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Dynamic Competitive Interaction: Implications for Strategy and
Competitive Intelligence
Lynagh’s
TwoKeysTavern
TwoKeysTavern
Consequences of Cutthroat Rivalry
Prisoner’s Dilemma
Criminal 1
Criminal 2
Squeal
Squeal
Clam Up
Clam Up
Both Serve 1 Year
Both Serve 5 Years
#2 Serves 10 Years
#1 Goes Free
#1 Serves 10 Years
#2 Goes Free
What Price a Dollar?
$1.00 will be auctioned off Opening bid is 10¢ Bids increase in 10¢ increments Highest bidder wins $1.00 Top two bidders must pay auctioneer
Three Stooges
Larry, Curley and Moe are in a 3-way duel and agree to take turns shooting each other in that order
Accuracy statistics:– Larry hits intended target 20% of the time– Curley hits intended target 80% of the time– Moe hits intended target 100% of the time
What should Larry do?
The Playbook: What will they run next?
Complex Rivalry: Where to move?
Firm 1Actions
Firm 2Actions
CompetitiveInteraction
CompetitiveOutcomes
IndustryCharacteristics
OrganizationalCharacteristics
Competitive Dynamics Observe competitive moves Organize competitive moves
– Action/response pairs– Action repertoires (year-end tallies)– Competitive attacks/sequences
Measurement/Analysis of Characteristics– Four key action pattern characteristics
that improve:• Market share• Stock price• Profitability
Strategy as Action
Externally-directed, observable competitive moves carried out to improve relative competitive position:
PricingMarketingProductsServiceCapacitySignalsOther
AirlinesTelecomBrewingPCsSoftwareMutual Funds41 Industries
GenericActions:
Studies:
Actions symbolicallyrepresented as these
ActionPair 1
ActionPair 2
ActionPair 3
ActionPair 4
Company 1
Company 2
Action-Reaction “Pairs”
timeAction Response Profits Growth Mkt. Share
ActionPair 1
ActionPair 2
ActionPair 3
ActionPair 4
Company 1
Company 2
Action-Reaction “Pairs”
time
Type Implementation
Requirement Radicality Irreversibility
Likelihood Speed (delay) Matching
Prior Studies: Action “Repertoires”
time
Profits Growth Mkt. Share
Year-EndTallies
Action
Repertoire
Company 1
Company 2
Prior Studies: Action “Repertoires”
time
Profits Growth Mkt. Share
Year-EndTallies
Total Actions Complexity
Company 1
Company 2
a b c d e f g h
8
7
6
5
4
3
2
1
Sequential Competitive Interaction ?
This Sequence:
Black: Knight b4
White: Pawn c3
Black: Bishop g4
White: Queen b5
Black: Pawn c5
Named Sequences:
Epaulette’s Mate
Sicilian Defense
Sequence Applications...
LANGUAGE:
BOXING: DNA:
qcheaTiueissesne. hsiT si a cesneueq.
This is a sequence.
Jab...Jab…Uppercut
CA
GT
AC
AT
AG
TA
CG
AT
AC
GA
MUSIC:
COMPUTER PROGRAM:
data actions2; subj = _n_; do i = 1 to max; output = matrix; end;run;
Sequences in Competitive Interaction
Ordered sample of things – Temporal orderliness among elements
Logically unified sequence– Succession of market-based decisions
Patterns in stream of behaviors Coordinated series of actions Actions in a sequential strategic thrust
ActionSequence 1
ActionSequence 2
Competitive Attack: Sequence of Actions
time
Profits Growth Mkt. Share
Competitive
Attack
MKT MKTPRICEMKT PRICE
SVCPRODRival Firm
(a) (a’)
Time
Focal Firm
Avg. Attack Volume (a + a’)– No. of Actions per Attack
Avg. Attack Duration (a + a’)– No. days firm sustains attack
MKT MKTPRICEMKT PROD PRICE
Time
MKT MKTPRICE SIGPROD PRICE
Time Period 1
Time Period 2
MKT
Attack Unpredictability– Resemblance of two attack sequences
Focal Firm’s Stock Price and/or Market Share Gain
Focal Firm’s Competitive Attack• Attack Volume• Attack Duration • Attack Complexity• Attack Unpredictability
MKT MKTPRICEMKT PRODMKTCAP SIG PROD MKT
Attack a Attack a’
Group Exercise: Bud vs. Miller Total Actions
– Count of total actions Average Response Time
– Avg. number of time units between last competitive move and first competitive response
Repertoire Complexity– Extent to which repertoire is skewed vs.
balanced Attack Unpredictability
– Lack of discernable action combinations or repetition
Response:• Less Likely• Slower
Action Characteristics
Implementation Req. Irreversibility Radicality
Action/Response Pairs
Better Profitabilityfor Attacker
MarketShare
Gain
ActionRepertoire
Characteristics
More Actions
Complexity
Faster Avg.Response
Speed
Competitive Repertoire and Market Share Gain
Competitive Attack and Market Share Gain
Market ShareGain
CompetitiveAttack
Characteristics
Attack VolumeAttack Duration
Competitive Attack and Market Share Gain
Market ShareGain
Simple Complex
Extent of Attack Complexity
Competitive Attack and Market Share Gain
Market ShareGain
Predictable Unpredictable
Extent of Attack Unpredictability
Results: Attack Intensity
StockPrice
Sporadic,Infrequent
Intense,Sustained
Number of Actions within Sustained
Attack per Unit TimeResults reversed for relationship between focal firm’s attack and rival’s stock price.
Results: Attack Complexity
Simple Complex
Extent to which Focal Firm’s Attacks Consist of Actions of Many Types
StockPrice
Post Hoc: Attack Unpredictability
Rival’sStockPrice
Predicable,Inertia
Unpredictable,Change
Extent of Change in Focal Firm’s Sequence of Actions
Scoring the Fight
Total Actions
Faster Responses
More Complex Repertoire
Unpredictable Attacks
Miller Bud
Competitive Aggressiveness
Performance Market Share Gains
Profitability
Too much of a good thing?Lynagh’s vs. Two Keys
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
Implications for CI:Monitor Your Own Behavior
Objective measures of competitive behavior Safeguard against complacency, predictability,
simplicity Keep rivals off balance / disruption Identify factors that facilitate aggressiveness What combinations of moves are effective? …
which are ineffective? …smoke signals?
Conclusions and Implications
Managerial Implications– Incorporate dynamic analysis of
competitive moves into competitive intelligence program
– Assists managers to make inform choices about the requisite level of competitive behavior
– Use stock returns as an important decision-making tool and as a messenger