RIVALRY AND

COmPETITIVE
DYNAMICS
CHAPTER 5

Sumayod | Osorio | Doming

KNOWLEDGE
OBJECTIVES:
1 Define competitors, competitive rivalry,
competitive behavior, and competitive
dynamics.

2 Describe market commonality and

resource similarity as the building blocks
of a competitor analysis.

3 Explain awareness, motivation, and

ability as drivers of competitive
behaviors.
KNOWLEDGE
OBJECTIVES:
4 Discuss factors affecting the likelihood
a competitor will take competitive
actions.

5 Describe factors affecting the likelihood

a competitor will respond to actions
taken against it.

6 Explain the competitive dynamics in

each of slow-cycle, fast-cycle, and
standard-cycle markets.
 IMPORTAN
T TERMS
Competitors
firms operating in the same market,
offering similar products, and targeting
similar customers
 IMPORTAN
T TERMS To gain advantageous
How Why market position

1? Competitive
actions ?Competitive
Rivalry
2 Competitive
responses
the ongoing set of competitive actions
and competitive responses that occur
 IMPORTAN
T TERMS
How Competitive
1? Competitive Behavior
actions
the set of competitive actions and
responses the firm takes to build or
2 Competitive
responses
defend its competitive advantages
and to improve its market position
 IMPORTAN
T TERMS
Multimarket
occurs when firms compete against
Competition
each other in several product or
geographic markets

Competitive
thatDynamics
Refer to all competitive behaviors –
is, the total set of actions and
responses taken by all firms
competing within a market
A MODEL OF
COMPETITIVE RIVALRY
Firms are mutually interdependent
• A firm’s competitive actions have noticeable
effects on competitors
• A firm’s competitive actions elicit
competitive responses from competitors
• Firms are affected by each other’s actions
and responses
• Over time firms take competitive actions and
reactions
A MODEL OF
COMPETITIVE RIVALRY
A MODEL OF
COMPETITIVE RIVALRY
• Firm level rivalry is usually dynamic and
complex
• The competitive actions and responses of
firmd are foundation for successfully building
and using capabilities and core
competencies to gain an advantageous
market position
 COMPETITOR
•
ANALYSIS
Competitor analysis is used to help a firm
understand its competitors.
• The firm studies competitors’ future objectives,
current strategies, assumptions, and capabilities.
• With the analysis, a firm is better able to predict
competitors’ behaviors when forming its
competitive actions and responses.
 COMPETITOR
•
ANALYSIS
Competitor analysis is the first step the firm takes
to be able to predict the extent and nature of its
rivalry with each competitor.
• The number of markets in which forms compete
against each other (market commonality) and
the similarity in their resources (resource similarity)
determine the extent to which the firms are
competitors.
 COMPETITOR
ANALYSIS
• Firms with high market commonality and highly
similar resources are “cleraly direct and mutually
acknowledged competitors.”

DIRECT COMPETITION DOES NOT ALWAYS IMPLY

INTENSE RIVALRY
 COMPETITOR
ANALYSIS
arket Commonality
• is concerned with:
• The number of markets with which a firm and a
competitor are jointly involved
• The degree of importance of the individual markets
to each competitor
 COMPETITOR
ANALYSIS
arket Commonality
Firms competing against one another in several or
many markets engage in multimarket competition

A FIRM WITH GREATER MULTIMARKET CONTACT IS LESS

LIKELY TO INITIATE AN ATTACK, BUT MORE LIKELY TO
RESPOND AGGRESSIVELY WHEN ATTACKED
 COMPETITOR
ANALYSIS
Resource
Similarity
is the extent to which the firm’s tangible and
intablgible resources are comprable to a
competitor’s in terms of both type and amount.
 COMPETITOR
ANALYSIS
Resource
Similarity
Firms with similar types and amounts of resources
are likely to:
• Have similar strengths and weaknesses
• Use similar strategies
 COMPETITOR
ANALYSIS
Resource
Similarity
Assessing resource similarity can be difficult if
critical resources are intangible rather than
tangible
Framework of
competitor analysis
Framework of
competitor
•
analysis
The firm’s mapping of its competitive relationship
with rivals is fluid as firms enter and exit markets
and as companies’ resources changes in type
and amount

THE COMPANIES WITH WHICH THE FIRM IS A DIRECT

COMPETITOR CHANGE ACROSS TIME.