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Strategic Management
Chapter 6 - Competitive Rivalry
38
Business
Undergraduate 4
06/11/2012

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Term

Competitors

 

Definition
Competitors are firms operating in the same market, offering similar products and targeting similar customers
Term
Competitive Rivalry
Definition
Competitive rivalry is the ongoing set of competitive actions and competitive responses occurring between competitors as they compete against each other for an advantageous market position
Term
Multimarket Competition
Definition
Multimarket competition occurs when firms compete against each other in several product or geographic markets
Term
Competitive Dynamics
Definition
Competitive dynamics refer to all competitive behaviors - that is, the total set of actions and responses taken by all firms competing within a market
Term
Market Commonality
Definition
Market commonality is concerned with the number of markets with which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each.
Term
Resource Similarity
Definition
Resource similarity is the extent to which the firm's intangible resources are comparable to a competitor's in terms of both type and amount.
Term
Awareness
Definition
Awareness is the extent to which competitors recognize the degree of their mutual interdependence that results from market commonality and resource similarity
Term
Motivation
Definition
Motivation is the firm's incentive to take action or to respond to a competitor's actions, in relation to perceived gains and losses
Term
Ability
Definition
Ability relates to each firm's resources and the flexibility they provide
Term
Dissimilarity
Definition
Dissimilarity influences competitive actions and responses between firms, int that the greater the resource imbalance between the acting firm and competitors or potential responders, the greater will be in the delay in response by the firm with a resource disadvantage
Term
Competitive Action
Definition
Competitive action is a strategic or tactical action the firm takes to build or defend its competitive advantages or improve its market position
Term
Competitive Response
Definition
A competitive response is a strategic or tactical action the firm takes to counter the effects of a competitor's competitive action
Term
Strategic Action / Strategic Response
Definition
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
Term
Tactical Action / Tactical Response
Definition
A tactical action or tactical response is a market-based move that is taken to fine-tune a strategy; it involved fewer resources and is relatively easy to implement and reverse
Term
Likelihood of Attack
Definition
  1. Market commonality
  2. Resource similarity
  3. Drivers of awareness
  4. Motivation, and
  5. Abiltiy
Term
First-Mover Incentives
Definition

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

First movers allocate funds for product innovation and development, aggressive advertising, and advanced R&D

Term
First Mover Advantages
Definition
  1. can gain the loyalty of customers who may become committed to the goods that first made them available, and
  2. can gain market share that can be difficult for competitors to take during future competitive rivalry
Term
Slack
Definition
Slack makes it possible for firms to have the ability to be first movers.  Slack is the buffer provided by actual or obtainable resources that aren't currently in use and are in excess of the minimum resources needed to produce a given level of organizational output
Term
Second Mover
Definition

A second mover is a firm that responds to the first mover's competitive action, typically through imitation

 

Term
Second movers
Definition
Second movers study customer's reactions and tries to avoid problems made by first movers.  They have the time to develop processes and technologies that are more efficient resulting in lower costs.   The profit tends to be lower, but so is the risk
Term
Late movers
Definition
A late mover is a firm that responds to a competitive action, but only after considerable time has elapsed after the first mover's action and the second mover's response
Term
Organization size factor
Definition

This tends to reduce the variety of competitive actions that large firms launch while it increases the variety of actions undertaken by smaller competitors.

Ideally the firm would like to initiate a large number of diverse actions when engaged in competitive rivalry.

Term
Quality
Definition
Quality exists when the firm's goods or services meet or exceed customers' expectations
Term
Product Quality Dimensions
Definition

Performance, features, flexibility, durability, conformance, serviceability, aesthetics, and perceived quality

 

Term
Service Quality Dimensions
Definition
Timeliness, courtesy, consistency, convenience, completeness, and accuracy
Term

Likelihood of Response

 

A firm is likely to respond to a competitor's action when:

Definition
  1. the action leads to better use of the competitor's capabilities to gain or produce stronger competitive advantages or an improvement in its market position
  2. the action damages the firm's ability to use its capabilities to create or maintain an advantage, or
  3. the firm's market position becomes less defensible
Term
Type of Competitive Action
Definition
Strategic actions elicit fewer total competitive responses as they involve a significant commitment of resources and are difficult to implement and reverse.  Also the time needed for a strategic action to be implemented and to assess its effectiveness delays the competitor's response.  They are more likely to respond to a tactical action - such as match price decrease
Term
Actor Reputation
Definition
An actor is the firm taking an action or a response while reputation is the positive or negative attribute ascribed by one rival to another based on past competitive behaviour.
Term
Price Predator
Definition

An actor that frequently reduces prices to gain or maintain market share. 

They generate few responses to its pricing tactical actions as they typically increase prices once their market share objective is reached, and they lack credibility with their competitors

Term
Market Dependence
Definition

Market dependence is the extent to which a firm's revenues or profits are derived from a particular market.

They will respond strongly to attacks threatening their market position

Term
Competitive Dynamics
Definition
Competitive dynamics concerns the ongoing actions and responses taking place among all firms competing with a market for an advantageous position
Term

Competitive Rivalry

3 Factors

(1)

Definition
  1. factors that determine the degree to which firms are competitors (market commonality and resource similarity)
Term

Competitive Rivalry

3 Factors

(2)

Definition

2. Drivers of competitive behaviour for individual firms (awareness, motivation, and ability)

 

Term

Competitive Rivalry

3 Factors

(3)

Definition

3.  Factors affecting the likelihood that a competitor will act or attack (first-mover incentives, organizational size, and quality) and respond (type of competitive  action, reputation, and market dependence) Building and sustaining competitive advantages are at the core of competitive rivalry, in that advantages are at key to creating value for the shareholders

Term
To explain Competive Dynamics
Definition
the effects of varying rates of competitive speed in different markets (slow, fast and standard cycle markets) on the behaviour (actions and responses) of all competitors within a given market.
Term
Slow-cycle Market
Definition
Slow-cycle markets are markets in which the firm's competitive advantages are shielded from imitation for what are commonly long periods of time and where imitation is costly.  Thus competitive advantages are sustainable in slow-cycle markets
Term
Fast-cycle Markets
Definition

Fast-cycle markets are markets in which the firm's competitive advantages aren't shielded from imitation and where imitation happens quickly and perhaps somewhat inexpensively.

Competitive advantages aren't sustainable.

Reverse technology is used by competitor to gain the knowledge required to imitate or improve the firm's products.

Term
Standard-cycle Markets
Definition

Standard-cycle markets are markets in which the firm's competitive advantages are moderately shielded from imitation and where imitation is moderately costly.

Competitive advantages are partially sustainable but only when firm is continuously upgrading the quality of its capabilities, making the competitive advantages dynamic.

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