Competitive Dynamics

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Competitive Dynamics,The Strategic Management Process,

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Presentation Transcript

Slide2 : Chapter 3 Internal Environment Chapter 2 External Environment Strategic Intent Strategic Mission Strategic Competitiveness Above Average Returns Feedback Strategy Formulation Chapter 4 Business-Level Strategy Chapter 5 Competitive Dynamics Chapter 6 Corporate-Level Strategy Chapter 8 International Strategy Chapter 9 Cooperative Strategies Chapter 7 Acquisitions & Restructuring Strategy Implementation Chapter 10 Corporate Governance Chapter 11 Structure & Control Chapter 12 Strategic Leadership Chapter 13 Entrepreneurship & Innovation Strategic Actions

Slide3 : Declining emphasis on single, domestic markets and increasing emphasis on global markets Advances in communication technology make coordination easier across multiple markets Advances in technology and innovation have increased competitiveness of small and medium sized firms National barriers are falling due to the number and scope of trade agreements (GATT, NAFTA, EEC) Factors Leading to More Complex Rivalry

Slide4 : Competitive Dynamics Results from a series of competitive actions and competitive responses among firms competing within a particular industry Competitive Rivalry Exists when two or more firms jockey with one another in the pursuit of better market position

Slide5 :

Slide6 : Relative Size Speed Innovation Quality Ability for Action and Response Outcomes Drivers of Competitive Behavior Awareness Motivation Capability Competitor Analysis Interfirm Rivalry: Attack & Response Likelihood of Attack First Mover Incentives Likelihood of Response Type of Competitive Action Dependence on the Market Resource Availability Actor’s Reputation Competitive Slow, Standard or Fast Cycle Market Types Competitive Sustained Outcomes Competitive Advantage Temporary Advantage Evolutionary Outcomes Entrepreneurial or Market-Power Growth-Oriented Actions Feedback Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide7 : Drivers of Competitive Behavior Motivation Capability Awareness Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide8 : Does the firm have appropriate incentives to attack or respond? Drivers of Competitive Behavior Motivation Capability Awareness Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide9 : Does the firm have the necessary resources to attack or respond? Drivers of Competitive Behavior Motivation Capability Awareness Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide10 : Relative Size Speed Innovation Quality Ability for Action and Response Outcomes Drivers of Competitive Behavior Awareness Motivation Capability Competitor Analysis Interfirm Rivalry: Attack & Response Likelihood of Attack First Mover Incentives Likelihood of Response Type of Competitive Action Dependence on the Market Resource Availability Actor’s Reputation Competitive Slow, Standard or Fast Cycle Market Types Competitive Sustained Outcomes Competitive Advantage Temporary Advantage Evolutionary Outcomes Entrepreneurial or Market-Power Growth-Oriented Actions Feedback Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide11 : Competitor Analysis Resource Similarity Market Commonality Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide12 : Competitor Analysis Resource Similarity Market Commonality Multipoint competition tends to reduce competitive interactions, but increases the likelihood of response where interaction occurs For example, airlines price flights similarly but respond quickly when competitors introduce promotional prices Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide13 : Competitor Analysis Resource Similarity Do competitors possess similar types or amounts of resources? Market Commonality Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide14 : Competitor Analysis Resource Similarity Market Commonality Firms are less inclined to attack a firm that is likely to retaliate Firms with dissimilar resources are more likely to attack Firms with similar resources are more likely to be aware of each other’s competitive moves Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide15 : Relative Size Speed Innovation Quality Ability for Action and Response Outcomes Drivers of Competitive Behavior Awareness Motivation Capability Competitor Analysis Interfirm Rivalry: Attack & Response Likelihood of Attack First Mover Incentives Likelihood of Response Type of Competitive Action Dependence on the Market Resource Availability Actor’s Reputation Competitive Slow, Standard or Fast Cycle Market Types Competitive Sustained Outcomes Competitive Advantage Temporary Advantage Evolutionary Outcomes Entrepreneurial or Market-Power Growth-Oriented Actions Feedback Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide16 : Interfirm Rivalry: Attack & Response Likelihood of Attack First Mover Incentives Likelihood of Response Type of Competitive Action Dependence on the Market Resource Availability Actor’s Reputation Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide17 : First Mover

Slide18 : Second Mover

Slide19 : Interfirm Rivalry: Attack & Response Likelihood of Attack First Mover Incentives Likelihood of Response Type of Competitive Action Dependence on the Market Resource Availability Actor’s Reputation Whether a competitor is likely to respond depends on several key factors Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide20 : Types of Competitive Actions

Slide21 : Gauging the Likelihood of Response Actor’s Reputation Type of Competitive Action -Tactical or Strategic

Slide22 : Market Dependence Competitor Resources Gauging the Likelihood of Response

