Strategic Management Dynamics

Chapter 7 - Rivalry

This chapter explains how just three rivalry mechanisms cover all competitive interactions between firms – in the case of customers, for example, these are the battle to win new customers, to steal customers from rivals, and to obtain a larger share of business from shared customers. Organizations may also compete for other resources, such as employees or providers of funds, making the mechanisms equally relevant to public services and voluntary groups. The chapter provides frameworks for laying out and quantifying how customers or other resources are flowing between competitors, and the implications of these processes for how performance develops over time. It also shows how to assess the consequence for the way in which industries develop, including important considerations, such as the risk of building a market for competitors to exploit. Most importantly, the chapter shows how to assess the impact of decisions and policies on the winning and losing of competitive situations. Many situations involve several competing organizations, or many, so the chapter also offers ways to understand and simplify these complex interactions. It ends with a description of the rivalry mechanisms as they apply to competitors in the low-fare airline sector, for which a learning-simulation is available.

This chapter includes connections to the following concepts: elasticity of demand, first-mover advantage, switching costs, competitor analysis, blue ocean strategy, game theory, strategic groups.

KEY ISSUES

• Type-1 rivalry – capturing new customers, especially in growing markets.
• Type-2 rivalry – stealing customers from competitors, especially in mature markets.
• Type-3 rivalry – fighting for share of sales to non-exclusive customers.
• How the three types of rivalry may operate together.
• How rivalry accelerates development of emerging markets, and how product generations renew the competitive process.
• Rivalry for other resources, such as projects, staff, intermediaries and suppliers.
• How limited rationality and delays make competitive outcomes dependent on the sequence and timing of events.
• Dealing with multiple customer segments.
• Relevance of competition in non-commercial cases.
• Dealing with multiple competitors.
• Grouping competitors according to similarities to simplify complicated cases.
• Rivalry for routes and passengers in the low-fare airline sector.