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Just three rivalry mechanisms cover all competitive interactions between firms.
In the case of customers these are:
- winning new customers
- stealing customers from rivals
- obtaining 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.
The 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 addressed
- 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
Lecture segments associated with this chapter are:
Class 7.0 - Summary and class overview - (14 min)
Class 7.1 - Type 1 rivalry - (7 min)
Class 7.2 - Type 2 rivalry - (10 min)
Class 7.3 - Type 3 rivalry - (13 min)
Class 7.4 - Competition and market development - (10 min)
Class 7.5 - Competing for other resources than customers - (17 min)
Class 7.5 - Dealing with multiple competitors - (15 min)
Notes:
Items in grey are not available under your current subscription. For information on
items for which you are currently registered see My Account.
You may also use items from the worksheet and exercise links (above) and other optional
references from the links to the right.
The worksheet materials are available to registered users.
Login here
or register here
If you are subscribed to one or more segments associated with this chapter suggestions for learning more,
and making use of the ideas and frameworks in class 2/chapter 2 are provided.
There are three models demonstrating the three forms of rivalry associated with segments from chapter 7.
Exercise associated with segment 7.5 - based on figures 7.28 - Call center staffing.
This small model explores how pay rates offered by two competing call centers in the same locality stimulate interest in this
employment opportunity and lead to staff being hired and retained by each call center.
Additional materials are available to registered teachers as
well as low cost access to the complete course. Login here or
register for more information
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Other resources and links
Software
Download the mystrategy reader for use in the worksheets and exercises here
This class can be complemented by the Iglu.com Microworld
Books
Constantinos Markides and Paul Geroski (2004) Fast Second: How Smart Companies Bypass Radical Innovation to Enter and Dominate New Markets, Jossey Bass.
Besanko, D., Dranove, D., Shanley, M. and Schaefer, S. (2007) The Economics of Strategy, 4th edn, Wiley, Chichester.
Chan Kim, W. and Mauborgne, R. (2004) Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, Harvard Business School Press, Boston.
Dutta, P. (1999) Strategies and Games: Theory and Practice, MIT Press, Boston, MA.
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(eds) Faulkner, D. and Campbell, A., The Oxford Handbook of Strategy, Blackwell, Oxford,
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