1. Competitive Dynamics
Chapter 9

2. Learning Objectives
Use industry and company trajectories to predict competitive actions.
Appropriate techniques for competitive intelligence.
Tactical versus strategic responses.
When cooperation is effective.

3. Predictions Based on Industries
Industry Environment
Industry Trajectories
Scenario Analysis

4. Predictions – Benign Environment
Benign industry environment
Demand exceeds supply
High gross profit margins
Low competitive intensity
Differentiation strategy often effective
Not the usual 21st Century conditions

5. Predictions – Hostile Environment
Hostile industry environment
Revenue growth – slow, flat, or decline
Cost containment and price wars
High competitive intensity
Rapid product / service obsolescence
Active efforts to reduce cost structures
New product / service development
Speed

6. Predictions – Industry Trajectories
Strategy maps over time reveal tendencies

7. Predictions – Industry Trajectories
Technological developments
Evolution of customer preferences
Evolution of Cell Phones

8. Predictions Based on Companies
Classifying types of organizations
Internal characteristics
Gathering competitive intelligence

9. Predictions – Types of Organizations
Prospector
More concerned with customer, less with competitor
Often leaders of change
Defender
Intensive
Rigorously defend their position
Analyzer
Sometimes Prospector, sometimes Defender
Unpredictable nature makes it dangerous
Reactor
Waits and reacts slower to developments

10. Predictions – Company Characteristics
Strategy analysis of company
Mission, Value Chain, Business Strategy
Management patterns
Experience and tendencies of senior management
Financial situation
Balance sheet
Income statement
Cash flow
Access to financial capital

11. Predictions – Competitive Intelligence
Media stories
Wall Street analysts' reports
Research among suppliers
Conferences
Speeches by senior management

12. Predictions – Scenario Analysis
Consider potentially dramatic shifts
Oil prices skyrocket to $250 / barrel, or
Oil prices plummet to $50 / barrel
Articulate effects
Transportation, cost, customer service, etc.
Pre-plan responses as changes begin to occur
Decide what new resource investments & activities would be necessary
Compare readiness to competitors

13. Tactics versus Strategy
Tactical – shorter term competitive moves and counter-moves
Strategic – longer term direction, investments, and performance

14. Tactics – Escalating Response Styles
Acquiesce
Compromise
Avoid
Defy
Manipulate
No direct confrontation
Obey institutional rules & norms
Balance expectations of stakeholders
Threat, but not worth immediate fight
Disengage, conserve resources
Change goals, activities, field of play
Key business segment is threatened
Competition cannot be disregarded
Actions directed at competitor
Coopt, influence other stakeholders

15. Strategy – Escalating Response Styles
Containment
Shaping
Absorption
Neutralize
Annulment
Usual dimension of Rivalry
New products, lock in customers & suppliers, raise switching costs, etc.
Influence market-wide standards & practices
Acquire the competitor
Act to make competitor obsolete
Leapfrog the competitor approach
Change fundamental industry dynamic

16. Cooperation Competition is unusually destructive
Prices and "fare wars" (Prisoner's Dilemma)
Collusion is illegal
Signaling – a tacit form of cooperation
Price leaders
Tit For Tat
Mutual benefits from strategic alliances
Each benefits more than operating alone
Requires careful management & attention to goals