Essay on Course Notes Exam Study Guide

Chapter 5- COMPETITIVE RIVALRY AND COMPETITIVE DYNAMICS
1. COMPETITOR ANALYSIS- first step the firm takes to be able to predict the extent and nature of its rivalry with each competitor
A competitive analysis is a critical part of your company marketing plan. With this evaluation, you can establish what makes your product or service unique--and therefore what attributes you play up in order to attract your target market. study competitors future objectives, current strategies, assumptions, and capabilities better able to predict competitor’s behaviors when forming its competitive actions and responses
TWO COMPONENTS to assess: Market Commonality & Resource Similarity
“The question: To what extent are firms competitors?
Competitor: high market commonality & high resource similarity
Example: Dell and HP= direct competitors
DIRECT COMPETITION DOES NOT ALWAYS IMPLY INTENSE RIVALRY

2. **MARKET COMMONALITY- # of markets in which firms compete against each other
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
Degree of importance of the individual markets to each competitor
 A firm with greater multimarket contact is less likely to initiate an attack, but more likely to respond aggressively when attacked

3. RESOURCE SIMILARITY- extent to which the firm’s tangible and intangible resources are comparable to a competitor’s in terms of both type and amount
Firms with similar types and amounts of resources are likely to:
Have similar strength and weakness
Use similar strategies
4. DRIVERS OF COMPETITIVE ACTION AND RESPONSES
1) Awareness- prereq to any competitive action or response taken by a firm refers to the extent to which competitors recognize the degree of their mutual interdependence that results from market commonality and resource similarity.
2) Motivation- concerns the firm’s incentive to take action or to respond to a competitor’s attack, relates to perceived gains and losses.
3) Ability – relates to each firm’s resources and flexibility they provide(financial capital and people)
Example: smaller and newer firms tend to be more innovative but generally have fewer resources to attack larger and established competitors.
 A firm is more likely to attack the rival with whom it has low market commonality than the one with whom it competes in multiple markets. Given the strong competition under market commonality, it is likely that the attacked firm will respond to its competitor’s action in an effort to protect its position in one or more markets
5. LIKELIHOOD OF ATTACK
1. First-Mover Incentives
-a firm that takes an initial competitive action in order to build or defend its competitive advantages or to improve its market position
- Firm’s achieve competitive advantage by taking innovative actions
- “allocate funds for product innovation and development, aggressive advertising, and advanced research and development”
First mover can gain (1) loyalty of customers who may become committed to the goods or services of the firm that first made them available. (2) market share that can be difficult for competitors to take during future competitive rivalry.
2. Second Mover- firm that responds to the first mover’s competitive action, typically through initiation.
Time to develop processes and technologies that are more effiecient than those used by the first mover or that create additional value for consumers
Most successful second movers rarely act too fast (fully analyzing 1st mover’s action)
3. Late Mover- responds to a competitive action a significant amount of time after the first mover’s actions and the second mover’s
ORGANIZATIONAL SIZE- affects competitive actions, types, and timing
QUALITY-when the firm’s goods or services meet or exceed customer’s expectations
6. LIKELIHOOD OF RESPONSE
1. Type of Competitive Action
2. Actor’s Reputation- An actor is the firm taking an

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