Upload
naimenim
View
222
Download
3
Embed Size (px)
Citation preview
Ch5-1
Chapter 5
Competitive Dynamics
Michael A. HittR. Duane Ireland
Robert E. Hoskisson
©2000 South-Western College Publishing
Ch5-2
Chapter 3Internal
Environment
Chapter 2External
EnvironmentThe StrategicThe StrategicManagementManagement
ProcessProcessStrategic IntentStrategic Mission
StrategicCompetitivenessAbove Average
ReturnsFeedback
Strategy Formulation
Chapter 4Business-Level
Strategy
Chapter 5CompetitiveDynamics
Chapter 6Corporate-Level
Strategy
Chapter 8International
Strategy
Chapter 9Cooperative
Strategies
Chapter 7Acquisitions &Restructuring
Strategy Implementation
Chapter 10Corporate
Governance
Chapter 11Structure& Control
Chapter 12Strategic
Leadership
Chapter 13Entrepreneurship & Innovation
Stra
tegi
cIn
puts
Stra
tegi
cA
ctio
nsSt
rate
gic
Out
com
es
Ch5-3
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 National barriers are falling due to the number and scope of trade agreements (GATT, NAFTA, EEC)scope of trade agreements (GATT, NAFTA, EEC)
Factors Leading to More Complex Rivalry
Ch5-4
Competitive DynamicsCompetitive DynamicsResults from a series of competitive actions and Results from a series of competitive actions and competitive responses among firms competing within competitive responses among firms competing within a particular industrya particular industry
Competitive RivalryExists when two or more firms jockey with one another Exists when two or more firms jockey with one another in the pursuit of better market positionin the pursuit of better market position
Ch5-5
Actions and Actions and responses shape the responses shape the
competitive positions competitive positions of each firm’s of each firm’s business level business level
strategystrategy
Actions taken Actions taken by one firm by one firm elicit responses elicit responses from from competitorscompetitors
A firm’s A firm’s strategic conduct strategic conduct
is dynamic in is dynamic in naturenature
Competitive Competitive responses lead responses lead
to additional to additional actions from the actions from the
firm that acted firm that acted originallyoriginally
CompetitiveCompetitive Dynamics Dynamics
Ch5-6
Relative SizeSpeed
InnovationQuality
Ability for Ability for Action and Action and ResponseResponse
OutcomesOutcomesDrivers of Drivers of
Competitive Competitive BehaviorBehaviorAwarenessMotivationCapability
Competitor Competitor AnalysisAnalysisMarket
CommonalityResourceSimilarity
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackFirst Mover Incentives
Likelihood of ResponseType of Competitive
Action
Dependence on theMarket
Resource Availability
Actor’s Reputation
Competitive
Slow, Standardor Fast Cycle
Market Types
Competitive
SustainedOutcomes
CompetitiveAdvantageTemporaryAdvantageEvolutionaryOutcomes
Entrepreneurial
or Market-PowerGrowth-Oriented
Actions
FeedbackFeedback
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Ch5-7
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 Do managers understand the key characteristics of the key characteristics of competitors?competitors?
Awareness
Ch5-8
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
Motivation
Capability
Awareness
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Ch5-9
Does the firm have the Does the firm have the necessary resources to necessary resources to attack or respond?attack or respond?
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
Ch5-10
Relative SizeSpeed
InnovationQuality
Ability for Ability for Action and Action and ResponseResponse
OutcomesOutcomesDrivers of Drivers of
Competitive Competitive BehaviorBehaviorAwarenessMotivationCapability
Competitor Competitor AnalysisAnalysisMarket
CommonalityResourceSimilarity
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackFirst Mover Incentives
Likelihood of ResponseType of Competitive
Action
Dependence on theMarket
Resource Availability
Actor’s Reputation
Competitive
Slow, Standardor Fast Cycle
Market Types
Competitive
SustainedOutcomes
CompetitiveAdvantageTemporaryAdvantageEvolutionaryOutcomes
Entrepreneurial
or Market-PowerGrowth-Oriented
Actions
FeedbackFeedback
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Ch5-11
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?
Market Commonality
Ch5-12
Competitor Competitor AnalysisAnalysis
Resource Similarity
Market Commonality
Multipoint competition tends to Multipoint competition tends to reduce competitive interactions, but reduce competitive interactions, but increases the likelihood of response increases the likelihood of response where interaction occurswhere interaction occurs
For example, airlines price flights For example, airlines price flights similarly but respond quickly when similarly but respond quickly when competitors introduce promotional competitors introduce promotional pricesprices
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Ch5-13
Competitor Competitor AnalysisAnalysis
Resource Similarity
Do competitors possess similar Do competitors possess similar types or amounts of types or amounts of resources?resources?
