Competition, Essay Example

Competitors engage in competitive rivalry through innovation, in order to gain advantage on the market. A competitive behavior, actions and responses are methods used to maintain and strengthen the company’s market position. The result is competitive dynamics, modeled as a flow of actions to gain more traction and brand recognition.

In order to determine a firm’s strategy of competitive rivalry, there is a need to complete an analysis of the market. A competitor analysis is a crucial step for all firms to take in order to understand the dynamics of the market. Another aspect of competition is market commonality. Resource similarity can make competition fiercer in several industries, and without correct market positioning, it is hard to compete on these markets.

The main drivers of competitive actions and resources are: awareness and motivation. Firms need to understand the impact of market commonality on rivalry and their interdependence. Further, in order to establish reasons why a company would respond to the attack of the competitor (new product, innovation, comparison), it needs to consider the benefits associated with the steps taken.

Competitive rivalry consists of strategic and tactical actions. A strategic action would involve organizational resources and need the prior assessment of the firm’s strategy. These actions are difficult to carry out and to reverse, therefore, need to be well thought through. Tactical actions are used to fine-tune the competitive strategy of the company; they do not require a lot of resources, are easy to implement or reverse.

The probability of attack and response depends on several market situations. These are the size of the organization, the existence of first-mover incentives, as well as the quality of products/service. The likelihood of response depends on reputation of the actor, the dependence on the market (importance) and the type of the market. (slow-cycle vs. fast-cycle).