page 1 competitive interaction. page 2 strategic management…action that creates value pazzo’s...

Competitive Interaction

Strategic Management…Action that Creates Value

Pazzo’s

Lynagh’sPub

Lynagh’sPub

Hardball?

CompetitiveOutcomes

IndustryCharacteristics

OrganizationalCharacteristics

Dethronement of the Leader

Market ShareShare

1950 1960 1970 1980 1990 20001950 1960 1970 1980 1990 2000

Wal-MartSears

JC Penney


Market Share

1950 1960 1970 1980 1990 20001950 1960 1970 1980 1990 2000

McDonnell-Douglass

Boeing

Airbus


Market Share(U.S.)

1980 1990 20051980 1990 2005

Adidas

Nike

Reebok

King of the Hill – Fizzy Beverages

Market Share

1970 1980 1990 2000 2010 2020

Other ?Coke

PepsiPepsi

Simple Rivalry: Prisoner’s Dilemma

What to say to police?

Criminal 1

Criminal 2

Confess

Confess

Keep Quiet

Keep Quiet

Both Serve 1 Year in Jail

Both Serve 5 Years in Jail

#2 Serves 10 Years in jail

#1 Goes Free

#1 Serves 10 Years in Jail

#2 Goes Free

Three Stooges

Larry, Moe, and Curley are in a 3-way duel and agree to take turns shooting each other, in that order

Accuracy statistics:

– Larry hits target 20% of the time

– Moe hits target 80% of the time

– Curley hits target 100% of the time

When the duel starts, what should Larry do?

Competitive Intelligence

A systematic and ethical program forgathering information about competitorsand general business trends to further yourown company’s goals

Why CI?

Play the Game Differently•New market opportunity•New customers•Develop/leverage new value

chain strengths•New strategies/tactics•New “flow” of the game

Figuring out what drives behavior•Environment/industry drivers•Organizational drivers•Managerial drivers

Playing the Game Better•Focus on existing

competitors/strategic position•Leverage value chain strengths•Incrementally improve existing

strategies/tactics

Competitor Intelligence Pyramid

s

z

aSources of Data

Analysis of Data

Recommendations

Recommendations

Analysis of Data

Sources of Data


•Industry experts/analysts•Industry publications•Trade shows/conferences•Advertisements/PR•University research centers•Financial•Court documents/patents•Suppliers/customers•Newspapers•Help wanted ads•Reverse engineering labs

Your Rival’s News-based Competitive Actions July-October 2009

• Contract with Spike Lee for TV ad

• Increase R&D budget by 30%

• Buy warehouse facility near airport in Germany, Re-tool with robotic material handling system

• License Oracle’s newest technology

• Cut prices on older version of product by 33%

• Endorsement contract with famous World Cup soccer athletes

• Create multifunctional new product design team

Reverse Engineering – Your Rival’s Product

Recommendations

Analysis of Data

Sources of Data


•Value chain analysis

•Ratio analysis

•Benchmarking

•Cost analysis

•Trend analysis

•Personality profiling

•Wargaming or scenario planning

•Competitive behavior analysis

Recommendations

Analysis of Data

Sources of Data


•Track Existing Rivals•Anticipate New Rivals•Inform Strategy:

– Identify own/competitor’s strengths/weaknesses

– Early warning system– Plan of attack/retaliation

The Cola Wars

Co

ke’

s M

ark

et S

ha

re

MKT MKTPRICE PRODMKTCAP SIG PROD

Competitive Action RepertoireThe set of competitive actions carried out in a given time period

Repertoire

Your Rival’s Competitive Actions

• Contract with famous movie director, Spike Lee, for TV ad

• Increase R&D budget by 30%

• Buy warehouse facility near airport in Germany, Re-tool with robotic material handling system

• License Oracle’s newest technology

• Cut prices on older version of product by 33%

• Endorsement contract with famous U.S. Olympic athletes

• Create multifunctional new product design teama b c d e

Competitive Dynamics Analysis

• Observe competitive moves• Organize competitive moves

–Action/response pairs–Action repertoires (year-end tallies)–Competitive attacks/sequences

