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Competitors are firms operating in the same market, offering similar products and targeting similar customers for instance Coca Cola and Pepsi. Decisions taken by a firm about who their competitors will be and especially how they will compete against their rivals have an important effect on their ability to earn above average returns.

The ongoing set of competitive actions and responses occurring between competitors as they compete against each other for an advantageous market position. Rivalry influences an individual firms ability to gain and sustain competitive advantages.

A set of competitive actions and competitive responses the firm takes to build or defend its competitive advantages and to improve its market position.

This is a situation where firms compete against each other in several products or geographical markets

This means all competitive behaviour. These are the total set of actions and responses taken by all firms competing within a market.


Rivalry at a firm level should be studied because it is the competitive actions and responses a firm takes that are the foundation of successfully building and using its competitive strategies to gain an advantageous market position.

Market Commonality Each Industry is composed of various markets for instance financial services comprise of brokerage services, banks and insurance. Each market serves different customer groups, for example the insurance market can be divided into commercial and consumer segments; product segment-health & life insurance; geographic segments-East Africa and South East Asia.

Resource similarity This is the extent to which firms tangible and intangible resources are comparable to a competitor in terms of amount and type. Firms with similar types and amounts are likely to have similar strengths and weaknesses and also use similar strategies

A) Awareness This refers to the extent to which competitors recognize the degree of their mutual interdependence that results from market commonality and resource similarity

B) Motivation Concerns the firms action to respond to a competitors attack, relates to perceived gains and losses. A firm may be aware of competitors but may not be motivated to engage in rivalry with them if it perceives that its position will not improve

Ability This relates to each firms resources and the flexibility they provide. Without the available resources which include financial capital and people, the firm lacks ability to attack its competitors. When a firm faces a competitor with similar resources, a careful study should be done before attack


A first mover is a firm that takes an initial competitive action in order to build or defend its competitive advantages or to improve its market position. This concept was influenced by Joseph Schumpeter who argued that firms achieve competitive advantage by taking innovative actions.

This is a firm that responds to the first movers competitive action typically through imitation. The second mover is usually more cautious than the first mover. The second mover studies actions of the first mover and avoids its mistakes. The second mover has time to develop processes and technologies that are more efficient than the first movers. They also provide a greater customer value than the first mover.

This describes a firm that responds to competitive action much later than the first and second movers action and response. Success achieved is usually less than the other movers.

The size of a firm determines its competitive actions as well as the time it acts. Small firms tend to launch competitive actions faster than large firms. Small firms are considered more flexible than large ones since they rely on speed to defend their competitive advantages

This refers to when a firms goods or services exceed customer expectations. Customer perspective- Quality is doing the right things relative to performance measures that are important to them

Performance Features Flexibility Aesthetics Durability Conformance Serviceability Perceived quality


Timeliness Courtesy Consistence Convenience Completeness Accuracy

Type of Competitive Action Actors Reputation Dependence on the Market

Are those in which the firms competitive advantages are shielded from imitation commonly for long periods of time and where imitation is costly. These competitive advantages are sustainable in slow cycle markets

Are markets in which the firms capabilities that contribute to competitive advantages are not shielded from imitation and where imitation is rapid and inexpensive? Speed is very important in this market

These are markets where firms competitive advantages are moderately shielded from imitation and imitation is moderately costly. Comparative advantage is partially substantial in Standard Cycle Markets but only when the firm is able to make comparative advantages dynamic. These Standard cycle Markets competitive actions and responses are designed to seek large market shares, gain customer loyalty through brand names and control firms operations

Miles and Snows adaptive strategies Abells business definition framework Porters generic competitive strategies


Prospector strategy Defender strategy Analyzer strategy Reactor strategy

According to Abell, a business can be defined in three dimensions: (1) customer groups- who we are going to serve, (2) customer needswhat customers need we are attempting to meet; and (3) technologies or distinctive competencies- how we are going to meet that need

Modern Approaches to Competitive advantage are based on the Business level strategies of Overall Cost Leadership Differentiation Focus

An overall low-cost position enables a firm to achieve above average returns despite strong competition. It protects a firm against rivalry from competitors because lower costs allow a form to earn returns even if its competitors eroded their profits through intense rivalry.

Too much focus on one or a few value chain activities All rivals share a common input or raw material The Strategy is easily imitated

This strategy consists of creating differences in the firms product or service offering by creating something that is perceived as unique and valued by customers. Differentiation provides protection against rivalry since brand loyalty lowers customer sensitivity to price


Too much Differentiation Too high a price premium Perception of Differentiation

This strategy is based on the choice of a narrow competitive scope within an industry. The essence of focus is the exploitation of a particular market niche. The focus strategy is a hybrid of the cost leadership strategy and the differentiated strategy

Focusers may become too focused to satisfy buyer needs. Erosion of cost advantages within the narrow segment

Firms that successfully integrate both differentiation and cost advantages create an enviable position to be in. For examples Bidcos integration of information systems, logistics and transportation helps it to drive down costs and provide outstanding product selection.