Market Signals

• Market signals are direct/indirect means of

communicating in the market place, and
reflection of most if not all of a
competitor’s behavior that can help in
competitor analysis and strategy
formulation.
• A prerequisite to interpreting signals
accurately is to develop a baseline
competitor analysis (done in the last topic).
 Types of Market Signals
• Prior announcement of moves
• Announcements of results or actions after the fact
• Public discussions of the industry by competitors
• Competitors discussions and explanations of their own
moves
• Competitors tactics relative to what they could have done
• Manners in which strategic changes are initially
implemented
• Divergence from past goals
• Divergence from industry precedent
• The cross-parry
• The fighting brand
• Private antitrust suits
 Prior Announcement of Moves
• Preempting other competitors (Ex. IBM, Apple)
• As a threat for actions to be taken if the competitor
follows through the planned action(Pepsi V/S Coke)
• Tests of competitors sentiments (ex Texas,Bowmar,
Motorola,)
• To Communicate pleasure or displeasure
• Conciliatory steps aimed at minimizing the provocation
• To avoid costly simultaneously moves (in creating over
capacity etc.)
• To communicate with the financial community (Nikesh
Arora move to buy stock -3150 CR-of Soft bank where he
was President)
• To get internal support for a move
• Serve as a bluff
Announcements of Results or Actions
After the Fact
• The after-the –fact announcement has a
function of insuring that other firms know
and take note of the data disclosed (giving
MRP sales data instead of realised sale
data)- which can influence their behavior.
 Public Discussions of the Industry by
Competitors
• Make a commentary on the industry
generally (Telecom – Airtel indicating that
“over the top”-OTT operators such as Skype
are harming industry. Need price raise.
• Comment on the rivals move directly
(Amazon on Flipcart/ Snapedeal)
• Praise competitor by name or the industry
generally
 Competitors Discussions and
Explanations of Their Own Moves
• Discuss their moves with a major customer or
distributor
• To communicate that the moves may not be
taken as a provocation(to make them see
logic of the move)
• The explanation may act as a preemptive
gesture (“very hard to develop this market”)
• To communicate commitment (Vistara
airline- Singapore Airline and Tata venture
investment statistics)
 Competitors Tactics Relative to What
They Could Have Done
• Relative to what a competitor could have
feasibly chosen to do, the prices and
advertisement actually chosen, the size of
capacity addition, specific product
characteristics adopted etc. may signal
conciliation.
 Manners in Which Strategic Changes
are Initially Implemented
• Product getting introduced initially in a
peripheral market, price change made on
products representing core products etc.
(starting of EOSS in the middle of the peak
season may indicate liquidity issues with
the firm)
 Divergence From Past Goals

• Introduction of a significantly inferior

product despite having the history of
serving top end of the market will mean a
major realignment
 The Cross-Parry

• When one firm initiates a move in one area and a

competitor responds in a different area with one
that affects the initiating firm.
• The cross-parry response represents a choice by
the defending firm not to counter the initial move
directly but counter it indirectly (ex. John Deere
entering into Earthmovers market reacted by
Caterpillar planned entry into Farm sector)
• Can be a particularly effective way to discipline a
competitor if there is a great divergence of market
share (Suzuki 43%, Hyundai 23% , Honda 6%- Price
cut by Honda will harm Suzuki the most, if all
other things are equal).
 The Fighting Brand

• A form of signal related to cross-parry is

the fighting brand
• Introduction of a brand to punish the
competitor (Coca-Cola with Mr. Pibb to
teach a lesson to Maxwell House’s Dr
Pepper, Nirma & Hindustan Lever)
 The Use of History in Identifying
Signals
• Studying the historical relationship
between firm’s announcements and
subsequent outcomes can greatly
improves one’s ability to read signals
correctly
Can Attention to Market Signal be a
Distraction?
• Too much attention may be counter
productive.