• Measurement/Analysis of Characteristics– Action pattern characteristics that improve:

•Market share•Stock price•Profitability

ActionPair 1

ActionPair 2

ActionPair 3

ActionPair 4

Coca-Cola

Pepsi

Action-Reaction “Pairs”

timeAction ResponsRespons

ee

•ProfitsProfits•GrowthGrowth•Mkt. Mkt. ShareShare

a

cd

e

d d

a c

Action “Repertoires”

time

•Profits•Growth•Mkt. Share

Year-EndTallies

•Total Actions•Complexity

Coca-Cola

Pepsi

a

c

e

cc

a

a c

d

a b c d e f g h

Strategy and Adaptive Maneuvering

8

7

6

5

4

3

2

1

Chess:• Epaulette’s Mate• Sicilian Defense

Sequence Applications...

LANGUAGE:

BOXING: DNA:

qcheaTiueissesne. hsiT si a cesneueq.

This is a sequence.

Jab...Jab…Uppercut

CA

GT

AC

AT

AG

TA

CG

AT

AC

GA

MUSIC:

COMPUTER PROGRAM:

data actions2; subj = _n_; do i = 1 to max; output = matrix; end;run;

a

b

c

d

e

ca bec a b de ca bd

Coke Pepsi

d

aa

b

e

c

e

b

a

d

b

c c

Observed Sequence Observed Sequence

Competitive Actions Over Time

a

b

c

d

e

ca bec a b de ca bd

Coke Industry Norm

d

aa

b

e

c

e

b

a

d

b

c c

Observed SequenceObserved Sequence Observed SequenceObserved Sequence

Coke Strategic Non-Conformity

a

b

c

d

e

ca beca b de cab d

Pepsi

d

aa

b

e

c

e

b

a

d

b

c c


Pepsi Strategic Conformity

Industry Norm

a

b

c

d

e

c ab eca bde ca bd

Coke in time1

d

e

b

aa a

d

bb

e

c cc

Coke in time2


Coke Strategic Unpredictability

a

b

c

d

e

ca beca bde ca bd

d

e

aa a

d

bb

e

c cc

Pepsi in time1 Pepsi in time2

b


Pepsi Strategic Predictability

King of the Hill – Fizzy Beverages

Market Market ShareShare

1950 1960 1970 1980 1990 20001950 1960 1970 1980 1990 2000

Other ?Coke

Pepsi

“Hardball” Competition

• Total Actions–More actions are better

• Average Response Time–Faster response time is better

• Repertoire Complexity–Complex repertoire is better

• Attack [Un-]Predictability–Unpredictability is better

Group Exercise: Coke vs. Pepsi

• Total Actions–Count of total actions

• Average Response Time–Avg. number of time units between last competitive move in Coke’s attack and Pepsi’s first competitive response, etc.

• Repertoire Complexity–Extent to which entire pattern/repertoire is skewed/simple vs. balanced/complex

• Attack [Un-]Predictability–Recognizable repetition or action combinations in the sequence of actions?

Scoring the Fight

Total Actions

Faster Responses

More Complex Repertoire

Unpredictable Attacks

Coke Pepsi

Who will win?

Implications for CI:

Predict Future Behavior of Rivals

Rivals’ prior behavior

•Patterns

•Tendencies

•Type & order of moves

•Proactiveness

•Reactiveness

Drivers of Behavior

•Management orientation

•Decision-making

•Financial constraints

•Industry characteristics

Implications for CI:

Monitor Your Own Behavior

•Objectively measures of competitive behavior

•Safeguard against complacency, predictability, simplicity of your own company

•Keep rivals off balance / disruption / guessing

•What combinations of moves are effective? …which are ineffective? …smoke signals or bluffs?

page 1 competitive interaction. page 2 strategic management…action that creates value pazzo’s...

Documents

free slide

rivals product page

competitive interaction

coke pepsi slide

new rivals

competitive intelligence

adidas nike reebok slide

walmart sears jc penney