CANS 406 Lecture Notes - Lecture 9: Hyundai Grandeur, Toyota Rav4, Toyota 4Runner
22 May 2018
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Competitive rivalry and dynamics
Feb 6th, 2018
Definitions
• Competitors
o Firms operating in the same market, offering similar products, and targeting similar
customers
• Competitive rivalry
o Ongoing set of competitive actions and responses occurring between competitors
o Influences an individual firm's ability to gain and sustain competitive advantages
• Competitive behavior
o Set of competitive actions and competitive responses the firm takes to build or defend its
competitive advantages and to improve its market position
• Multimarket competition
o Firms competing against each other in several product or geographic markets
• Competitive dynamics
o Total set of actions and responses taken by all firms competing within a market
A model of competitive rivalry
• Competitive rivalry exists when firms jockey with one another to pursue an advantageous market
position
• When one or more firms competing in an industry feels pressure to act or perceives an
opportunity to improve their competitive position
o Competitive rivalry occurs, as various firms initiate a series of actions and responses
find more resources at oneclass.com
find more resources at oneclass.com
• Interfirm rivalry or competitive dynamics: begins with competitive analysis in terms of market
commonality and resource similarity
o Market commonality and resource similarity affect drivers of competitive behavior
• Firm's awareness, motivation, ability to attack or respond
▪ Attack and responses to attack result in competitive outcomes: market position
and financial performance
• Feedback from competitive outcomes will affect future competitive
dynamics
Competitor analysis
• First step to understanding competitive rivalry and identifying who your direct competitors are
o Involves collecting competitive intelligence
o Focuses on trying to predict competitors' behavior
o Question: "to what extent are firms competitors?"
• 2 components to assess
o Market commonality
o Resource similarity
• Direct competitors: high market commonality & high resource similarity
• Market commonality
o Concerned with
• Number of markets with which a firm and competitor are jointly involved
• Degree of importance of the individual markets to each competitor
o Each industry composed of various markets which can be subdivided into segments
• Ex: automobile industry
o Firms competing against one another in several or many markets engage in multimarket
competition
Multi-market competition (automobile industry)
Small
Midsize
Large
SUV
Trucks
Sports cars
Hyundai
Accent
Elantra
Ioniq
Sonata
Azera
Santa Fe
Tucson
Honda
Civic
Fit
Accord
Clarity
CR-V
HR-V
Pilot
Ridgeline
Toyota
Corolla
Prius
Yaris
Camry
Avalon
C-HR
4Runner
Highlander
Land Cruiser
RAV4
Sequoia
Tacoma
Tundra
Toyota 86
Ford
Fiesta
Focus
Fusion
Taurus
EcoSport
Edge
F-150
Mustang
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find more resources at oneclass.com
Escape
Expedition
Explorer
Flex
• resource similarity
o How comparable the firm's tangible and intangible resources are to a competitor's in terms
of both types and amounts
o Firms with similar types and amounts of resources are likely to
• Have similar strengths and weaknesses
• Use similar strategies
o Assessing resource similarity is difficult if critical resources are intangible, rather than
tangible
A framework of Competitor Analysis
Potential competitors
Direct competitors
Incipient competitors
Indirect competitors
Drivers of Competitive Behavior
• Awareness
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Definitions: competitors, firms operating in the same market, offering similar products, and targeting similar customers, competitive rivalry, ongoing set of competitive actions and responses occurring between competitors. Interfirm rivalry or competitive dynamics: begins with competitive analysis in terms of market commonality and resource similarity: market commonality and resource similarity affect drivers of competitive behavior. Firm"s awareness, motivation, ability to attack or respond: attack and responses to attack result in competitive outcomes: market position and financial performance. Feedback from competitive outcomes will affect future competitive dynamics. First step to understanding competitive rivalry and identifying who your direct competitors are. Flexibility that these resources provide: without available resources, firm lacks the ability to, attack a competitor, respond to the competitor"s actions. Single-period simultaneous game: dominant strategy is one that is optimal regardless of what rival does, repeated games may result in threat of future retaliation influencing current move.