Market Commonality
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Ch5-14
Competitor Competitor AnalysisAnalysis
Resource Similarity
Market Commonality Firms are less inclined to attack a Firms are less inclined to attack a
firm that is likely to retaliatefirm that is likely to retaliate
Firms with dissimilar resources Firms with dissimilar resources are more likely to attackare more likely to attack
Firms with similar resources are Firms with similar resources are more likely to be aware of each more likely to be aware of each other’s competitive movesother’s competitive moves
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Ch5-15
Relative SizeSpeed
InnovationQuality
Ability for Ability for Action and Action and ResponseResponse
OutcomesOutcomesDrivers of Drivers of
Competitive Competitive BehaviorBehaviorAwarenessMotivationCapability
Competitor Competitor AnalysisAnalysisMarket
CommonalityResourceSimilarity
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackFirst Mover Incentives
Likelihood of ResponseType of Competitive
Action
Dependence on theMarket
Resource Availability
Actor’s Reputation
Competitive
Slow, Standardor Fast Cycle
Market Types
Competitive
SustainedOutcomes
CompetitiveAdvantageTemporaryAdvantageEvolutionaryOutcomes
Entrepreneurial
or Market-PowerGrowth-Oriented
Actions
FeedbackFeedback
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Ch5-16
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackFirst Mover IncentivesLikelihood 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 AttackFirst Mover Incentives
First Mover advantage First Mover advantage can be substantialcan be substantial
Ch5-17
First MoverFirst MoverFirms 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
Can earn above average profits until competitors respondGain customer loyalty, helping to create a barrier to entry by competitorsAdvantage depends upon difficulty of imitation
Ch5-18
Second MoverSecond Mover
Firms that respond to a First Mover’s actionsSecond Movers frequently imitate First Movers
Speed of response often dictates success
Should evaluate customers’ response before moving
“Fast” Second Movers can capture some of initial customers and develop some brand loyalty
Avoid some of the risks associated with First Move
Must possess necessary capabilities to imitate
Ch5-19
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackFirst Mover IncentivesLikelihood of Response
Type of CompetitiveAction
Dependence on theMarket
Resource Availability
Actor’s Reputation
Whether a competitor Whether a competitor is likely to respond is likely to respond depends on several depends on several key factorskey factors
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Ch5-20
TacticalTacticalActionsActions
Major AcquisitionMajor AcquisitionExampleExample
Types of Competitive ActionsTypes of Competitive Actions
Strategic Strategic ActionsActions
Price cutPrice cutExampleExample
Significant commitments of specific and distinctive organizational resources
Difficult to implement
Difficult to reverse
Relatively easy to implementRelatively easy to implement
Relatively easy to reverseRelatively easy to reverse
Undertaken to “fine tune” strategyUndertaken to “fine tune” strategy
Ch5-21
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 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
Type of Competitive Action -Tactical or Strategic
Easier to respond to
Require fewer resources to mount a response
Ch5-22
Market DependenceMarket Dependence
Competitor ResourcesCompetitor ResourcesSmaller firms are more likely to respond to tactical Smaller firms are more likely to respond to tactical actionsactions
Limited resources may lead to alternatives such as Limited resources may lead to alternatives such as Strategic AlliancesStrategic Alliances
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 firms
Industry dependent firms will likely respond to either strategic or tactical actions
Ch5-23
Relative SizeSpeed
InnovationQuality
Ability for Ability for Action and Action and ResponseResponse
OutcomesOutcomesDrivers of Drivers of
Competitive Competitive BehaviorBehaviorAwarenessMotivationCapability
Competitor Competitor AnalysisAnalysisMarket
CommonalityResourceSimilarity
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackFirst Mover Incentives
Likelihood of ResponseType of Competitive
Action
Dependence on theMarket
Resource Availability
Actor’s Reputation
Competitive
Slow, Standardor Fast Cycle
Market Types
Competitive
SustainedOutcomes
CompetitiveAdvantageTemporaryAdvantageEvolutionaryOutcomes
Entrepreneurial
or Market-PowerGrowth-Oriented
Actions
FeedbackFeedback
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Ch5-24
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 SizeFirm size can have Firm size can have opposing effects on opposing effects on competitive dynamicscompetitive dynamics
Ch5-25
Quality
Speed
Large firms may exert market power Large firms may exert market power over rivals and erect barriers to over rivals and erect barriers to entry against smaller competitorsentry against smaller competitors
However, smaller competitors However, smaller competitors may be more nimble and may be more nimble and innovativeinnovative
Ability for Ability for Action and Action and ResponseResponse
Relative 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 smaller. Think and act small and we’ll get bigger.”and we’ll get bigger.”
