2. 4-1 1 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Chapter Three: The External Environment Chapter Three: The External Environment Hitt, Ireland, Hoskission, Rowe & Sheppard Strategic Management N o t e s Chapter Six: Competitive Rivalry and Competitive Dynamics Competitiveness & Globalization

3. 4-2 2 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback The Strategic Management Process Chapter 5: Bus.-Level Strategy Chapter 6: Competitive Dynamics Chapter 7: Corp.-Level Strategy Chapter 8: Acquisition & Restructuring Chapter 9: International Strategy Chapter 10: Cooperative Strategy Strategy Formulation Chapter 11: Corporate Governance Ch. 12: Org. Structure & Controls Chapter 13: Strategic Leadership Chapter 14: Org. Renewal & Innovation Strategy Implementation Strategic  Actions  Ch. 1: Strat. Mgmt. & Com- petitiveness Ch. 2: Strat. Mgmt. & Performance Chapter 3: The External Environment Chapter 4: The Internal Environment Strategic Competitiveness Strategic Mission & Strategic Intent Strategic Objectives & Inputs Chapter 6: Competitive Dynamics

4. 4-3 3 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Competitive Rivalry & Competitive Dynamics Knowledge Objectives 1.Describe market commonality & resource similarity as the building blocks of a competitor analysis. 2.Explain awareness, motivation, and ability as drivers of competitive behaviour. 3.Discuss factors affecting the likelihood a competitor will take competitive actions. 4.Discuss factors affecting the likelihood a competitor will respond to actions taken against it. 5.Explain competitive dynamics in slow-cycle, fast-cycle, and standard-cycle markets.

5. 4-4 4 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Via competitive – Actions & – Responses – Responses For advantageous market position Why? How? Competitors Competitiverivalry Engage in Feedback Drivers of Competitive Behaviour Outcomes Interfirm Rivalry: Attack & Response Competitor Analysis A Model of Competitive Rivalry Competitiverivalry Competitive Dynamics Competitive actions & responses taken by all firms competing in a market.Competitive actions & responses taken by all firms competing in a market. Creates Via competitive – Actions & – Responses – Responses For advantageous market position Why? How? Competitors Competitiverivalry Engage in From Competitors to Competitive Dynamics A Competitive Rivalry Model

6. 4-5 5 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Competitor Analysis Feedback Drivers of Competitive Behaviour Outcomes Interfirm Rivalry: Attack & Response Competitor Analysis Market Commonality Resource Similarity Competitor Analysis Market Commonality Resource Similarity Resource Similarity Resource Similarity  The extent to which a firm’s tangible & intangible resources are comparable to a competitors in terms of type & amount. Market Commonality Market Commonality  The number of markets which the firm & a rival are jointly involved & the importance of each market.  Multipoint competition tends to reduce competitive interactions, but increases response likelihood where interaction occurs. -E.g., airlines price flights alike, but respond quickly when competitors introduce promotional prices. -The possibility of cross subsidizing markets. Competitor Analysis

7. 4-6 6 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Awareness Motivation Drivers of Competitor Behaviour Feedback Drivers of Competitive Behaviour Outcomes Interfirm Rivalry: Attack & Response Competitor Analysis Market Commonality Resource Similarity Does the firm have appropriate incentives to attack or respond? Do managers understand key characteristics of competitors? MotivationAwareness Behaviour Drivers

8. 4-7 7 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Attack Likelihood First Mover Incentives Quality Size Awareness Motivation Factors Affecting Attack Likelihood: Feedback Drivers of Competitive Behaviour Outcomes Interfirm Rivalry: Attack & Response Competitor Analysis Market Commonality Resource Similarity Interfirm Rivalry Attack Likelihood

9. 4-8 8 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Factors Affecting Attack Likelihood: First movers allocate funds forFirst movers allocate funds for –product innovation & development. –aggressive advertising. –advanced research & development. First Mover Incentives First mover incentives First movers can gainFirst movers can gain –the loyalty of customers who may become committed to the firm’s goods or services. –market share that can be difficult for competitors to take during future competitive rivalry. Attack Likelihood

10. 4-9 9 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Small firms are more likelySmall firms are more likely –to launch competitive actions –to be quicker in doing so. Size Factors Affecting Attack Likelihood: First mover incentives Size Small firms are perceived as:Small firms are perceived as: –nimble and flexible competitors; –rely on speed & surprise to defend their competitive advantages or develop new ones while engaged in competitive rivalry. Small firms have the flexibility needed to launch a greater variety of competitive actions.Small firms have the flexibility needed to launch a greater variety of competitive actions. “Think and act big & we’ll get smaller. Think & act small & we’ll get bigger.” - Herb Kelleher, Former CEO, Southwest Air. - Herb Kelleher, Former CEO, Southwest Air. Attack Likelihood

