COMPETITIVE RIVALRY MODEL

Summary written by: Zubair Ahmed Memon

Link: https://www.ukessays.com/essays/marketing/drivers-of-competitive-
actions-and-responses-marketing-essay.php

Submitted to:
Sir Adnan Kehar

SEPTEMBER 14, 2018

Competitive Rivalry Model:
The ongoing competitive action/response sequence between a firm and a competitor have impact
on the performance of both firms, therefore it is important for companies to carefully analyze and
understand the competitive rivalry present in the markets they serve to select and implement
successful strategies.

In this model it is discussed that for a particular company be able to respond competitive rivalry,
it has to know that who its competitors are. It should have motivation to respond and it should
have the necessary resources and capabilities to take necessary action. Companies which have
greater market commonality and resource similarity direct competitors.

Two important factors of competitive actions and responses are market commonality and resource
similarity. 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.
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.

Companies who have almost common resources tend to have same strengths and weaknesses, they
use same strategies. Competitors are more likely to respond to strategic and tactical actions of
market leaders in the industry. Therefore, reputation is also important factors that determine the
extent of competitive rivalry. Understanding a competitor’s awareness, motivation, and ability
helps the firm to predict the likelihood of an attack by that competitor and the probability that a
competitor will respond to actions taken against it.

Competitive dynamics concerns the ongoing competitive behavior occurring among all firms
competing in a market for advantageous positions. Market characteristics affect the set of actions
and responses that firms take while competing in a given market as well as the sustainability of
firms’ competitive advantages.

In slow-cycle markets, where competitive advantages can be maintained, competitive dynamics

finds firms taking actions and responses that are intended to protect, maintain, and extend their
proprietary advantages.

In fast-cycle markets, competition is almost frenzied as firms concentrate on developing a series

of temporary competitive advantages. This emphasis is necessary because firms’ advantages in
fast-cycle markets aren’t proprietary and as such, are subject to rapid and relatively inexpensive
imitation.

Standard-cycle markets are between slow-cycle and fast-cycle markets, in that firms are
moderately shielded from competition in these markets as they use competitive advantages that
are moderately sustainable. Competitors in standard-cycle markets serve mass markets and try to
develop economies of scale to enhance their profitability.