1. 1 Chapter 6 Competitive Rivalry and Competitive Dynamics PART III CREATING COMPETITIVE ADVANTAGE

3.  Dramatic increase in competitive actions and reactions between firms  Decreased decision making time  Increased speed of new ideas and products  Soaring speed at which knowledge “pulses” between competitors Fast firms generate advantages and market power. Faster firms generate more advantages and greater market power.

4.  Key Terms  Competitors Firms operating in the same market, offering similar products, and targeting similar customers  Competitive rivalry Ongoing set of competitive actions and competitive responses occurring between competitors as they contend with each other for an advantageous market position

5.  Key Terms  Competitive behavior Set of competitive actions and competitive responses the firm takes to build or defend its competitive advantages and to improve its market position  Competitive dynamics Total set of actions and responses taken by all firms competing within a market  Multimarket competition Firms competing against each other in several product or geographic markets

8.  The total number of competitors  Market characteristics  Quality of individual firms' strategies  Drivers of competitive behavior

9.  Market Commonality  Resource Similarity Firms with high market commonality and highly similar resources are clearly direct and mutually acknowledged competitors.

10.  Key Terms  Market commonality Number of markets with which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each

11.  Key Terms  Resource similarity Extent to which the firm's tangible and intangible resources are comparable to competitors' resources in terms of both type and amount

13.  Awareness  Motivation  Ability  Resource Dissimilarity

14.  Key Terms  Competitive action Strategic or tactical action the firm takes to build or defend its competitive advantages or improve its market position  Competitive response Strategic or tactical action the firm takes to counter the effects of a competitor's action  Tactical action (or response) Market-based move that is taken to fine-tune a strategy

15.  Strategic actions/responses are market- based moves that signify a significant commitment of organizational resources to pursue a specific strategy. They are difficult to implement and reverse.  Tactical actions/responses are market-based moves that are taken to fine-tune a strategy that is already in place, involving fewer resources. They are relatively easy to implement and reverse.

16.  First mover incentives  Organizational size  Quality

17.  Key Terms  First mover Firm that takes an initial competitive action to build or to defend its competitive advantages or to improve its market position  Second mover Firm that responds to the first mover's competitive action, typically through imitation  Late mover Firm that responds to a competitive action, but only after considerable time has elapsed after the first mover's action and the second mover's response

18.  Often build upon a strategic foundation of superior research and development skills  Tend to be aggressive and willing to experiment with innovation  Tend to take higher, yet reasonable, risks  Need to have liquid resources that can be quickly allocated to support actions

19.  Competitive advantage  Above-average returns  Customer loyalty  Industry standards  Market share

20.  Difficulty to accurately estimate potential returns  Substantial costs of product innovation, which reduces organizational slack available for other opportunities  Low likelihood of introducing or converting to the product that eventually becomes the dominant design or industry standard as the market evolves

21.  More cautious than first movers  Tend to study customer reactions to product innovations  Tend to learn from the mistakes and avoid the large investments required of first movers, reducing their risks  Can take advantage of time to develop more efficient processes and technologies than first movers, reducing their costs  Will not benefit from first mover advantages, lowering potential returns

22.  Respond to market opportunities only after considerable time has elapsed after first and second movers, substantially reducing risks and returns  Typically, a late response is better than no response at all

23.  Small firms  Nimble and flexible competitors  Rely on speed and surprise to defend their competitive advantage  Greater variety of competitive behavior options available

24.  Large firms  Often have greater slack  Greater likelihood to initiate competitive and strategic actions over time  Tend to rely on a limited variety of competitive actions, which can ultimately reduce their competitive success

25.  Key Terms  Quality Customer perception that the firm's goods or services perform in ways that are important to the customer to meet or exceed their expectations

27.  Types of competitive action  Actor’s reputation  Dependence on the market  Competitive dynamics

28.  Strategic actions elicit different responses than tactical actions.  Strategic actions generally elicit strategic responses.  Tactical actions generally elicit tactical responses.  Strategic actions elicit fewer total competitive responses.  Actions that target a large number of a rival’s customers are likely to elicit strong responses.

29.  Key Terms  Actor Firm taking an action or response (in the context of competitive rivalry)  Reputation Positive or negative attribute ascribed by one rival to another based on past competitive behavior

30.  Key Terms  Market dependence Extent to which a firm's revenues or profits are derived from a particular market

31.  Slow-cycle markets  Fast-cycle markets  Standard-cycle markets

32.  Key Terms  Slow-cycle markets Markets in which the firm's competitive advantages are shielded from imitation for what are commonly long periods of time and where imitation is costly

33.  One-of-a-kind proprietary competitive advantage  Orient competitive behavior to protecting, maintaining, and extending that advantage

35.  Key Terms  Fast-cycle markets Markets in which the firm's capabilities that contribute to competitive advantages are not shielded from imitation and where imitation is often rapid and inexpensive

36.  Complex and rapid strategic decisions  Relatively easy imitation  Unprotected technology  High volatility

37.  Rapid and continuous development of new competitive advantages – innovation  Temporary competitive advantage  Avoid loyalty to products – willingly cannibalize own products

39.  Key Terms  Standard-cycle markets Markets in which the firm's competitive advantages are moderately shielded from imitation and where imitation is moderately costly

40.  Continuously upgrade quality  Serve many customers and gain a large market share  Gain customer loyalty through brand names  Deliver consistent customer experiences

41. When competing against one another, firms jockey for a market position that is advantageous, relative to competitors. In this jockeying, what are the ethical implications associated with the way competitor intelligence is gathered?

42. Second movers often respond to a first mover’s competitive actions through imitation. Is there anything unethical about a company imitating a competitor’s good or service as a means of engaging in competition?

43. The standards for competitive rivalry differ in countries throughout the world. What should firms do to cope with these differences? What guidance should a firm give to employees as they deal with competitive actions and competitive responses that are ethical in one country but unethical in others?

44. In slow-cycle markets, effective competitors are able to shield their competitive advantages from imitation by competitors for relatively long periods of time. However, this is not the case in fast-cycle markets. Do these conditions have implications in terms of ethical business practices? Do ethical standards in slow-cycle markets differ from those in fast-cycle markets?

45. Is it ethical for the firm competing against a competitor in several markets to launch a competitive response in a market that differs from the one in which that competitor took a competitive action against the local firm? Why or why not?