Competitive Strategy

Question 1

Definition Competitor - direct & indirect

Answer 1

Direct: Firms operating in the same market, similar product and similar costumers

Indirect: Outside strategy group, different way to satisfy customer, same industry

Question 2

Market Commonality

Answer 2

Number of markets in which the firm and its competitors meet each other and the degree of importance of individual markets to each

Question 3

Resource Similarity

Answer 3

Extent to which firm’s tangible/ intangible resources are comparable to competitor’s type and amount

Question 4

Framework to competitive analysis

Answer 4

MC and RS and their implication on direct or indirect competition with triangles and squares

Question 5

Competitive Action

Answer 5

1. Strategic - Significant Commitment, difficult to implement and to reverse
2. Tactical - “fine-tuning”, easy to implement and reverse

look for hiring or ad activities, new supplier - gather info

Question 6

Competitive Dynamics

Answer 6

Strategy is dynamic in nature. Actions by one firm lead to responses by the competitor. All these actions shape the competitive position for the BLS.

• Total set of actions and responses of all firms competing within one market

Question 7

Competitive Asymmetry

Answer 7

Wikipedia:
Asymmetric competition refers to forms of business competition where firms are considered competitors in some markets or contexts but not in others. In such cases a firm may choose to allocate competitive resources and marketing actions among its competitors out of proportion to their market share. Asymmetric competition can be visualized using techniques such as multidimensional scaling and perceptual mapping.

–>Concerns the Multimarket Contract of firm A and B and the Market Commonality from firm A point of view and firms B point of view.

->A has two markets in which Firm B both is competing as well.

–>Firm B has 4 markets and only competes in 2 out of 4 markets with firm A.

–>Therefore Firm A has a higher Market commanlity than Firm B.

Question 8

Competitive Behavior

Answer 8

Set of competitive actions and responses a firm takes to build or defend a competitive advantage.
Serve to position the firm with regards to five forces

Question 9

Competitive Rivalry

Answer 9

Ongoing set of competitive actions between competitors

Question 10

Multimarket Competition

Answer 10

Firms competing in several product or geographic markets

Question 11

Drivers of competitive behavior

Answer 11

1. Awareness
   - prerequisite to any action
   - recognition of the degree of mutual interdependence driven by MC and RS
   - MC and RS increase awareness
2. Motivation
   - firm’s incentive to take action
   - MC and RS reduce the likelihood of attack but increases the likelihood of response
3. Ability
   - firms resources that allow competitive action and responsiveness
   - similar resources - similar ability
   - imbalance may lead to delay in response

Question 12

Drivers of likelihood to attack

Answer 12

1. First-mover Advantage
   - learning curve
   - loyalty gain by moving first
   - gain market share
   Characteristics: superior R&D, aggressive, higher but reasonable risk, slack resource
2. Organizational size
   - larger firms are more likely to attack because of their resources, but slower due to bureaucracy
   2.1. Small firms
   > act as nimble and flexible competitors
   > rely on speed and surprise
   > have greater variety of competitive behavior options available
   2.2. Large firms
   > often greater slack
   > greater likelihood to initiate competitive actions over time and launch a greater number of actions
   > limited variety of actions
3. Quality
   - customer perception, than product perform in ways that are important to customers
   - Solve quality first, then action
   - and then even more aggressive

Question 13

Drivers of likelihood of response

Answer 13

1. Types and effectiveness of competitive action
   - strategic vs. tactical
2. Actor’s reputation
   - more or less likely to trigger response
   - market leader will respond but firms who constantly change price will not be taken seriously by the costumer
3. Dependence on market

Question 14

Market Cycles

Answer 14

1. Slow-Cycle market
   > Imitation is slow and costly due to shielded resources due to historical conditions, causal ambiguity and patents
   > Competitive Advantage is sustainable in this market
2. Fast-Cycle market
   > Rapid imitation
   > Competitive Advantage is not sustainable
3. Standard-Cycle Market
   > Imitation is faster and less costly than in SCM but vice versa with FCM
   > Competitive Advantage is partially sustainable

Question 15

Multimarket Contact and Competitive Behavior

Answer 15

• competition in distinct geographical markets
• increases interdependence
• MMC leads to mutual forbearance
• MMC increases likelihood of responses
• several factors dampen effect of mutual forbearance
• > cultual diversity across markets
• > presence of domestic competitors
• > government regulations
• > presence of single market competitors

> Mutual forbearance requires full observability and effective internal coordination!
- violations need to be detected and punished