978-1305502208 Chapter 5 Solution Manual Part 2

Chapter 5: Competitive Rivalry and Competitive Dynamics

5-15

Actor’s Reputation

To predict the likelihood of a competitor’s response to a current or planned action, the firm

studies the responses that that competitor has taken previously when attacked, in that past

behavior is assumed to be a reasonable predictor of future behavior.

Competitors are more likely to respond to either strategic or tactical actions taken by a

market leader. For example, competitive actions taken by Home Depot are almost certain to

incite a response from Lowe’s.

Market Dependence

Market dependence denotes the extent to which a firm’s revenues/profits are derived from a

particular market. Firms that are highly concentrated in—or dependent on—an industry (or

market) in which a competitive action has been taken are more likely to respond than are

firms who do business in multiple industries and markets.

6

Explain competitive dynamics in slow-cycle, in fast-cycle, and

in standard-cycle markets.

COMPETITIVE DYNAMICS

Teaching Note

Recall that Figure 5.1 illustrates the potential outcomes of inter-firm rivalry.

Chapter 5: Competitive Rivalry and Competitive Dynamics

5-16

Slow-Cycle Markets

Slow-cycle markets are those in which the firm’s competitive advantages are shielded from

imitation, often for long periods of time, and where imitation is costly. Thus, competitive

advantages are sustainable in slow-cycle markets.

Once a proprietary advantage is developed, the firm’s competitive behavior in a slow-cycle

market is oriented toward protecting, maintaining, and extending that advantage.

Teaching Note

Providing some examples may help students understand what has been involved in

establishing and defending a one-of-a-kind competitive advantage. The following are

some possibilities:

Chapter 5: Competitive Rivalry and Competitive Dynamics

5-17

Figure Note: The sustainability of competitive actions in slow-cycle markets is

illustrated in Figure 5.4.

FIGURE 5.4

Gradual Erosion of a Sustained Competitive Advantage

Fast-Cycle Markets

Fast-cycle markets are those in which the firm’s competitive advantages aren’t shielded from

imitation and where imitation happens quickly and somewhat inexpensively through reverse

engineering and technology diffusion. Competitive advantages aren’t sustainable in fast–

cycle markets.

Imitation of many fast-cycle products is relatively easy, as demonstrated by Dell and

Gateway, along with a host of local PC vendors. All of these firms have partly or largely

imitated IBM’s initial PC design to create their products.

STRATEGIC FOCUS

The Ripple Effect of Supermarket Wars: Aldi is Changing the Markets in Many

Countries

Chapter 5: Competitive Rivalry and Competitive Dynamics

5-18

5-19

Teaching Note

As discussed earlier, the contemporary competitive landscape requires that firms (1)

introduce more new products, (2) develop broader product lines, and (3) provide more

rapid product upgrades.

Standard-Cycle Markets

Standard-cycle markets are those in which the firm’s competitive advantages are moderately

shielded from imitation and where imitation is moderately costly. Competitive advantages

are partially sustainable in standard-cycle markets, but only when the firm is able to

continuously upgrade the quality of its competitive advantages.

Innovation has a substantial influence on competitive dynamics as it affects the actions and

responses of all companies competing within a slow-cycle, fast-cycle, or standard-cycle

market.

5-20

Chapter 5: Competitive Rivalry and Competitive Dynamics

5-21

Awareness tends to be greatest when firms have highly similar resources (in terms of types

and amounts) to use while competing against each other in multiple markets. Awareness

4. What factors affect the likelihood a firm will take a competitive action?

Chapter 5: Competitive Rivalry and Competitive Dynamics

5-22

5. What factors affect the likelihood a firm will initiate a competitive response to a

competitor’s action(s)?

6. What competitive dynamics can be expected among firms competing in slow-cycle

markets? In fast-cycle markets? In standard-cycle markets?

Chapter 5: Competitive Rivalry and Competitive Dynamics

MINI-CASE

FedEx and United Parcel Service (UPS): Maintaining Success While Competing

Aggressively

Chapter 5: Competitive Rivalry and Competitive Dynamics

5-24

1. Have students read the popular business press (e.g., Business Week, Fortune, Fast

Company), and identify a strategic action and a tactical action taken by firms

2. Why would a firm regularly choose to be a second mover? Likewise, why would a firm

purposefully be a late mover?

3. How did Walmart’s strategic actions affect its primary European competitors? How has

Walmart’s e-commerce strategy affected competitors?

4. Have students choose a large firm and examine the popular business press to identify how

5. Identify a firm in a fast-cycle market. What strategic actions account for its success or

failure over the last several years? How has the Internet affected the firm?

1. Are there some industries in which ethical practices are more important than in other

industries? If so, name the industries that are ethical, and explain how the competitive

2. When engaging in competitive rivalry, firms jockey for a market position that is

advantageous, relative to competitors. In this jockeying, what types of competitor

intelligence-gathering approaches are ethical? How has the Internet affected competitive

intelligence activities?

3. A second mover is a firm that responds to a first mover’s competitive actions, often

through imitation. Is there anything unethical about how a second mover engages in

competition? Why or why not?

Chapter 5: Competitive Rivalry and Competitive Dynamics

5-25

4. Standards for competitive rivalry differ in countries throughout the world. What should

firms do to cope with these differences? How do the differences relate to ethical practices?

5. Could total quality management practices result in firms operating more ethically than

before such practices were implemented? If so, what might account for an increase in the

ethical behavior of a firm using TQM principles?

6. What ethical issues are involved in fast-cycle markets?

INSTRUCTOR’S NOTES FOR MINDTAP

INSTRUCTOR’S NOTES FOR EXPERIENTIAL EXERCISES

Competitive Advantage: First-Movers Coming In Second

The purpose of this exercise is to take a look at competition in the marketplace and

whether success is based on being a first-mover. In this group project, students will have

the opportunity to practice valuable management skills including critical thinking,

research comparisons, presentations, and discussing competitive actions.

This exercise provides students an opportunity to identify competitive behaviors and the

benefits of companies who are first movers. Instructors should encourage students to

discuss competitive rivalry and the strategic and tactical actions companies can take to

achieve competitive advantage.

To modify this project as an individual assignment, consider requiring just one

deliverable – identify a first mover and describe the benefits.

Chapter 5: Competitive Rivalry and Competitive Dynamics

5-26

INSTRUCTOR’S NOTES FOR VIDEO EXERCISES

The media quiz offers additional opportunities for students to apply the concepts in the

chapter to a real-world scenario as it is described in news reports.

Title: Competition Among Car Companies

RT: 2:58

Topic Key: Competitive behavior, Competitive dynamics, Multimarket competition,

Competitive response, Strategic actions

Suggested Discussion Questions and Answers

1. How can GM understand its competitive environment?

2. General Motors and its competitors are constantly “thinking of tomorrow” in terms

of their products. Describe the rate of competitive speed in this industry.

INSTRUCTOR’S NOTES FOR DIRECTED CASE

Chapter 5: Competitive Rivalry and Competitive Dynamics

5-27

Directed Case exercises are a series of multiple choice questions designed to focus on the

concepts from the chapter utilizing the case study analysis steps, such as gaining

familiarity, recognizing symptoms, identifying goals, conducting the analysis, making the

diagnosis and doing the action planning.

J.C. Penney

J. C. Penney is a mid-tier retailer that sells apparel and home goods. This case takes

students through the company’s 100 year history as well as the challenges of competing

against other strong mid-tire competitors, and increased competition by lower-tier

retailers.

Students will review these concepts:

MindTap