11. 4-10 10 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Quality Factors Affecting Attack Likelihood:  Quality dimensions include: First mover incentives Size Quality  Quality exists when the firm’s goods or services meet or exceed customers’ expectations. For Products:For Products: –Performance –Features –Flexibility –Durability –Serviceability –Aesthetics For Services:For Services: -Timeliness -Courtesy -Consistency -Convenience -Completeness -Accuracy Attack Likelihood

12. 4-11 11 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Attack Likelihood First Mover Incentives Quality Size Awareness Motivation Factors of Response Likelihood: In the Model of Competitive Rivalry Feedback Drivers of Competitive Behaviour Outcomes Interfirm Rivalry: Attack & Response Competitor Analysis Market Commonality Resource Similarity Response Likelihood Competitive Action Type Actor’s Reputation Dependence on Market Resource Availability Response Likelihood

13. 4-12 12 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Factors of Response Likelihood: Competitive Action Type Strategic actions receive strategic responses.Strategic actions receive strategic responses. Strategic actions elicit fewer total competitive responses.Strategic actions elicit fewer total competitive responses. Tactical responses are taken to counter the effects of tactical actions.Tactical responses are taken to counter the effects of tactical actions. A competitor likely will respond quickly to a tactical action.A competitor likely will respond quickly to a tactical action. The time needed to implement and assess a strategic action delays competitors’ responses.The time needed to implement and assess a strategic action delays competitors’ responses. Competitive Action Type Response Likelihood

14. 4-13 13 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Factors of Response Likelihood: Reputation Reputation is the positive or negative attribute ascribed by one rival to another based on past competitive behavior.Reputation is the positive or negative attribute ascribed by one rival to another based on past competitive behavior. The firm studies responses that a competitor has taken previously when attacked to predict likely responses.The firm studies responses that a competitor has taken previously when attacked to predict likely responses. Competitive Action Type Reputation Response Likelihood

15. 4-14 14 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Marketdependence Factors of Response Likelihood: Market Dependence Market dependence is:Market dependence is: –the extent to which a firm’s revenues or profits are derived from a particular market. Firms can predict that competitors with high market dependence are likely to respond strongly to attacks threatening their market position.Firms can predict that competitors with high market dependence are likely to respond strongly to attacks threatening their market position. Competitive Action Type Reputation Response Likelihood

16. 4-15 15 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Attack Likelihood First Mover Incentives Quality Size Awareness Motivation Desired Outcomes Feedback Market Position Financial Position Drivers of Competitive Behaviour Outcomes Interfirm Rivalry: Attack & Response Competitor Analysis Market Commonality Resource Similarity Response Likelihood Competitive Action Type Actor’s Reputation Dependence on Market Resource Availability Is a sustained competitive advantage being created?Is a sustained competitive advantage being created? Better financial position should lead to better financial performance.Better financial position should lead to better financial performance. Outcome & Feedback

17. 4-16 16 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Attack Likelihood First Mover Incentives Quality Size Awareness Motivation Feedback: Competitive Dynamics Feedback Market Position Financial Position Drivers of Competitive Behaviour Outcomes Interfirm Rivalry: Attack & Response Competitor Analysis Market Commonality Resource Similarity Response Likelihood Competitive Action Type Actor’s Reputation Dependence on Market Resource Availability Competitive Dynamics: Slow, Standard & Fast Cycle Markets Outcome & Feedback

18. 4-17 17 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Competitive Market Types Slow, Standard, Fast Cycle Feedback Slow cycle markets are frequently shielded by monopoly power or very strong brand loyalties. A lack of interfirm rivalry may lead to sustained competitive advantage. A lack of interfirm rivalry may lead to sustained competitive advantage. Slow Cycle Slow, Standard, Fast, Cycle Feedback: Competitive Dynamics Outcome & Feedback

19. 4-18 18 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Competitive Market Types Slow, Standard, Fast Cycle Feedback StandardCycle Slow, Standard, Fast Cycle Feedback: Competitive Dynamics Firms with multi-market competition may dampen rivalry somewhat. Firms with multi-market competition may dampen rivalry somewhat. Sustained competitive advantage is a possible outcome in this instance. Sustained competitive advantage is a possible outcome in this instance. Standard cycle markets often lead to highly com- petitive pressures despite world class products. Outcome & Feedback