-- Herb Kelleher, CEO, Southwest Airlines
Ch5-26
Relative Size
Quality
Innovation
Speed
Quick response is Quick response is crucial to both the crucial to both the first mover and the first mover and the fast second moverfast second mover
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
Ch5-27
Consistent innovation Consistent innovation is required for market is 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
Innovation
Speed
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Ch5-28
Exceeding customer Exceeding customer expectations is a necessity expectations is a necessity to compete in the 21st to compete in the 21st centurycentury
Ability for Ability for Action and Action and ResponseResponse
Relative Size
Quality
Innovation
Speed
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Ch5-29
Quality Dimensions of Goods & ServicesQuality Dimensions of Goods & Services
ProductProduct Quality Dimensions: Quality Dimensions:
Perceived quality Perceived quality Subjective assessment of Subjective assessment of characteristics (product image)characteristics (product image)
Performance Performance Operating characteristicsOperating characteristicsFeatures Features Important special characteristicsImportant special characteristicsFlexibility Flexibility Meeting operating specifications over timeMeeting operating specifications over timeDurability Durability Amount of use before performance Amount of use before performance
deterioratesdeterioratesConformance Conformance Match with pre-established standardsMatch with pre-established standardsServiceability Serviceability Ease and speed of repair or normal serviceEase and speed of repair or normal serviceAesthetics Aesthetics How a product looks and feelsHow a product looks and feels
Ch5-30
Quality Dimensions of Goods & ServicesQuality Dimensions of Goods & 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
Ch5-31
Relative SizeSpeed
InnovationQuality
Ability for Ability for Action and Action and ResponseResponse
OutcomesOutcomesDrivers of Drivers of
Competitive Competitive BehaviorBehaviorAwarenessMotivationCapability
Competitor Competitor AnalysisAnalysisMarket
CommonalityResourceSimilarity
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackFirst Mover Incentives
Likelihood of ResponseType of Competitive
Action
Dependence on theMarket
Resource Availability
Actor’s Reputation
Competitive
Slow, Standardor Fast Cycle
Market Types
Competitive
SustainedOutcomes
CompetitiveAdvantageTemporaryAdvantageEvolutionaryOutcomes
Entrepreneurial
or Market-PowerGrowth-Oriented
Actions
FeedbackFeedback
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Ch5-32
OutcomesOutcomes
Evolutionary ActionsGrowth-Oriented Actions Market-Power Actions
Evolutionary Outcomes
Sustained Competitive
Competitive Market TypesSlow, Standard or Fast Cycle
Competitive Outcomes
AdvantageTemporary 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
This market outcome and This market outcome and lack of interfirm rivalry lack of interfirm rivalry may lead to sustained may lead to sustained competitive advantagecompetitive advantage
Sustained Competitive
Competitive Market TypesSlow, Standard or Fast Cycle
Competitive Outcomes
AdvantageTemporary Advantage
Ch5-33
OutcomesOutcomes
Evolutionary ActionsGrowth-Oriented Actions Market-Power Actions
Evolutionary OutcomesSustained 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 despite world class productsproducts
Firms with multimarket Firms with multimarket competition may dampen competition may dampen rivalry somewhatrivalry somewhat
Sustained Competitive
Competitive Market TypesSlow, Standard or Fast Cycle
Competitive Outcomes
AdvantageTemporary Advantage
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Ch5-34
Sustained Competitive
OutcomesOutcomes
Competitive Market TypesSlow, Standard or Fast Cycle
Competitive Outcomes
AdvantageTemporary Advantage
Evolutionary ActionsGrowth-Oriented Actions Market-Power Actions
Fast cycle markets are Fast cycle markets are intensely dynamic and a intensely dynamic and a first mover advantage is first mover advantage is often unsustainableoften unsustainable
Evolutionary Outcomes
Firms may cannibalize Firms may cannibalize older generation products older generation products while introducing new while introducing new innovative premium innovative premium productsproducts
Sustainable competitive Sustainable competitive advantage is unilkelyadvantage is unilkely
