The Dynamics of Competitive Rivalry PDF

# The Dynamics of Competitive Rivalry ## Presented by: * Mary Joy Tasarte * Rica Mae Parcon ## Objectives: After this lesson, you should be able to : 1. Understand the importance of competitive dynamics. 2. Know the importance of the global market and its competitive advantage. 3. Develop tacti...

# The Dynamics of Competitive Rivalry ## Presented by: * Mary Joy Tasarte * Rica Mae Parcon ## Objectives: After this lesson, you should be able to : 1. Understand the importance of competitive dynamics. 2. Know the importance of the global market and its competitive advantage. 3. Develop tactical actions to competitive rivalry. 4. Enumerate the factors that influence the likelihood of rivalry attack. 5. Give the importance of product quality as strategy for competitiveness. 6. Enumerate the different dynamics of rival's response actions. ## Competitors - Firms operating in the same market, offering similar products and targeting similar customers. ## Competitive Rivalry - The ongoing set of competitive actions and competitive responses occurring between competitors as they contend with each other for an advantageous market place. ## Competitive Behavior - Competitive behaviors are developed when the firm overcomes the forces of competition and uses their current advantage in building greater return on investments. - The set of competitive action and responses that an individual firm takes while engaged in competitive rivalry. ## Competitive Dynamics - Competitive dynamics is the firm's total set of actions and responses to all competitors within the market niche. - It makes the firm alert in the developing scenario in the industrial world, that they could not just fold their arms watching the changing environment. - It also requires innovations and new strategic actions that will develop the firms competitive advantage. ## Example: - **Smart** - **Globe** ## The Dynamics of Global Competition: - Globalization is the target of most firms as the market expansions is the direction of populated countries of the world. The price war is on, and companies will tend to compete in lower priced products with acceptable quality. - The global dynamics of competition is felt in the field of communication and electronics. The firms are competing in price and product differentiation of cellular phones, computers, and other office equipment. - According to an article by times of India, in the year 2019, Samsung, Huawei, Apple, Oppo, and Vivo are the top 5 smartphones that wage war among its other in the market in terms of features and price. - The car industry is another sector where global dynamics of competitions exists with such known brand as Honda, Toyota, Mitsubishi, and Ford, and now Hyundai with its improved features and price. They develop innovative features and low-down payments for their brand new cars. - The global competitive scope in geographic competition is increasing in the intensity as the superpowers in the world economy is pressing pressures on the third world countries or developing nations to reduce barriers for the entrance of their products. ## The Model of Competitive Strategy - Firms must develop strategies and actions that should outperform other firms in the same industry. The competitive response is interdependent, and firms watch each other's actions and respond immediately to the market needs. ### The Intensity of Market Rivalry is Affected by the Following: 1. **Total number of Competitors**: It is an analysis of the competitors who are offering the same product, same market, and same marketing environment. 2. **The Market characteristics**: It is concerned with the number of market with which the firm and its competitors are jointly involved and the degree of its importance to both firms. 3. **The Quality and Extent of Individual Firm's Strategies** Strategies of firms must be able to identify the tangible and intangible resources and that of the competitors. Firms with similar resources and capabilities are more likely to have the same strength and weaknesses and therefore use similar strategies. ## Strategic Response to Competitors Action - Competitors would not rest until they will be able to catch up or overtake the leaders in the industry. No industry rests on their laurels or successes letting competitors overshadow their supremacy. ### Factors That Influence Strategic Response: 1. **Corporate Awareness to Competition:** The strategic response of corporate awareness is a prerequisite to any competitive action or response. This refers to the extent to which competitors recognize the degree of their mutual interdependence in terms of market commonality and resource similarity. 2. **Motivation to Respond to Competition** It refers to the corporate incentive to act or respond to the competitors attack to perceive gains and losses. The firm may be aware of the competitors actions but may not be motivated to engage in rivalry if they perceive that their industrial position will not improve, or the rivals action would not affect their performance in the market. 3. **Ability in Term of Resources and Technology** While the firm may be aware of the competitors attack and be motivated to respond rivals action, they must also consider the availability of their resources and technology at hand to enter the market competition. 4. **Dissimilarity of Resources and Operational Capability** It refers to the competitive action and response between the firms in that the greater the resources imbalance between the actors of competition or respondent competitors, the greater is the delay in response. * **Operational Capability:** In terms of logistic mobilization and delivery is another factor that affects competitive advantage, which could not be seen by the rival firms. ## Tactical Action to Competitive Rivalry - The forms market position must be maintained at profitable level and must depend its competitive advantage through tactical actions towards the attack of its rivals. Competitive response is the strategic action that the firms take to counter the possible effects on its market position. ## Factors That Influence the Likelihood of Rival's Attack - The attack in the market is present in all firms, and competitors will always find ways to penetrate the market with their products and services. These market wars are brought about by the commonality