Competitive Rivalry and Competitive Dynamics

5-1 Define competitors, competitive rivalry, competitive behavior, and competitive dynamics.
5-2 Describe market commonality and resource similarity as the building blocks of a competitor analysis.
5-3 Explain awareness, motivation, and ability as drivers of competitive behavior.
5-4 Describe how strategic actions and tactical actions drive competitive rivalry between firms.
5-5 Discuss factors affecting the likelihood a firm will take actions to attack its competitors.
5-6 Explain factors affecting the likelihood a firm will respond to actions its competitors take.
5-7 Explain competitive dynamics in slow-cycle, fast-cycle, and standard-cycle markets.

Kroger emphasizes the importance of online ordering and product stocking to enhance profitability in 2020 and beyond.
Intense competition from rivals including Aldi, Walmart, and Safeway affects Kroger's strategic emphasis.
Notably, Amazon's acquisition of Whole Foods for approximately $13.7 billion in 2017 signals a shift in competition due to Amazon's growing online capabilities.
Strategic Actions: Significant market-based actions that affect competition.
- Amazon's acquisition of Whole Foods prompts competitive responses from Kroger and others.
- Kroger’s strategy might include reducing physical storefronts in favor of bolstering e-commerce.
CEO Insights: Investments in online capabilities are critical for surviving in a new competitive landscape dominated by e-commerce.

Competitors: Firms operating in the same market, offering similar products, targeting similar customers.
Competitive Behavior: Set of actions and responses a company engages in while competing.
- Competitors interact in pursuit of above-average returns within a structured competitive landscape.
Competitive Rivalry: Continuous competitive actions and responses between firms seeking advantageous positions in the market.
- In high-competitive industries like groceries, firms react to one another's strategic movements.
The effectiveness of a firm’s competitive strategy is intrinsically linked to how well it understands its rivalry with competitors.

Market Commonality: Extent of overlapping markets between competing firms.
- Example: Coca-Cola and PepsiCo compete in soft drinks and bottled water, indicating high market commonality.

Resource Similarity: Comparison of tangible and intangible resources against a competitor.
- Firms with similar resources (ex: financial capital, technology) are likely to deploy similar strategies in competition.

Awareness: Firms must recognize their interdependence in competitive environments; greater awareness leads to better understanding of actions.
Motivation: The perceived benefits and risks of taking action influence a firm’s incentive to act.
Ability: Resource availability affects a firm's capacity to take competitive actions.

Coca-Cola launched new flavors aimed at millennials; PepsiCo responded with innovations in flavored sparkling water, showcasing both competitors' abilities and motivations driven by market awareness.

Strategic Actions: Major market maneuvers requiring significant resources, difficult to reverse (e.g., product launches, market entry).
Tactical Actions: Minor adjustments using fewer resources and are more easily reversible (e.g., pricing adjustments).
Companies balance strategic and tactical actions to navigate competitive dynamics effectively.

First-Mover Advantages: Firms that are first to enter a market can secure loyal customers, shape consumer preferences, and command better market positions longer.
- Example: Amazon as a first mover in the online retail space.
Organizational Size: Small firms often initiate more actions quickly due to their agility, while larger firms take a broader quantity of actions over time.

The firm's response is dependent on:
- Type of Action: Strategic actions elicit fewer responses compared to tactical ones.
- Actor's Reputation: A company with a strong reputation garners quicker responses from competitors.
- Market Dependence: Firms highly reliant on certain markets are more likely to respond to threats in those markets.

Characterized by competitors lacking the ability to imitate advantages easily, which helps maintain market positions for extended periods.
- Example: Swiss watchmakers benefitting from exclusivity until disruptive technologies emerge.

Rapid imitation of advantages occurs, making sustained competitive advantage hard to achieve. Firms rush to innovate continuously.
Example: Technology firms competing to dominate new product segments and rapidly executing innovations.

Moderate imitation of advantages exists; firms strive to maintain advantages while competing for market share in highly competitive channels.

Competitors: Firms in the same sector with similar products.
Competitive Rivalry: The interplay of actions/responses that shape the market dynamics.
Strategic vs. Tactical Actions: Differentiated primarily by resource commitment and reversibility.
Competitor Analysis: The cornerstone of understanding and predicting market actions and responses—based an understanding of market commonality and resource similarity.
Innovation’s Role: Critical across all types of competition to sustain or improve market positions.