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Ch5-35Time (years)Time (years) 1010
LaunchLaunch
ExploitationExploitationCounterattackCounterattack
Gradual Erosion of a Gradual Erosion of a Sustained Competitive Advantage Sustained Competitive Advantage
Returns Returns from a from a
Sustained Sustained Competitive Competitive AdvantageAdvantage
Ch5-36
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 opportuntites to serve the customer by Identify new opportuntites to serve the customer by shifting the rules of competition through speed and varietyshifting the rules of competition through speed and variety
Creating Temporary AdvantageCreating Temporary AdvantageUse superior knowledge of the customer, technology and the Use superior knowledge of the customer, technology and the future to enhance customer orientation and empower future to enhance customer orientation and empower workersworkersSeizing the InitiativeSeizing the InitiativeMove aggressively into new areas of competition to create Move aggressively into new areas of competition to create new advantage and undermine a competitor’s old advantagenew advantage and undermine a competitor’s old advantage
11
22
33
44 Sustaining the MomentumSustaining the MomentumTake several actions in a row in order to seize the initiative Take several actions in a row in order to seize the initiative and create momentum to develop new advantagesand create momentum to develop new advantages
Ch5-37Time (years)Time (years) 1010
LaunchLaunch
ExploitationExploitation CounterattackCounterattack
Returns Returns from a from a
Sustained Sustained Competitive Competitive AdvantageAdvantage
Obtaining Temporary Advantages Obtaining Temporary Advantages to Create Sustained Advantageto Create Sustained Advantage
55 1515
Ch5-38Time (years)Time (years) 1010
LaunchLaunch
ExploitationExploitation CounterattackCounterattack
Returns Returns from a from a
Sustained Sustained Competitive Competitive AdvantageAdvantage
55 1515
Firm has already moved Firm has already moved on to Advantage No. 2on to Advantage No. 2
Obtaining Temporary Advantages Obtaining Temporary Advantages to Create Sustained Advantageto Create Sustained Advantage
Ch5-39Time (years)Time (years) 1010
LaunchLaunch
ExploitationExploitation CounterattackCounterattack
Returns Returns from a from a
Sustained Sustained Competitive Competitive AdvantageAdvantage
55 1515
Firm continues to move Firm continues to move on to the next Advantageon to the next Advantage
Obtaining Temporary Advantages Obtaining Temporary Advantages to Create Sustained Advantageto Create Sustained Advantage
Ch5-40
Strategies may be deter-Strategies may be deter-mined by the life cycle of mined by the life cycle of the industrythe industry
Younger firms and Younger firms and emerging industries are emerging industries are generally characterized by generally 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 TypesSlow, Standard or Fast Cycle
Competitive Outcomes
AdvantageTemporary Advantage
Evolutionary ActionsGrowth-Oriented Actions Market-Power Actions
Evolutionary Outcomes
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Ch5-41
Relative SizeSpeed
InnovationQuality
Ability for Ability for Action and Action and ResponseResponse
OutcomesOutcomesDrivers of Drivers of
Competitive Competitive BehaviorBehaviorAwarenessMotivationCapability
Competitor Competitor AnalysisAnalysisMarket
CommonalityResourceSimilarity
Interfirm Rivalry:Interfirm Rivalry:Attack & ResponseAttack & Response
Likelihood of AttackFirst Mover Incentives
Likelihood of ResponseType of Competitive
Action
Dependence on theMarket
Resource Availability
Actor’s Reputation
Competitive
Slow, Standardor Fast Cycle
Market Types
Competitive
SustainedOutcomes
CompetitiveAdvantageTemporaryAdvantageEvolutionaryOutcomes
Entrepreneurial
or Market-PowerGrowth-Oriented
Actions
FeedbackFeedback
Model of Interfirm Rivalry:Model of Interfirm Rivalry:Likelihood of Attack and ResponseLikelihood of Attack and Response
Ch5-42
An Action-Based Model of the An Action-Based Model of the Industry Life CycleIndustry Life Cycle
Key TaskKey Task
Exploiting Open Exploiting Open Niches (Blind Spots) Niches (Blind Spots)
and Competitive and Competitive UncertaintyUncertainty
Entrepreneurial Entrepreneurial ActionsActions
Key TaskKey Task
Growth-OrientedGrowth-OrientedActionsActions
Exploiting Factors Exploiting Factors of Productionof Production
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