in resources, the drivers of awareness, the presence of motivation, the ability to penetrate the market, and the likelihood of strategies of the rivals in the industry. The likelihood of attack can be grouped into the following strategies: ### 1. Pioneering Incentive Strategy: - The pioneering incentives strategy could be classified into two. #### A. Pioneer of First Mover Strategy: - These firms initiate competitive action to build competitive advantage in order to improve market position. Firms of this nature believe that innovation will improve its strategic actions and gain the needed market share. They make additional investment and resources for new innovative products through research and development and intensive advertising campaign to be noticed by the consumer. - The first movers have the following advantages: - Consumers loyalty to the product is developed. - Satisfied customers became committed to the product. #### B. Imitators or Second Mover Strategy: - The next firm that introduces the kind of product by the initiator is likely to produce products that are imitations of the first mover. The clever second mover studies the success and failure of the first mover and develop processes and technologies that may be superior in creating customer value. - The imitators or second mover's advantages are: - Avoid the problems and mistakes of the pioneers or first mover. - Develop technologies and efficiency that are more superior. - Create products that create customer value. ### 2. Organizational Size Strategies: - Big companies used to set on their laurels confident that the competitors could not easily overtake their size. - Smaller organizations that are aggressive enough to increase their market niche are more likely to launch competitive actions. - Smaller firms' flexibility and nimbleness allow them to develop greater variety in their competitive actions as compared to large organizations, which tend to limit the type of competitive actions. - Smaller firms can easily imitate their products through innovation, modifications, and improvement without many investments in research and development. - The competitive strategies of smaller firms against its big rivals are: - Lower investment cost in research and development. - Lower fixed and overhead expenses. - Technology and resource base through imitation. - Quicker and flexibility in action and response. - Lower product price with new features. ### 3. Product Quality Strategies: - Quality is the byword in competitive strategy. It is the production of goods or services with no defects involving a never-ending cycle of continuous improvement. In strategic objectives, quality refers to how the firm produces products that exceed customer expectations. For the corporate perspective quality is an outcome of how the firm completes the cycle of the primary and support activities that develop customer satisfaction that gives the firm the desired return on investments. - **Customer' Perception of Quality Products:** - Performance - it refers to its operating characteristics. - Product Features - it refers to important special characteristics. - Flexibility - it refers to meeting operating specifications over some period in time. - Conformance - it fers to matching the pre-established standards. - Durability - it refers to the amount of use before it deteriorates. - Aesthetics - it refers to how the products look and feel in the use of the. - Serviceability - ease and speed of repair when it broke down. - **Total Quality Management** became the focus of most competing firms in order to sustain the development of quality products to its customers. TOM is a managerial strategy of innovations that emphasized the organization's total commitment to customer satisfaction. It is the process of continuous improvement in production processes through the use of data-driven strategies in problem solving. It also involves groups and teams' empowerment through employee's commitment to quality products. - **Firms that implemented TQM strategies resulted in the following advantages:** - Increase in customer satisfaction. - Cut down cost by 20 percent. - Reduce down time cost in product innovation and processing. - Increase productivity of work force. - Greater incentives for work teams. - **The quality strategy affects the competitive rivalry and its competitive advantage:** - Poor quality products cause decline in sales volume. - Credibility in the market could not be easily corrected - Loss of customer patronage and loyalty. - Image building would take time and correct. - Greater loss in profit margin. ## The Dynamics of Rival's Responses - Competitors respond more frequently to actions taken by the firm with a reputation for predictable and understandable competitive behavior, especially if the firm is the market leader in the industry. In general, the firm can predict that when its competitor is highly dependent for its revenue and profitability in the market in which the firm took competitive action. - The competitor will likely launch a strong response. On the other hand, firms that are more diversified across markets are less likely to respond to a particular action that affects one of the markets in which they compete. - Competitive dynamics concerns the ongoing competitive behavior occurring among all firms competing in a market for advantageous positions, and the ongoing actions and responses taking place among all firms competing within a market for advantageous positions. Market characteristics affect the set of actions and responses firms take while competing in a given market as well as the sustainability of firms' competitive advantage. ## Three Important Factors That Affect Competitors Rivalry 1. Factors that determine the degree to which firms are competitors. 2. The drivers of competitive behavior for individual firms. 3. The likelihood that the competitor will attack or respond. - Building and sustaining competitive advantage is the core of competitive rivalry, and the advantages are greatly linked to the firm's position in the market. The rivals in the market are further affected by the speed in product positioning. - Competitive behavior as well as reasons or the logic for their actions and response are similar within each market type, but they only differ on their approach and strategies to penetrate their valued customers. ## Thank You!