Multimarket Contact and Competitive

Aggressiveness at the Marketing-Mix

Tactical Level

JUAN MANUEL GONZÁLEZ SÁNCHEZ

Universidad Icesi
 MULTIMARKET COMPETITION

• A form of competition that has caught the attention of researchers,

especially in strategy from the perspective of competitive dynamics.

• Occurs when two or more firms meet each other in more than one market
(MMC).

• It has several implications for the parties to such competition as well as for
single-market rivals in those markets.
– Whether to attack competitors or not, whether to respond to the moves of rivals or not,
which rivals to attack, and how to defend the firm market position from both single-market
and multimarket rivals over time (Heide & Miner, 1992).

• When MMC, chances of knowing, hurting or benefiting each other increase,

leading to a situation where firms recognize their interdependence, thus,
they must exercise caution when deciding which competitive moves to make
because the outcome of a move depends heavily on how rivals respond to it
(Baum & Korn, 1996; Bernheim & Whinston, 1990; Gimeno, 1999; Haveman
& Nonnemaker, 2000; Jayachandran, Gimeno, & Varadarajan, 1999).
 MULTIMARKET COMPETITION

• Knowing each other’s capacity to inflict harm may restrain firms from
making aggressive competitive moves (key role of spheres of influence)

• Thus, firms involved can develop mutual forbearance – condition in which

firms decide to implicitly collude and avoid attacking each other (Bernheim &
Whinston, 1990; Edwards, 1955),

• Which leads to a competitive stability: higher and more stable prices, and
higher margins (Bernheim & Whinston, 1990).

Market

The mutual forbearance hypothesis states that when the same

competitors meet in multiple markets, rivalry is deterred (Subramanian
& Cannella, 2009).
 COMPETITIVE AGGRESSIVENESS

• Competitive dynamics research stream studies the relationships among the

actor, the competitive action, the reactor, the competitive response, the
competitive environment, and the consequences of the action.

• Competitive actions-CA are the conceptual foundation for competitive

dynamics research.

• CA characteristics are type, magnitude, scope, threat, implementation

requirements, irreversibility, speed, and visibility among others (Smith,
Ferrier & Ndofor, 2001).

• Most CA can be classified as pricing actions, marketing actions, new

product actions, capacity and scale-related actions, service and operations
actions, and signaling actions (Smith et al., 2001).

• CA are a reflection of individual-firm competitive behavior. Capturing CA is a

way to capture competitive rivalry (Yu & Cannella, 2013).
 COMPETITIVE AGGRESSIVENESS

• Previous research has used CA and their speed as measures of intensity of

rivalry (Yu & Cannella, 2013), and rivalry can be characterized as attack and
response characteristics.

• This approach connects the notion of individual CA with that of a competitive

attack.

• According to Ferrier (2001) a competitive attack has four characteristics that

affect performance:

 Volume: total number of competitive actions that comprise an attack.

 Duration: time lasting the competitive attack from the beginning to the
end of a single action or a sequence of them.
 Complexity: extent to which attacks are composed of several types of
different actions.
 Unpredictability: extent to which the sequence of competitive actions
deployed during an attack differs from that of a previous or subsequent
period.
 THE MARKETING MIX

• Business tool used in marketing, not a theory with a body of knowledge

developed around it. McCarthy (1960) developed today’s 4p’s classification
– Product, Price, Place, and Promotion.

• According to Jobber (2001) the strength of the 4p’s resides on the practical
framework it represents for decision-making and for the practical tool it is for
case analysis in colleges and universities.

• Basic strategic principles in marketing: targeting and positioning choices

(related to designing, developing, and introducing products to markets;
pricing those products; selecting proper distribution and commercialization
channels for those products; and communicating the products and their
benefits through advertising, personal selling, or publicity as free
advertising, or a mix of them (E.J. McCarthy, 1960).

• It is a mix and as a one, changes in one variable affect changes in other,

thus, affecting positioning.
 THE MARKETING MIX

VARIABLE MEANING
Product Everything, tangible or intangible offered to a market for
purchase, use or consumption that can satisfy a need or
a desire. Almost everything, material goods, people,
ideas, services, places, and organizations are products.
It includes brand and packaging
Price Is the monetary amount associated with the transaction
exchange, even though sometimes goods and services
are also paid with time and effort. It includes payment
mode, credit type, prompt payment discounts, volume,
surcharges, etc.
Place Where to market the product or service being offered,
(distribution) which is essential for the product to be at consumer
reach for purposes of convenience.
Promotion All the methods to communicate, to inform and to
(communications) persuade customers and other stakeholders about the
company, its products, and offerings.
 IS THERE A GAP?

• Strategic CA have been analyzed (market entry-exit, changes in product

portfolio, product introduction)

• Isolated CA have been analyzed.

• Mutual forbearance hypothesis have found support at the strategic level –a

long-run rivalry

• What about the tactical level? (day-to-day rivalry)

• What about seeing CA as interconnected instead of isolated ones?

