Tutorial 4

QUESTIONS

1. Who are competitors? How are competitive rivalry, competitive behavior, and
competitive dynamics defined in the chapter?

• Firms operating in the same market, offering similar products, and targeting
similar customers are competitors. Competitors are firms operating in the
same market, offering similar products, and targeting similar customers.

• Comp,etitive rivalry is the ongoing set of competitive actions and

competitive responses that occur among firms as they maneuver for an
advantageous market position.

• Competitive behavior is the set of competitive actions and responses a firm

takes to build or defend its competitive advantages and to improve its
market position.

• Multimarket competition occurs when firms compete against each other in

several product or geographic markets.

• Competitive dynamics is the total set of competitive actions and responses

taken by all firms competing within a market.

2. What is market commonality? What is resource similarity? In what way are

these concepts the building blocks for a competitor analysis?

As previously noted, a competitor analysis is the first step the firm takes to be
able to predict the extent and nature of its rivalry with each competitor.
Competitor analyses are especially important when entering a foreign market
because firms doing so need to understand the local competition and foreign
competitors currently operating in that market. Without such analyses, they are
less likely to be successfuL The number of markets in which firms compete
against each other is called market commonality while the similarity in
their resources is called resource similarity.These two dimensions of
competition determine the extent to which firms are competitors. Firms
with high market commonality and highly similar resources are direct and
mutually acknowledged competitors.

Market commonality

Every industry is composed of various markets. The financial services industry

has markets for insurance, brokerage services, banks, and so forth. To
concentrate on the needs of different, unique customer groups, markets can be
further subdivided. The insurance market could be broken into market
segments (such as commercial and consumer), product segments (such as
health insurance and life insurance), and geographic markets (such as
Southeast Asia and Western Europe).

Resource similarity is the extent to which the firm's tangible and

intangible resources are comparable to a competitor's in terms of both
type and amount. Firms with similar types and amounts of resources are
likely to have similar strengths and weaknesses and use similar strategies
on the basis of their strengths to pursue what may be similar opportunities
in the external environment. "Resource similarity" describes part of the
relationship between FedEx and United Parcel Service (UPS). These
companies compete in many of the same markets, and thus are also accurately
described as having market commonality. For example, these firms have
similar types of truck and airplane fleets, similar levels of financial capital, and
rely on equally talented reservoirs of human capital along with sophisticated
information technology systems (resources). In addition to competing
aggressively against each other in North America, the firms share many other
country markets in common. Thus, the rivalry between these two firms is
intense.

The drivers of competitive behavior-as well as factors influencing the

likelihood that a competitor will initiate competitive actions and will respond
 to its competitors' actions-influence the intensity of rivalry.

3. How do awareness, motivation, and ability affect the firm's competitive

behavior?

Awareness suggests the level of cognizance a firm has of its competitors and
the general competitive environment. Motivation reflects a focal firm's level of
drive to take competitive actions. Finally, capability is the level of available
resources to take competitive actions (Smith et aI., 2001:320).

What is awareness in competitive behavior?

Awareness is the extent to which competitors recognize their mutual

interdependence from market commonality and resource similarity

Research indicates that three factors determine the likelihood that a firm will
respond to a competitive move: awareness, motivation, and capability.
These three factors together determine the level of competition tension
that exists between rivals

4. What factors affect the likelihood a firm will take a competitive action?

Research indicates that three factors determine the likelihood that a firm will
respond to a competitive move: awareness, motivation, and capability. These
three factors together determine the level of competition tension that exists
between rivals

What are the factors that influence the competitiveness of an organization?

A firm's competitive advantage is influenced by internal factors and external

factors. Internal factors include financial ability, human resources,
research collaborations, marketing, product differentiation and cost

5. What factors affect the likelihood a firm will initiate a competitive response to
a competitor's action(s)?
 Competitive advantages are attributed to a variety of factors including cost
structure, branding, the quality of product offerings, the distribution network,
intellectual property, and customer service.

Four factors help the company to establish and retain competitive advantage,
namely superior efficiency, quality, innovation, and accountability to customer.
Each of these factors are the result of a distinctive competence of a firm.

6. What competitive dynamics can firms expect to experience when competing in

slow-cycle markets? In fast-cycle markets? In standard-cycle markets?

Competitive Dynamics

Whereas competitive rivalry concerns the ongoing actions and responses

between a firm and its direct competitors for an advantageous market position,
competitive dynamics concerns the ongoing actions and responses among all
firms competing within a market for advantageous positions. To explain
competitive dynamics, we explore the effects of varying rates of competitive
speed in different markets (called slow-cycle, fast-cycle, and standard-cycle
markets) on the behavior (actions and responses) of all competitors within a
given market. Competitive behaviors, as well as the reasons for taking them,
are similar within each market type, but differ across types of markets. Thus,
competitive dynamics differ in slow-cycle, fast-cycle, and standard-cycle
markets.

Slow-cycle markets are markets in which the firm's competitive advantages are
shielded from imitation, commonly for long periods of time, and where
imitation is costly.94 Thus, competitive advantages are sustainable over longer
periods of time in slow-cycle markets. Building a unique and proprietary
capability produces a competitive advantage and success in a slow-cycle
market. This type of advantage is difficult for competitors to understand. As
discussed in Chapter 3, a difficult-to-understand and costly- to-imitate
capability usually results from unique historical conditions, causal ambiguity,
and/or social complexity. Copyrights and patents are examples of these types
of capabilities.
 Fast-cycle markets are markets in which the firm's capabilities that contribute
to competitive advantages aren't shielded from imitation and where imitation is
often rapid and inexpensive.98 Thus, competitive advantages aren't sustainable
in fast-cycle markets. Firms competing in fast-cycle markets recognize the
importance of speed; these companies appreciate that "time is as precious a
business resource as money or head count-and that the costs of hesitation and
delay are just as steep as going over budget or missing a financial forecast."99
Such high-velocity environments place considerable pressures on top managers
to quickly make strategic decisions that are also effective. The often substantial
competition and technology-based strategic focus make the strategic decision
complex, increasing the need for a comprehensive approach integrated with
decision speed, two often-conflicting characteristics of the strategic decision
process

Standard-cycle markets are markets in which some competitors may be able to

imitate the focal firm's competitive advantages and where that imitation is
moderately costly.

• In addition to market commonality, resource similarity, and the drivers of

awareness, motivation, and ability, three more specific factors affect the
likelihood a competitor will take competitive actions:

1. First-mover benefits

2. Organizational size

3. Quality

• Firms use both strategic and tactical actions when forming their
 ·competitive actions and competitive responses in the course of engaging in
competitive rivalry.

• A strategic action or a strategic response is a market-based move

that involves a significant commitment of organizational resources
and is difficult to implement and reverse.

• A tactical action Qr a tactical response is a market-based move that

firms take to fine-tune a strategy; these actions and responses
involve fewer resources and are relatively easy to implement and
reverse.

• A competitive action is a strategic or tactical action the firm takes to

build or defend its competitive advantages or improve its market
position.

• A competitive response is a strategic or tactical action the firm takes

to counter the effects of a competitor's competitive action.

Select any journal article based Competitive Rivalry and Competitive Dynamics from the Online
databases available in the digital library link from the FNU Website and provide the following
details of the article. You can do this in groups if you wish to do so .
. 1. Research Area

2. Topic

3. Objectives

4. Literature Review sub-topics

5. Methodology used
6. Findings

7. Conclusion