Callo, Myka I.

BSBA-Financial Management

KEY TERMS

 Competitors -are firms operating in the same market, offering similar products, and targeting
similar customers.
 Competitive rivalry-is the ongoing set of competitive actions and competitive responses that
occur among firms as they maneuver for an advantageous market position.
 Competitive behavior-is the set of competitive actions and responses a firm takes to build or
defend its competitive advantages and to improve its market position.
 Competitive dynamics- refer to all competitive behaviors—that is, the total set of actions and
responses taken by all firms competing within a market.
 Competitive action -is a strategic or tactical action the firm takes to build or defend its
competitive advantages or improve its market position.
 Competitive response -is a strategic or tactical action the firm takes to counter the effects of a
competitor’s competitive action.
 First mover -is a firm that takes an initial competitive action in order to build or defend its
competitive advantages or to improve its market position.
 Fast-cycle markets - are markets in which the firm’s capabilities that contribute to competitive
advantages aren’t shielded from imitation and where imitation is often rapid and inexpensive.
 Late mover - is a firm that responds to a competitive action a significant amount of time after
the first mover’s action and the second mover’s response.
 Multimarket competition -occurs when firms compete against each other in several product or
geographic markets.
 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.
 Quality - exists when the firm’s goods or services meet or exceed customers’ expectations.
 Resource similarity -is the extent to which the firm’s tangible and intangible resources are
comparable to a competitor’s in terms of both type and amount.
 Strategic action -is a market-based move that involves a significant commitment of
organizational resources and is difficult to implement and reverse.
 Strategic response- is a market-based move that involves a significant commitment of
organizational resources and is difficult to implement and reverse.
 Second mover - is a firm that responds to the first mover’s competitive action, typically through
imitation.
 Slow-cycle markets - are markets in which the firm’s competitive advantages are shielded from
imitation, commonly for long periods of time, and where imitation is costly.
 Standard-cycle markets -are markets in which the firm’s competitive advantages are partially
shielded from imitation and imitation is moderately costly.
 Tactical action - is a market-based move that is taken to fine-tune a strategy; it involves fewer
resources and is relatively easy to implement and reverse.
  Tactical response - is a market-based move that is taken to fine-tune a strategy; it involves
fewer resources and is relatively easy to implement and reverse.

REVIEW QUESTION

1.Who are competitors? How are competitive rivalry, competitive behavior, and competitive dynamics
defined in the chapter?

Competitors - firms competing in the same market, offering similar products, and targeting
similar customers.

Competitive Rivalry - the ongoing set of competitive actions and responses occurring between
competitors as they compete against each other for an advantageous market position.

Competitive Behavior - the set of competitive actions and responses an individual firm takes
while engaged in competitive rivalry.

Competitive Dynamics - the set of actions and responses taken by all firms that are competitors
within a particular market

2. What is market commonality? What is resource similarity? In what way are these concepts the
building blocks for competitor analysis?

market commonality: the # of markets with which competitors are jointly involved and their
importance to eachresource similarity: how comparable competitors' resources are in terms of type and
amount a competitor analysis is the 1st step the firm takes to be able to predict its competitors' actions
and responses. market commonality and resource similarity are studied to complete a competitor
analysis in general, the greater the market commonality and resource similarity, the more firms
acknowledge that they are direct competitors

3. How do awareness, motivation, and ability affect the firm's competitive behavior?

market commonality and resource similarity shape the firm's awareness (the degree to which it
and its competitors understand their mutual interdependence), motivation (the firm's incentive to
attack or respond), and ability (the quality of the resources available to the firm to attack and
respond)having knowledge of these 3 characteristics of a competitor increases the quality of the firm's
predictions about that competitor's actions and responses.

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

1.) market commonality

2.) resource similarity

3.) awareness

4.) motivation

5.) ability
 6.) first-mover benefits - often gain loyal customers - earn above-avg. returns until competitors
can successfully respond to their action - firms lacking awareness, motivation or ability cannot engage in
first-mover benefits

7.) organizational size - reduce the variety of competitive actions that large firms launch -
increases variety of actions undertaken by smaller competitors

8.) quality - base denominator for competing successfully in the global economy - necessary but
insufficient condition for establishing an advantage

5.What factors affect the likelihood a firm will initiate a competitive response to a competitor's
action(s)?

1.)the type of action (strategic or tactical) the firm took

2.) the competitor's reputation for the nature of its competitor behavior

3.) the competitor's dependence on the market in which the action was taken

6.What competitive dynamics can be expected among firms competing in slow-cycle markets? In fast-
cycle markets? In standard-cycle markets?

In slow-cycle markets, competitive dynamics often include actions and responses intended to protect,
maintain, and extend the firm's proprietary advantages In fast-cycle markets, competitive dynamics
entail actions and responses that are oriented to rapid and continuous product introductions and the
development of a stream of over-changing competitive advantages--> competitive dynamics in fast-cycle
markets often result in rapid product upgrades as well as quick product innovations In standard-cycle
markets, competitive dynamics rest midway between characteristics of dynamics in slow-cycle and fast-
cycle markets. Imitation comes less quickly and is more expensive when a firm is able to develop
economies of scale by combining coordinated and integrated design and manufacturing processes with
a large sales value for its products.

CASE DISSCUSION
1. FedEx and UPS have many similar resources and compete across many of the same markets.
How are they different? Stated differently, how do they differentiate themselves? Although
these two firms are very similar they different from one another regarding the position they
wish to project in the market. FedEx focuses on providing customers with a simple portfolio of
its integrated transportation services. UPS in the other seeks to position itself as a primary
coordinator of the flow of goods, information, and funds through-out the entire supply chain.
These firms also want to differentiate themselves to achieve a competitive advantage in the
market and enhance their brand. Furthermore, FedEx concentrates more on trans-portation
services and international markets. Meanwhile, UPS has a greater focus on the supply chain and
competing domestically.
2. When FedEx learned that its contract to fly domestic mail for the U.S. Postal Service had been
selected for renewal. UPS also bid on the contract, and thus it lost this competitive battle to its
 rival. To support its strength in logistics as part of the entire supply chain, UPS recently agreed to
buy “Hungary-based pharmaceutical-logistics company Cemelog Zrt for an undisclosed amount
in a deal to strengthen its health-care business in Europe, giving it access to the increasingly
important markets of Central and Eastern Europe.” UPS is also emphasizing trans-border
European Union services as a growth engine for the foreseeable future. To enhance its ability to
compete against UPS and other rivals as well, FedEx is restructuring some of its operations to
increase efficiency. Similarly, the firm is increasing its emphasis on finding ways for its
independent express, ground, and freight networks to work together more synergistically. Yes,
those actions have been successful because competition between them became more intense
and aggressive that makes each firm stronger and more agile because each has to be at its best
in order to outperform the other.
3. Both firms are running strong, and show no signs of stopping anytime soon.As far as the future
goes, UPS seems like its going to surpass FedEx giventhat they acquired the contract with the
United States Postal Service. UPSalso has a working relationship with Amazon, which is
becoming a juggernauton its own right. However, with FedEx having a larger presence in
theinternational market, they may have the edge over UPS in the long run.b