• Would the mutual forbearance hypothesis find support on a day-to-

day rivalry setting?
 PUTTING THINGS TOGETHER

• CA categories describe a set of similar moves assumed to have similar

implications for the resulting intensity of rivalry (Chen, 1996)

• Extant literature accounts for isolated action categories.

• However, from a marketing perspective, many actions across categories are

naturally interconnected (Borden, 1984; Constantinides, 2006; Magrath,
1986; McCarthy, 1960)

• But some of the actions classified into different categories as Smith et al.,
(2001) and others have done, ignores that fact.

• For example, viewing discrete categories of actions like pricing actions,

marketing actions, and new product actions separately naturally minimizes
the importance of coordination among tactical marketing actions that must
be considered jointly because they are interconnected (Borden, 1984).
 PUTTING THINGS TOGETHER

• I propose to categorize all product, pricing, distribution, and promotional

actions as marketing actions, and group them in McCarthy (1960)’s
marketing mix (tactical level)

• It presents marketing tactics as sets of actions that can be categorized as

either product, price, promotion, or place.

• These four categories comprise the marketing mix, and, as noted earlier,
marketing theory holds that the elements of the mix must be analyzed
jointly.

• A fundamental assumption: what is broadly accepted by competitive

dynamics researchers as different competitive action categories (e.g., Smith
et al., 2001) should be considered all marketing actions that should be
jointly analyzed as tactical competitive moves, rather than analyzed in
isolation or as independent action categories.
 PUTTING THINGS TOGETHER

• Better organizational performance comes from two sources: ripped of

competitors’ performance or global market growth.

• Repertoires of CA at the marketing mix level have different levels of volume,

duration, complexity, and unpredictability…..aggresiveness

• Being aggressive is good business for a firm that can rip of market share
from others and benefit of such thing, thus, deploying aggressive repertoires
of competitive attacks is a wise decision to make for firms that want to
capitalize those benefits

• But at the tactical level, what seems to be a very aggressive movement can
be overlooked as such, since movements like those could be common
practice in the industry and no harm is being caused.

Could it be possible that firms that have multimarket contact instead

of being less aggressive with each other (mutually forbear), in fact
behave as aggressive ones?
 PUTTING THINGS TOGETHER

• Single market competitors

H1a: the relationship between competitive aggressiveness at the marketing
mix level of single-market firms and competitors’ performance will be
negative

H1b: the relationship between competitive aggressiveness at the marketing

mix level of firms that compete in various market segments where each
competitor is unique to each market, and competitors’ performance will be
negative

• High volume; long lasting

H2a: under the presence of multimarket contact, an increase in the attack
volume a firmdeploys, with no change in the other three attack
characteristics, will not deteriorate competitors’ performance.
 
H2b: under the presence of multimarket contact, an increase in the attack
duration a firm deploys, with no change in the other three attack
characteristics, will not deteriorate competitors’ performance.
 PUTTING THINGS TOGETHER

• Complex and unpredictable repertoires

H3a: under multimarket contact conditions, an increase in attack complexity
deployed by a firm will cause competitors’ performance deterioration.

H3b: under multimarket contact conditions, an increase in attack

unpredictability deployed by a firm will cause competitors’ performance
deterioration.
 SETTING AND VARIABLES

• The Colombian car industry:

Dynamic market with 20 different brands and 100 car models competing in
11 segments (markets).

• Tactical movements:
Car advertisings for years 2010, 2011, 2012, and 2013 in Semana
magazine (greatest readability in Colombia). Counting the number of
ads placed every week by each brand (1 P), and analyzing the content
of the advertising looking for key elements that reflect the other 3 P´s of
the marketing mix.

• Firm performance:
Market share with single-brand and whole-market sales.

• Competitive aggressiveness:
Aggregated term of volume, duration, complexity, and unpredictability. (to be
defined)
 SETTING AND VARIABLES

• Control variables:
Total advertising investment.
Total marketing investment.
Peso/dollar exchange rate.
Tariffs

The Colombian car market, for its size, has a good number of competitors,
some of which are present in several market segments and some of which
are focused on a few of them. Despite the size of the firms and the number
of market segments they compete in, it is very common that firms invest a
lot of money in printed magazines to advertise their different corporate
branded vehicles and characteristics, communicate something about
distribution channels, and financing and price features; a whole perfect
setting to capture multimarket contact and marketing mix deployment
 EXPECTED CONTRIBUTIONS

• Developing new theory regarding how firms in a multimarket contact setting

mange to tactically attack and respond without disturbing the equilibrium.

• Including the concept of marketing mix to predict how multimarket rivals

might respond to actions in ways that are more or less aggressive, as
mutual forbearance theory fundamentally predicts.

• Developing a marketing mix approach that will permit me to analyze sets of

what others have categorized as dissimilar actions as part of a broad
marketing strategy, rather than view actions in isolation.

• Providing a better understanding of the implications and characteristics of

multimarket contact through analyzing sets and sequences of actions as
broad parts of tactical engagement among rivals, which in turn represents a
more complex but complete and accurate picture of rivalry among firms with
multimarket contact.