Chapter 11: Managing Global Competitive Dynamics

Attack

An initial set of actions taken by a firm to gain competitive advantage.

Counterattack

A set of actions taken by a firm in response to a competitor’s attack.

Competitive Dynamics

The actions and responses among competing firms as they engage in rivalry.

Competitor Analysis

The process of anticipating rivals’ actions to adjust plans and prepare countermeasures.

Market Commonality

The extent to which two rivals compete in the same markets.

Multimarket Competition

When firms engage the same rivals across multiple markets.

Mutual Forbearance

A situation where multimarket firms respect each other’s territories to avoid aggressive competition, leading to tacit collusion.

Tacit Collusion

Indirect coordination between firms through signaling or mutual understanding, not explicit agreement.

Explicit Collusion

Direct negotiation and agreement among firms to fix prices, divide markets, or limit competition.

Collusion

Any collective attempt among competing firms to reduce competition.

Collusive Price Setting

Firms jointly setting prices above the competitive level.

Price Leader

A dominant firm that sets acceptable prices and margins within an industry.

Capacity to Punish

The resources a dominant firm possesses to deter rivals from defecting from collusive arrangements.

Game Theory

A framework that studies interactions between two or more parties who compete and/or cooperate with each other.

Prisoner’s Dilemma

A game theory model showing that even when cooperation would lead to better outcomes, self-interest can drive both parties to defect.

Resource Similarity

The extent to which a competitor possesses similar strategic resources compared to the focal firm.

Concentration Ratio

The percentage of total industry sales accounted for by the largest firms (usually top 4, 8, or 20).

Antitrust Law

Laws that outlaw monopolies and cartels to promote fair competition.

Antidumping Law

Laws that make it illegal for exporters to sell goods abroad below cost with the intent to raise prices after eliminating local rivals.

Competition Policy

Government rules and policies designed to maintain competitive markets.

Antitrust Policy

Government efforts to prevent or dismantle monopolies and cartels.

Cartel (Trust)

A group of firms that collusively set output or prices to act like a monopoly.

Predatory Pricing

Setting prices below cost to drive competitors out of the market, then raising prices later to recoup losses.

Blue Ocean Strategy

A strategy that focuses on creating new, uncontested market space (“blue oceans”) rather than fighting in saturated existing markets (“red oceans”).

Defender

A strategy that focuses on using existing local assets in areas where MNEs are weak.

Contender

A strategy where a firm rapidly learns, upgrades, and expands overseas to challenge global competitors.

Extender

A strategy that leverages homegrown capabilities abroad in similar markets.

Dodger

A strategy that cooperates with MNEs through joint ventures or sell-offs to survive global competition.