and speed of repair or normal serviceEase and speed of repair or normal service
Aesthetics Aesthetics How a product looks and feelsHow a product looks and feels
© Dr. D. Bhattacharjee
Quality Dimensions of ServicesQuality Dimensions of Services
ServiceService Quality Dimensions: Quality Dimensions:
Timeliness Timeliness Performed in promised period of timePerformed in promised period of time
Courtesy Courtesy Performed cheerfullyPerformed cheerfully
Consistency Consistency Giving all customers similar experiencesGiving all customers similar experiences
Convenience Convenience Accessibility to customersAccessibility to customers
Completeness Completeness Fully serviced, as requiredFully serviced, as required
Accuracy Accuracy Performed correctly each timePerformed correctly each time
© Dr. D. Bhattacharjee
Deming’s Fourteen Points to Quality
1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business, and to provide jobs.
2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change.
3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place.
4. End the practice of awarding business on the basis of price tag. Instead, minimize total cost.
5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly reduce costs.
TABLE 5.2
© Dr. D. Bhattacharjee
Deming’s Fourteen Points to Quality
6. Institute training on the job.
7. Institute leadership. The aim of leadership should be to help people and machines and gadgets do a better job. Leadership of management is in need of an overhaul, as well as leadership of production workers.
8. Drive out fear, so that everyone may work effectively for the company.
9. Break down barriers between departments. People in research, design, sales, and production must work as a team, to foresee problems of production and in use that may be encountered with the product or service.
10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships. The bulk of the causes of low quality and productivity belong to the system and thus lie beyond the power of the work force.
© Dr. D. Bhattacharjee
Deming’s Fourteen Points to Quality
11. (a) Eliminate work standards on the factory floor. Substitute leadership. (b) Eliminate management by objective. Eliminate management by numbers, numerical goals. Substitute leadership.
12. (a) Remove barriers that rob hourly workers of their right to pride of workmanship. The responsibility of supervisors must be changed from sheer numbers to quality. (b) Remove barriers that rob people in management and in engineering of their right to pride of workmanship.
13. Institute a vigorous program of education and self-improvement.
14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody’s job.
© Dr. D. Bhattacharjee
Market Types Slow Cycle Markets: Products in slow-cycle markets reflect strongly
shielded resource positions where competitive pressures do not readily penetrate a firm’s sources of strategic competitiveness.
Standard-cycle markets: Products in standard-cycle markets reflect moderately shielded resource positions where competitive interaction penetrates firms sources of strategic competitiveness, but with improvement of its capabilities, the firm may be able to sustain competitive advantage.
Fast-cycle Markets: In fast-cycle markets, a competitive advantage can not be sustained, firms attempt to gain temporary competitive advantages by strategically disrupting the market.
© Dr. D. Bhattacharjee
Relative SizeSpeed
InnovationQuality
Ability for Ability for Action and Action and ResponseResponse
OutcomesOutcomesDrivers of Drivers of
Competitive Competitive BehaviorBehaviorAwarenessMotivationCapability
Competitor Competitor AnalysisAnalysis
MarketCommonality
ResourceSimilarity
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackLikelihood of AttackFirst Mover Incentives
Likelihood of ResponseLikelihood of ResponseType of Competitive
Action
Dependence on theMarket
Resource Availability
Actor’s Reputation
CompetitiveCompetitive
Slow, Standardor Fast Cycle
Market TypesMarket Types
CompetitiveCompetitive
SustainedOutcomesOutcomes
CompetitiveAdvantageTemporaryAdvantageEvolutionaryEvolutionaryOutcomesOutcomes
Entrepreneurial
or Market-PowerGrowth-Oriented
ActionsFeedbackFeedback
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
© Dr. D. Bhattacharjee
OutcomesOutcomes
