Exam 5: Competitive Rivalry and Competitive Dynamics

What is market commonality? What is resource similarity? How are these concepts combined to identify the level of competition between two firms?

Disney is an example of a firm in a slow-cycle market because its animated characters are shielded from imitation by copyrights and trademarks.

Competitive rivalry is the set of competitive actions and responses that occur among firms as they maneuver for an advantageous market position.

Research suggests that a firm with greater multimarket contact is less likely to initiate an attack, but more likely to respond aggressively when attacked.

Rapid-Built Homes specializes in low-cost prefabricated, modular homes that can be erected in a matter of days anywhere in the country. Rapid-Built focuses on entire subdivisions of homes developed by real estate speculators. ModernModular Homes (ModMod) specializes in modular homes designed by architects which can be built anywhere in the country. The buyers usually build the home themselves from kits on their own lots. ModMod sells fewer than 100 house kits per year. ModMod is run by two professors of architecture as a sideline business. According to the "Framework of Competitive Analysis," we can say that Rapid-Built and ModMod

A firm can predict that a competitor whose products suffer from poor quality is likely to be less aggressive in its competitive actions until those quality problems are corrected.

Market commonality is concerned with the number of markets with which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each.

Firms that are typically late movers usually have little organizational slack.

Two firms, such as a small local, family-owned Italian restaurant and Olive Garden share few markets and have little similarity in resources, but are nonetheless direct and mutually acknowledged competitors.

A strategy's success is determined not only by the firm's initial competitive actions but also by how well it anticipates competitors' responses to them and by how well the firm anticipates and responds to its competitors initial actions.

Lobelia's Nursery and Garden Resource Center has long provided high quality, typical types of seasonal bedding plants to customers in the Mobile, Alabama, metropolitan area. It has traditionally competed with the other plant nurseries within a 50-mile radius of Mobile. Recently, Lobelia has opened a branch in Fairfax, Virginia. Lobelia's research shows that most Fairfax nurseries have only one location. Lobelia can expect the local Fairfax nurseries to

An organization with high profitability, such as Wal-Mart, will be able to develop high organizational slack.

Quality affects competitive rivalry because a competitor whose products suffer from poor quality likely will _____________ until ________________.

Because of the demanding technology development required, disruptive innovations such as the iPhone are usually confined to a single industry where it can focus on competing against a few rivals (Chapter 5 Opening Case).

Firms operating in the same market, offering similar products and targeting similar customers are competitors.

In general, strategic actions elicit fewer competitive responses than do tactical actions.

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

A lack of awareness leads to a reduction in competition.

Case Scenario : Romulac, Inc. Romulac Inc. (RI), a subsidiary of a large successful manufacturing conglomerate, supplies a key component in the assembly of residential cooling systems (air conditioning units, etc.). There has been tremendous consolidation in RI's industry, to the point where only five suppliers of this particular component account for nearly 90% of U.S. industry sales. Paralleling this trend, its customers - comprised of makers of branded residential air conditioning units like Carrier and Trane - have seen similar levels of consolidation in their own industry. Half of these firms produce all their components in-house, while the balance purchases them from specialized component manufacturers like RI. RI's business is extremely capital intensive, and their 40% share of the market allows them to also be the most profitable domestic player. Strong competitors exist in Europe and Asia. Although like RI, these foreign players' strongholds are their home regions, with negligible presence outside of the region. Some of the larger Asian manufacturers have signaled an interest in more aggressively pursuing the lucrative U.S. market. RI is presently considering a $400 million dollar investment in a new plant, which will create a component that is much quieter, more efficient, and is likely to satisfy future regulatory standards. While the core technology for the new component is very old, RI's engineering and design skills have allowed them to retain their low cost-advantage, even though the component will represent a significant improvement over products currently provided by its competition. -(Refer to the above Case Scenario) As one of RI's direct competitors, how would you try to predict what it will do with regard to the new technology?

A competitive action can be one of two types, either ____ or ____.