Slide23 : Relative Size Speed Innovation Quality Ability for Action and Response Outcomes Drivers of Competitive Behavior Awareness Motivation Capability Competitor Analysis Interfirm Rivalry: Attack & Response Likelihood of Attack First Mover Incentives Likelihood of Response Type of Competitive Action Dependence on the Market Resource Availability Actor’s Reputation Competitive Slow, Standard or Fast Cycle Market Types Competitive Sustained Outcomes Competitive Advantage Temporary Advantage Evolutionary Outcomes Entrepreneurial or Market-Power Growth-Oriented Actions Feedback Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide24 : Relative Size Quality Innovation Speed Ability for Action and Response Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide25 : Quality Speed Large firms may exert market power over rivals and erect barriers to entry against smaller competitors However, smaller competitors may be more nimble and innovative Ability for Action and Response Relative Size Innovation Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide26 : Relative Size Quality Innovation Speed Quick response is crucial to both the first mover and the fast second mover Ability for Action and Response Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide27 : Consistent innovation is required for market leadership in many dynamic industries Ability for Action and Response Relative Size Quality Innovation Speed Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide28 : Exceeding customer expectations is a necessity to compete in the 21st century Ability for Action and Response Relative Size Quality Innovation Speed Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide29 : Quality Dimensions of Goods & Services Product Quality Dimensions:

Slide30 : Quality Dimensions of Goods & Services Service Quality Dimensions:

Slide31 : Relative Size Speed Innovation Quality Ability for Action and Response Outcomes Drivers of Competitive Behavior Awareness Motivation Capability Competitor Analysis Interfirm Rivalry: Attack & Response Likelihood of Attack First Mover Incentives Likelihood of Response Type of Competitive Action Dependence on the Market Resource Availability Actor’s Reputation Competitive Slow, Standard or Fast Cycle Market Types Competitive Sustained Outcomes Competitive Advantage Temporary Advantage Evolutionary Outcomes Entrepreneurial or Market-Power Growth-Oriented Actions Feedback Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide32 : Outcomes Evolutionary Actions Growth-Oriented Actions Market-Power Actions Evolutionary Outcomes Sustained Competitive Competitive Market Types Slow, Standard or Fast Cycle Competitive Outcomes Advantage Temporary Advantage Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide33 : Outcomes Evolutionary Actions Growth-Oriented Actions Market-Power Actions Evolutionary Outcomes Sustained competitive advantage is a possible outcome in this instance Standard cycle markets often lead to highly competitive pressures despite world class products Firms with multimarket competition may dampen rivalry somewhat Sustained Competitive Competitive Market Types Slow, Standard or Fast Cycle Competitive Outcomes Advantage Temporary Advantage Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide34 : Sustained Competitive Outcomes Competitive Market Types Slow, Standard or Fast Cycle Competitive Outcomes Advantage Temporary Advantage Evolutionary Actions Growth-Oriented Actions Market-Power Actions Fast cycle markets are intensely dynamic and a first mover advantage is often unsustainable Evolutionary Outcomes Firms may cannibalize older generation products while introducing new innovative premium products Sustainable competitive advantage is unilkely Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide35 : Time (years) 10 Gradual Erosion of a Sustained Competitive Advantage Returns from a Sustained Competitive Advantage

Slide36 : Some Firms Maintain Competitive Advantage in Fast-Cycle Markets by Seizing the Initiative

Slide37 : Time (years) 10 Launch Exploitation Counterattack Returns from a Sustained Competitive Advantage Obtaining Temporary Advantages to Create Sustained Advantage 5 15

Slide38 : Time (years) 10 Launch Exploitation Counterattack Returns from a Sustained Competitive Advantage 5 15 Firm has already moved on to Advantage No. 2 Obtaining Temporary Advantages to Create Sustained Advantage

Slide39 : Time (years) 10 Launch Exploitation Counterattack Returns from a Sustained Competitive Advantage 5 15 Firm continues to move on to the next Advantage Obtaining Temporary Advantages to Create Sustained Advantage

Slide40 : Strategies may be deter-mined by the life cycle of the industry Younger firms and emerging industries are generally characterized by entrepreneurial actions Growth-oriented and Market-power strategies dominate established or mature industries Sustained Competitive Outcomes Competitive Market Types Slow, Standard or Fast Cycle Competitive Outcomes Advantage Temporary Advantage Evolutionary Actions Growth-Oriented Actions Market-Power Actions Evolutionary Outcomes Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide41 : Relative Size Speed Innovation Quality Ability for Action and Response Outcomes Drivers of Competitive Behavior Awareness Motivation Capability Competitor Analysis Interfirm Rivalry: Attack & Response Likelihood of Attack First Mover Incentives Likelihood of Response Type of Competitive Action Dependence on the Market Resource Availability Actor’s Reputation Competitive Slow, Standard or Fast Cycle Market Types Competitive Sustained Outcomes Competitive Advantage Temporary Advantage Evolutionary Outcomes Entrepreneurial or Market-Power Growth-Oriented Actions Feedback Model of Interfirm Rivalry: Likelihood of Attack and Response

Slide42 : An Action-Based Model of the Industry Life Cycle Firm Resource & Market Strength