20. 4-19 19 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Competitive Market Types Slow, Standard, Fast Cycle Feedback Fast Cycle Slow, Standard, Fast Cycle Feedback: Competitive Dynamics Fast cycle markets are intensely dynamic and a 1 st mover advantage is often unsustainable. Firms may cannibalize older generation product while introducing new innovative premium ones. Sustainable competitive advantage is unlikely. Outcome & Feedback

21. 4-20 20 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback 0 Sales Time Growth Intro. Maturity Decline The Sigmoid Growth CurveLaunchExploitation Counterattack 0 Returns from a sustained competitive advantage Time  Extended Growth Curves The firm moves from one temporary advantage to the next. In doing so, it creates a sustained advantage 0 Sales Time Growth Intro. Maturity Decline The Sigmoid Growth Curve Competitive advantage eventually erodes Temporary Advantages that create a Sustained Advantage B O N U S Sustained Temp. Advantages

22. 4-21 21 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback 0 Sales Time  PC  Α. Computing power to the people. A Extended Growth Curves at Apple 0 Sales Time Growth Intro. Maturity Decline The Sigmoid Growth Curve A 0 Sales Time  PC  GUI   Α. Computing power to the people. B. Advancing friendly computing. A B  Time of Confusion Extended Growth Curves at Apple BB 0 Sales Time  PC  GUI  iPod    Α. Computing power to the people. B. Advancing friendly computing. C. Providing portable high tech. A B C  Time of Confusion Extended Growth Curves at Apple C 0 Sales Time  PC  GUI  iPod    Α. Computing power to the people. B. Advancing friendly computing. C. Providing portable high tech. D. Marrying hi-tech hardware with user-friendly software A B C   Time of Confusion Extended Growth Curves at Apple  iPhone D D 0 Sales Time  PC  GUI  iPod    Α. Computing power to the people. B. Advancing friendly computing. C. Providing portable high tech. D. Marrying hi-tech hardware with user-friendly software A B C  E. Continual cutting edge  Time of Confusion Extended Growth Curves at Apple  iPhone  iPad D  E E 0 Sales Time  PC  GUI  iPod    Α. Computing power to the people. B. Advancing friendly computing. C. Providing portable high tech. D. Marrying hi-tech hardware with user-friendly software A B C  E. Continual cutting edge  Time of Confusion Extended Growth Curves at Apple  iPhone  iPad D  E 19801983200120072010 Temporary Advantages that create a Sustained Advantage: an Example B O N U S Sustained Temp. Advantages

23. 4-22 22 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback 0 Sales Time Maturity Growth Demise Start Decline Recovery Renewal Rejuvenation Repeat as often as needed 1976 1983 1989 – 1991 1992 – 1995 1996 – 1997 2001 Began GUI Golden Age Time of Confusion Losses iPod Temporary Advantages that create a Sustained Advantage: an Example B O N U S Sustained Temp. Advantages

24. 4-23 23 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback The Life Cycle & Nessie Curve Apple’s log of 3 yr. rolling average inflation adj. sales $156 Bil. in 2012 $1 $2 $6 $11 $8 $14 $62 Billion in Sales IPO GUI Mac No Steve Jobs iMac iPod iPhone iPad B O N U S Sustained Temp. Advantages

25. 4-24 24 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback Attack Likelihood First Mover Incentives Quality Size The Model of Competitive Rivalry: Feedback A Detailed Model Response Likelihood Competitive Action Type Actor’s Reputation Dependence on Market Resource Availability Competitive Dynamics: Slow, Standard & Fast Cycle Markets Market Commonality Resource Similarity Awareness Motivation Market Position Financial Position Drivers of Competitive Behaviour Outcomes Interfirm Rivalry: Attack & Response Competitor Analysis A Detailed Model

26. 4-25 25 A Detailed Model Sustained Temp. Advantages Response Likelihood A Competitive Rivalry Model Competitor Analysis Behaviour Drivers Attack Likelihood Outcome & Feedback The Strategic Management Process Chapter 5: Bus.-Level Strategy Chapter 6: Competitive Dynamics Chapter 7: Corp.-Level Strategy Chapter 8: Acquisition & Restructuring Chapter 9: International Strategy Chapter 10: Cooperative Strategy Strategy Formulation Chapter 11: Corporate Governance Ch. 12: Org. Structure & Controls Chapter 13: Strategic Leadership Chapter 14: Org. Renewal & Innovation Strategy Implementation Strategic  Actions  Ch. 1: Strat. Mgmt. & Com- petitiveness Ch. 2: Strat. Mgmt. & Performance Chapter 3: The External Environment Chapter 4: The Internal Environment Strategic Competitiveness Strategic Mission & Strategic Intent Strategic Objectives & Inputs Chapter 6: Competitive Dynamics