Exam 5: Competitive Rivalry and Competitive Dynamics

Mighty Mike's, a manufacturer of power tools for the home hobbyist, has seen its main competitor, MyTools, bring out a line of power tools that are smaller sized, lighter weight, and suitable for women and older hobbyists who have weaker hands than the typical male workshop hobbyist. Mighty Mike is waiting to see whether MyTool's new line is a success. Mighty Mike could be classified as a second mover.

A tactical competitive action involves a significant commitment of specific and distinctive organizational resources.

Define awareness, motivation and ability in reference to competitive behavior.

An organization's loyalty to its own product is a competitive disadvantage in a ____ market.

In general, compared with firms which compete in only one market, among firms which face one another in multiple markets there is

Two firms, such as Fed Ex and UPS that have similar resources and common markets would be direct and mutually acknowledged competitors.

Goods or services in standard-cycle markets reflect

A firm with a reputation as a price predator (an actor that frequently reduces prices to gain or maintain market share) generates few responses to its pricing tactical actions.

Late movers are those firms that

A competitive action is a strategic or tactical action taken by a firm to gain or defend a competitive advantage or improve its market position.

Fast-cycle markets are characterized by "generational products" which start out with a substantial technological advance in the performance of a product category followed by incremental technological advances as new generations of products are introduced.

According to the Chapter 5 Opening Case, in the video-on-demand market, Apple's iTunes service ________________.

The benefits of being a first mover are most substantial in fast cycle markets.

Large firms with significant slack resources (i.e., are able to launch a greater number of competitive actions) but who remain flexible and act like small firms (i.e., are able to launch a variety of actions) will be more successful against rivals.

Case Scenario 2: Plasco. Plasco is a $3 billion U.S.-based manufacturer of flexible plastic products like trash cans, reheatable and freezable food containers, and a broad range of other plastic storage containers designed for home and office use. Historically, Plasco has been the category killer for most of its products and has devoted tremendous resources to new product development on an ongoing basis - this research intensity has allowed the company to release, on average, a new product every day over the past five years. Despite its past strength and high brand awareness, Plasco's profitability has been eroded by dramatic increases in the cost of plastic resin, the primary input into its plastic products. Moreover, the retail channel has experienced rapid consolidation resulting in a shift in the balance of power from branded manufacturers like Plasco, to strong retailers like Wal-Mart, who in turn have been unwilling to help Plasco absorb the higher resin costs. Enhancing Wal-Mart's power is the fact that it can always turn to alternative high-volume sources of consumer plastic products like Sterlite. Further hampering Plasco's recovery is the emergence of feisty little foreign competitors like Zig Industries, a $250 million Israeli firm that has begun to take part of Plasco's market share in plastic toolboxes. Ironically, Plasco was the first company to offer plastic toolboxes some 20 years ago. This innovation changed the market dramatically and Plasco's first mover strategy rewarded it with a rapidly growing new segment and a dominant market position. Today, Plasco's toolboxes are viewed as rather boring, while Zig's products are ingeniously designed to catch the customer's eye in the aisle (better merchandising the product) and capture their interest (and pocketbook) with many new and novel features. Zig is also able to provide this new line of toolboxes at between 10% to 15% less than Plasco. -(Refer to Case Scenario 2) Although Plasco was the first mover in plastic toolboxes several years ago, its competitor Zig has gained market share by building brand loyalty to its boxes which are viewed as more attractive and have novel features. The characteristics of this market are most similar to a standard-cycle market.

Unlike fast-cycle markets, the struggle for market share in standard-cycle markets is moderate.

The more dependent a firm is on its market, the more aggressively it will defend it from another competitor.

Reverse engineering is characteristic of

Among the drivers of competitive actions and responses, motivation refers to the perceived gains that will result from a firm which initiates an attack. If a firm perceives that its position will improve, it is more likely to attack.

Case Scenario 3: The Pet Food Industry. The pet food industry is comprised primarily of six market segments: dry dog food, dry cat food, moist dog food, moist cat food, canned dog food, and canned cat food. Five large firms dominate the market and each has some market share in all segments, and the leading share in at least one segment. The largest firm participates solely in the pet food industry, while the next four firms are actually subsidiaries of some of the world's largest food and consumer products companies. Top management of these larger firms have made public statements that suggest they each see themselves as future leaders of the pet food industry. All five have acquired comparable skills in terms of manufacturing and marketing. Two small firms also participate in the industry, but these players are relatively weak and compete in just two of the six segments; the pet food industry is the only industry in which they operate. Inputs to the industry are basic commodities and there is no real threat of substitute products except across segments and price points. The industry is growing slowly, barely keeping up with the rate of inflation. Barriers to entry are enormous when pet food companies can gain scale economies in production coupled with aggressive marketing, though even then these coordinated actions may only yield average industry profitability. Any firm can increase its market share only to the extent that another firm's share is decreased. -(Refer to Case Scenario 3) Members of the pet food industry are likely to experience