Exam 5: Competitive Rivalry and Dynamics

Canon's desktop copiers couldn't collate, enlarge, or do grayscale replication and as such failed as a disruptive innovation (Chapter 5 Opening Case).

US-owned automobile companies have recently (2011) bolstered their fuel efficient offerings in part due to __________________ (Chapter 5 Strategic Focus)

Case Scenario 1: 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 Case Scenario 1) As one of RI's direct competitors, how would you try to predict what it will do with regard to the new technology?

First movers are

Competitive rivalry is the contest to be the first mover in an international market.

As noted in the Chapter 5 Opening Case, Apple opened a service called "Game Center" once it found that users were using its iPhone, iPad, and iPod platforms for videogames. This is an example of a strategic action by Apple which was followed by strategic responses by Nintendo and Sony.

Define slow-cycle, fast-cycle and standard cycle markets.

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

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

Firms in a slow-cycle market are shielded from imitators for long periods of time.

Both ____ and ____ affect the awareness and motivation of a firm to undertake actions and responses.

____ relates to the gains or losses a firm will experience if it attacks a rival or responds to an attack by a rival.

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.

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

The flat-panel television market where prices have come down and competition has become more stable is best characterized as

Competitors are more likely to respond to strategic or tactical actions when they are taken by a market leader.

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.

A lack of awareness leads to a reduction in competition.

"Competitive dynamics" indicates that firms and their strategic actions are independent.

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) Is Wal-Mart a competitor or a customer of Plasco?