Dynamic Competitive Interaction:
Implications for Strategy and
Competitive Intelligence
Consequences of Cutthroat Rivalry
Lynagh’s
Two
Keys
Tavern
Two
Keys
Tavern
Prisoner’s Dilemma
Criminal 2
Squeal
Squeal
Both Serve
5 Years
Clam Up
#2 Serves
10 Years
#1 Goes Free
Criminal 1
Clam Up
#1 Serves
10 Years
#2 Goes Free
Both Serve
1 Year
What Price a Dollar?





$1.00 will be auctioned off
Opening bid is 10¢
Bids increase in 10¢ increments
Highest bidder wins $1.00
Top two bidders must pay auctioneer
Three Stooges


Larry, Curley and Moe are in a 3-way
duel and agree to take turns shooting
each other in that order
Accuracy statistics:
– Larry hits intended target 20% of the time
– Curley hits intended target 80% of the time
– Moe hits intended target 100% of the time

What should Larry do?
The Playbook:
What will they run next?
Complex Rivalry: Where to move?
Competitive
Outcomes
Firm 1
Actions
Competitive
Interaction
Organizational
Characteristics
Firm 2
Actions
Industry
Characteristics
Competitive Dynamics


Observe competitive moves
Organize competitive moves
– Action/response pairs
– Action repertoires (year-end tallies)
– Competitive attacks/sequences

Measurement/Analysis of Characteristics
– Four key action pattern characteristics
that improve:
• Market share
• Stock price
• Profitability
Strategy as Action

Externally-directed, observable
competitive moves carried out to
improve relative competitive position:
Generic Pricing
Actions: Marketing
Products
Service
Capacity
Signals
Other
Actions symbolically
represented as these
Studies: Airlines
Telecom
Brewing
PCs
Software
Mutual Funds
41 Industries
Action-Reaction “Pairs”
Action
Pair 1
Action
Pair 2
Action
Pair 3
Action
Pair 4
Company 1
Company 2

Action
Response


Profits
Growth
time
Mkt. Share
Action-Reaction “Pairs”
Action
Pair 1
Action
Pair 2
Action
Pair 3
Action
Pair 4
Company 1
Company 2
time




Type
Implementation
Requirement
Radicality
Irreversibility


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Likelihood
Speed (delay)
Matching
Prior Studies: Action “Repertoires”
Company 1
Company 2
Year-End
Tallies
time
Action
Repertoire



Profits
Growth
Mkt. Share
Prior Studies: Action “Repertoires”
Company 1
Company 2
Year-End
Tallies
time


Total Actions
Complexity



Profits
Growth
Mkt. Share
Sequential Competitive Interaction ?
8
This Sequence:
Black: Knight b4
White: Pawn c3
Black: Bishop g4
White: Queen b5
Black: Pawn c5
7
6
5
4
3
2
1
a
b
c
d
e
f
g
h
Named Sequences:
Epaulette’s Mate
Sicilian Defense
BOXING:
Jab...Jab…Uppercut
COMPUTER PROGRAM:
data actions2;
subj = _n_;
do i = 1 to max;
output = matrix;
end;
run;
LANGUAGE:
qcheaTiueissesne.
hsiT si a cesneueq.
This is a sequence.
MUSIC:
DNA:
CAGTACATAGTACGATACGA
Sequence
Applications...
Sequences in Competitive Interaction

Ordered sample of things
– Temporal orderliness among elements

Logically unified sequence
– Succession of market-based decisions

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Patterns in stream of behaviors
Coordinated series of actions
Actions in a sequential strategic thrust
Competitive Attack:
Sequence of Actions
Action
Sequence 1
Action
Sequence 2
time
Competitive
Attack


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Profits
Growth
Mkt. Share
Time
Focal Firm
MKT MKT
PRICE
MKT
(a)
Rival Firm

PROD SVC
Avg. Attack Volume (a + a’)
– No. of Actions per Attack

Avg. Attack Duration (a + a’)
– No. days firm sustains attack
PRICE
(a’)
Time Period 1
MKT MKT PRICE PROD
MKT
MKT
SIG
PRICE PROD
MKT PRICE
PRICE
MKT
Time Period 2
Time

Attack Unpredictability
– Resemblance of two attack sequences
Focal Firm’s Stock Price and/or Market Share Gain
MKT MKT CAP SIG PROD PRICE
Attack a
MKT MKT MKT PROD
Attack a’
Focal Firm’s Competitive Attack
• Attack Volume
• Attack Duration
• Attack Complexity
• Attack Unpredictability
Group Exercise: Bud vs. Miller

Total Actions
– Count of total actions

Average Response Time
– Avg. number of time units between last
competitive move and first competitive
response

Repertoire Complexity
– Extent to which repertoire is skewed vs.
balanced

Attack Unpredictability
– Lack of discernable action combinations or
repetition
Action/Response Pairs
Implementation Req.
Irreversibility
Radicality
Response:
• Less Likely
• Slower
Action
Characteristics
Better Profitability
for Attacker
Competitive Repertoire
and Market Share Gain
Market
Share
Gain
More Actions
Complexity
Faster Avg.
Response
Speed
Action
Repertoire
Characteristics
Competitive Attack and
Market Share Gain
Market Share
Gain
Attack Volume
Attack Duration
Competitive
Attack
Characteristics
Competitive Attack and
Market Share Gain
Market Share
Gain
Simple
Complex
Extent of Attack Complexity
Competitive Attack and
Market Share Gain
Market Share
Gain
Predictable
Unpredictable
Extent of Attack Unpredictability
Results: Attack Intensity
Stock
Price
Sporadic,
Infrequent
Intense,
Sustained
Number of Actions within Sustained
Attack per Unit Time
Results reversed for relationship between focal firm’s attack and rival’s stock price.
Results: Attack Complexity
Stock
Price
Simple
Complex
Extent to which Focal Firm’s Attacks
Consist of Actions of Many Types
Post Hoc: Attack Unpredictability
Rival’s
Stock
Price
Predicable,
Inertia
Unpredictable,
Change
Extent of Change in Focal Firm’s
Sequence of Actions
Scoring the Fight
Miller
Total Actions
Faster Responses
More Complex
Repertoire
Unpredictable Attacks
Bud
Too much of a good thing?
Lynagh’s vs. Two Keys
Performance
Market
Share
Gains
Profitability
Competitive
Aggressiveness
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

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Objective measures of competitive behavior
Safeguard against complacency, predictability,
simplicity
Keep rivals off balance / disruption
Identify factors that facilitate aggressiveness
What combinations of moves are effective?
…which are ineffective? …smoke signals?
Conclusions and Implications

Managerial Implications
– Incorporate dynamic analysis of
competitive moves into competitive
intelligence program
– Assists managers to make inform choices
about the requisite level of competitive
behavior
– Use stock returns as an important
decision-making tool and as a messenger