Evolutionary ActionsGrowth-Oriented Actions Market-Power Actions
Evolutionary OutcomesEvolutionary Outcomes
Sustained Competitive
Competitive Market TypesCompetitive Market TypesSlow, Standard or Fast Cycle
Competitive OutcomesCompetitive Outcomes
Advantage
Temporary Advantage
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Slow cycle markets are Slow cycle markets are frequently shielded by frequently shielded by monopoly power or very monopoly power or very strong brand loyaltiesstrong brand loyalties
Slow cycle markets are Slow cycle markets are frequently shielded by frequently shielded by monopoly power or very monopoly power or very strong brand loyaltiesstrong brand loyalties
This market outcome and This market outcome and lack of interfirm rivalry may lack of interfirm rivalry may lead to sustained competitive lead to sustained competitive advantageadvantage
This market outcome and This market outcome and lack of interfirm rivalry may lack of interfirm rivalry may lead to sustained competitive lead to sustained competitive advantageadvantage
Sustained CompetitiveSustained Competitive
Competitive Market TypesCompetitive Market TypesSlow, Standard or Fast CycleSlow, Standard or Fast Cycle
Competitive OutcomesCompetitive Outcomes
AdvantageAdvantage
Temporary AdvantageTemporary Advantage
© Dr. D. Bhattacharjee
OutcomesOutcomes
Evolutionary ActionsGrowth-Oriented Actions Market-Power Actions
Evolutionary OutcomesEvolutionary Outcomes
Sustained competitive Sustained competitive advantage is a possible advantage is a possible outcome in this instanceoutcome in this instance
Standard cycle markets Standard cycle markets often lead to highly often lead to highly competitive pressures competitive pressures despite world class productsdespite world class products
Firms with multimarket Firms with multimarket competition may dampen competition may dampen rivalry somewhatrivalry somewhat
Sustained CompetitiveSustained Competitive
Competitive Market TypesCompetitive Market TypesSlow, Standard or Fast CycleSlow, Standard or Fast Cycle
Competitive OutcomesCompetitive Outcomes
AdvantageAdvantage
Temporary AdvantageTemporary Advantage
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
© Dr. D. Bhattacharjee
Sustained CompetitiveSustained Competitive
OutcomesOutcomes
Competitive Market TypesCompetitive Market TypesSlow, Standard or Fast CycleSlow, Standard or Fast Cycle
Competitive OutcomesCompetitive Outcomes
AdvantageAdvantage
Temporary AdvantageTemporary Advantage
Evolutionary ActionsGrowth-Oriented Actions Market-Power Actions
Fast cycle markets are Fast cycle markets are intensely dynamic and a first intensely dynamic and a first mover advantage is often mover advantage is often unsustainableunsustainable
Evolutionary OutcomesEvolutionary Outcomes
Firms may cannibalize older Firms may cannibalize older generation products while generation products while introducing new innovative introducing new innovative premium productspremium products
Sustainable competitive Sustainable competitive advantage is unlikelyadvantage is unlikely
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
© Dr. D. Bhattacharjee Time (years)Time (years) 1010
LaunchLaunch
ExploitationExploitationCounterattackCounterattack
Gradual Erosion of a Gradual Erosion of a Sustained Competitive Advantage Sustained Competitive Advantage
Returns from a Returns from a Sustained Sustained
Competitive Competitive AdvantageAdvantage
© Dr. D. Bhattacharjee
Some Firms Maintain Competitive Advantage Some Firms Maintain Competitive Advantage in Fast-Cycle Markets by Seizing the Initiativein Fast-Cycle Markets by Seizing the Initiative
Disrupting the Status QuoDisrupting the Status QuoIdentify new opportunities to serve the customer by shifting the Identify new opportunities to serve the customer by shifting the rules of competition through speed and varietyrules of competition through speed and variety
Creating Temporary AdvantageCreating Temporary AdvantageUse superior knowledge of the customer, technology and the future Use superior knowledge of the customer, technology and the future to enhance customer orientation and empower workersto enhance customer orientation and empower workers
