The Dynamics of
Competitive Rivalry
CHAPTER 5
Group 3
Know the
Understand the
importance of the
importance of
global market and
competitive
dynamics; its competitive
advantage;
Enumerate the
Develop tactical
factors that
actions to
influence the
competitive
likelihood of
rivalry;
rivalry attack;
OBJECTIVES: Enumerate Give the
the different importance of
dynamics of product quality as
rival’s strategy for
response competiveness;
actions;
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Introduction
The firm's environment is devoid of
competitors if they are offering similar
products or services. While competition
serves the purpose of the customers, it also
makes the firm aware of their position in
the industry that makes them strive to
create better products and develop new
ones through innovations. The dynamics of
competition is an ongoing set of
competitive actions and response that
occurs as they compete in satisfying
customer needs and wants.
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COMPETITIVE DYNAMICS
• Competitive dynamics is the firm's total set of actions and responses to all
competitors within the market niche.
• Makes the firm alert in the developing scenario in the industrial world, that they
could not just fold their arms watching the changing environment.
• Requires innovations and new strategic actions that will develop the firm’s
competitive advantages.
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THE DYNAMIC OF
GLOBAL
COMPETITION
• The global economic rivalry is
intensifying Globalization is the target of
most firms as the market expansion is in
the direction of the 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 MODEL OF
COMPETITIVE
STRATEGY
• To stay in the competitive market, firms must develop
strategies and actions that should outperform other
firms in the same industry,
• Competitive rivalry evolves from the patterns of
actions, responses as one's pattern of action have
noticeable effect on the competitors, and it elicited
competitive response.
• Competitive response is interdependent and firms
watch each other's actions and respond immediately
to the market needs.
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The intensity of market rivalry is affected by the following;
1. The total number of competitors
The firm must be able to conduct market analysis to predict the nature and
extent of competition and rivalry.
2. The market characteristics
The market characteristics is concerned with the number of markets with
which the firm and its competitors are jointly involved and the degree of its
importance to the both firms.
3. The quality and extent of individual firm’s strategies.
In the analysis of the competitors, strategy firms must be able to identify its
tangible and intangible resources and that of the competitors.
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STRATEGIC RESPONSE
TO COMPETITOR’S
ACTION
As pointed out in many discussions,
competitors would not rest until they
will be able to catch up or overtake the
leaders in the industry.
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Factors that influence Strategic Response;
[Link] awareness to competitons
The strategic response of corporate awareness is a prerequisite to any competitive
action or response.
2. Motivation to respond to competition
It refers to the corporate incentive to take action or respond to the competitor’s
attack to perceive gains and losses.
3. Ability in terms of resources and technology
While the firm may be aware of the competitor’s attack and be motivated to respond
to rival’s action, they must also consider the availability of their resources and
technology at hand to enter the market competitors.
4. Dissimilarity of resources and operational capability
It refers to the competitive action and response between firms in that the greater the
resource imbalance between the actors of competition or respondent competitor’s, the
greater is the delay response.
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TACTICAL ACTIONS TO
COMPETITIVE RRIVALRY;
• The firm's market position must be maintained
at profitable level and must depend its
competitive advantage through tactical actions
towards the attack of its rivals.
• A tactical response is a market-based strategy
that the firm makes a fine-tuning of its
approaches to the competitors' actions.
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FACTORS THAT INFLUENCE THE LIKELIHOOD OF
RIVALS' 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.
• The likelihood of attack can be grouped into the following strategies:
1. PIONEERING INCENTIVE STRATEGY- The pioneering incentives strategy could be
classified into two.
B. Pioneer or First Mover Strategy
These firms initiate competitive action in order to build competitive advantage in order to improve
market position.
The First Movers have the following advantages;
• Consumer's loyalty to the product is developed
• Satisfied customer became committed to the product.
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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. Since the imitators or second movers have the
time to study the pioneer's strategy, it allows them to avoid spending on substantial
investments in research and development.
The Imitators or Second Movers' advantages are:
• Avoid the problems and mistakes of the pioneers or first more
• 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.
The competitive strategies of smaller firms against its big rivals are:
a. Lower investment cost in research and development
b. Lower fixed and overhead expenses
c. Technology and resource base through imitation d. Quicker and flexibility in action and
response
d. Lower product price with new features
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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.
Customer's Perception of Quality Products;
a. Performance-it refers to its operating characteristics
b. Product Features - It refers to important special characteristics
c. Flexibility it refers to meeting operating specifications over some period in time
d. Conformance- it refers to matching the pre-established standards
e. Durability-it refers to the amount of use before it ware out or deteriorate
f. Aesthetics-it refers to how the products looks and feel in the use of the user
g. Serviceability-Ease and speed of repair when it breakdown
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TQM- Total Quality Management became the focus of most competing firms in
order to sustain the development of quality products to its customers.
Firms that implemented TQM strategies resulted in the following advantages
a. Increase in customer satisfaction
b. Cut down cost by 20 percent
c. Reduce down time cost in product innovation and processing
d. Increase productivity of work force
e. Greater incentives for work teams
The quality strategy affects the competitive rivalry and its competitive advantage The following
factors will results due to poor quality products;
a Poor quality products cause decline in sales volume
b. Credibility in the market could not be easily corrected c. Loss of customer patronage and
loyalty
d. Image building would take time to correct
e. Greater loss in profit margin
Competitors in the industry will always look at the quality of the rival products and the
innovations that is being introduced to improve its delivery to customer's satisfaction.
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THE DYNAMICS
OF RIVAL'S
RESPONSES
• Competitors respond more frequently
to actions taken by the firm with
reputation for predictable and
understandable competitive behavior,
especially if the firm is the market
leader in the industry.
• Competitive dynamics concems the
ongoing competitive behavior
occurring among all firms competing
in a market for advantageous
positions.
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Three Important Factors that Affect Competitors Rivalry
1. Factors that determines 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
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