Seizing the InitiativeSeizing the InitiativeMove aggressively into new areas of competition to create new Move aggressively into new areas of competition to create new advantage and undermine a competitor’s old advantageadvantage and undermine a competitor’s old advantage
11
22
33
44Sustaining the MomentumSustaining the MomentumTake several actions in a row in order to seize the initiative and Take several actions in a row in order to seize the initiative and create momentum to develop new advantagescreate momentum to develop new advantages
© Dr. D. Bhattacharjee Time (years)Time (years) 1010
LaunchLaunch
ExploitationExploitation CounterattackCounterattack
Returns from a Returns from a Sustained Sustained
Competitive Competitive AdvantageAdvantage
Obtaining Temporary Advantages Obtaining Temporary Advantages to Create Sustained Advantageto Create Sustained Advantage
55 1515
© Dr. D. Bhattacharjee Time (years)Time (years) 1010
LaunchLaunch
ExploitationExploitation CounterattackCounterattack
Returns from a Returns from a Sustained Sustained
Competitive Competitive AdvantageAdvantage
55 1515
Firm has already moved on Firm has already moved on to Advantage No. 2to Advantage No. 2
Obtaining Temporary Advantages Obtaining Temporary Advantages to Create Sustained Advantageto Create Sustained Advantage
© Dr. D. Bhattacharjee Time (years)Time (years) 1010
LaunchLaunch
ExploitationExploitation CounterattackCounterattack
Returns from a Returns from a Sustained Sustained
Competitive Competitive AdvantageAdvantage
55 1515
Firm continues to move on to Firm continues to move on to the next Advantagethe next Advantage
Obtaining Temporary Advantages Obtaining Temporary Advantages to Create Sustained Advantageto Create Sustained Advantage
© Dr. D. Bhattacharjee
Strategies may be deter-Strategies may be deter-mined by the life cycle of the mined by the life cycle of the industryindustry
Younger firms and emerging Younger firms and emerging industries are generally industries are generally characterized by characterized by entrepreneurial actionsentrepreneurial actions
Growth-oriented and Growth-oriented and Market-power strategies Market-power strategies dominate established or dominate established or mature industriesmature industries
Sustained Competitive
OutcomesOutcomes
Competitive Market TypesCompetitive Market TypesSlow, Standard or Fast Cycle
Competitive OutcomesCompetitive Outcomes
Advantage
Temporary Advantage
Evolutionary ActionsGrowth-Oriented Actions Market-Power Actions
Evolutionary ActionsGrowth-Oriented Actions Market-Power Actions
Evolutionary OutcomesEvolutionary Outcomes
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
© Dr. D. Bhattacharjee
Relative SizeSpeed
InnovationQuality
Ability for Ability for Action and Action and ResponseResponse
OutcomesOutcomesDrivers of Drivers of
Competitive Competitive BehaviorBehaviorAwarenessMotivationCapability
Competitor Competitor AnalysisAnalysis
MarketCommonality
ResourceSimilarity
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackLikelihood of AttackFirst Mover Incentives
Likelihood of ResponseLikelihood of ResponseType of Competitive
Action
Dependence on theMarket
Resource Availability
Actor’s Reputation
CompetitiveCompetitive
Slow, Standardor Fast Cycle
Market TypesMarket Types
CompetitiveCompetitive
SustainedOutcomesOutcomes
CompetitiveAdvantageTemporaryAdvantageEvolutionaryEvolutionaryOutcomesOutcomes
Entrepreneurial
or Market-PowerGrowth-Oriented
ActionsFeedbackFeedback
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
© Dr. D. Bhattacharjee
Identify stages of industry evolution and explain the types of competitive actions emphasized in those stages.
© Dr. D. Bhattacharjee
An Action-Based Model of the An Action-Based Model of the Industry Life CycleIndustry Life CycleKey TaskKey Task
Exploiting Open Niches Exploiting Open Niches (Blind Spots) and (Blind Spots) and
Competitive UncertaintyCompetitive Uncertainty
Entrepreneurial Entrepreneurial ActionsActions
Key TaskKey Task
Growth-OrientedGrowth-OrientedActionsActions
Exploiting Factors of Exploiting Factors of ProductionProduction
Key TaskKey Task
Market-PowerMarket-PowerActionsActions
Exploiting Market Exploiting Market PositionPosition
Firm Resource Firm Resource &&
Market StrengthMarket Strength
Emerging StageEmerging Stage Growth StageGrowth Stage Mature StageMature Stage
TimeTime