Competitive Interaction
Page 1
Strategic Management…Action that Creates Value
Pazzo’s
Lynagh’s
Pub
Lynagh’s
Pub
Page 2
Competitive
Outcomes
Hardball?
Organizational
Characteristics
Industry
Characteristics
Dethronement of the Leader
Market
Share
Wal-Mart
Sears
JC Penney
1950
1960
1970
1980
1990
2000
Page 4
Dethronement of the Leader
Market
Share
Boeing
McDonnellDouglass
Airbus
1950
1960
1970
1980
1990
2000
Page 5
Dethronement of the Leader
Market
Share
(U.S.)
Nike
Reebok
Adidas
1980
1990
2005
Page 6
King of the Hill – Fizzy Beverages
Market
Share
Other ?
Coke
Pepsi
1970
1980
1990
2000
2010
2020
Page 7
Simple Rivalry: Prisoner’s Dilemma
What to say to police?
Criminal 2
Confess
Confess
Both Serve
5 Years in Jail
Keep Quiet
#2 Serves
10 Years in jail
#1 Goes Free
Criminal 1
Keep Quiet
#1 Serves
10 Years in Jail
Both Serve
1 Year in Jail
#2 Goes Free
Page 8
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?
Page 9
Competitive Intelligence
A systematic and ethical program for
gathering information about competitors
and general business trends to further your
own company’s goals
Page 10
Why CI?
Playing the Game Better
Play the Game Differently
• Focus on existing
competitors/strategic position
• Leverage value chain strengths
• Incrementally improve existing
strategies/tactics
• 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
Page 11
Competitor Intelligence Pyramid
s
Recommendations
z
Analysis of Data
Sourcesaof Data
Page 12
Competitor Intelligence Pyramid
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
Page 13
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
Page 14
Reverse Engineering – Your Rival’s Product
Page 15
Competitor Intelligence Pyramid
• Value chain analysis
• Ratio analysis
Recommendations
• Benchmarking
• Cost analysis
• Trend analysis
Analysis of Data
• Personality profiling
• Wargaming or scenario planning
• Competitive behavior analysis
Sources of Data
Page 16
Competitor Intelligence Pyramid
Recommendations
Analysis of Data
• Track Existing Rivals
• Anticipate New Rivals
• Inform Strategy:
– Identify own/competitor’s
strengths/weaknesses
– Early warning system
– Plan of attack/retaliation
Sources of Data
Page 17
The Cola Wars
Page 18
Coke’s Market Share
Competitive Action Repertoire
The set of competitive actions carried out in a given time period
MKT
CAP
SIG
PROD
PRICE
MKT
MKT
PROD
Repertoire
Page 19
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 team
a
b
c
d
e
Page 20
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
Page 21
Action-Reaction “Pairs”
Action
Pair 1
Coca-Cola
d
Pepsi
Action
Action
Pair 2
Action
Pair 3
d
a
d
c
a
Response
Action
Pair 4
c
e
• Profits
• Growth
time
• Mkt. Share
Action “Repertoires”
c
Coca-Cola
Pepsi
Year-End
Tallies
c
c
a
a
a
c
d
e
time
• Total Actions
• Complexity
• Profits
• Growth
• Mkt. Share
Strategy and Adaptive Maneuvering
8
7
6
5
4
3
2
Chess:
• Epaulette’s Mate
• Sicilian Defense
1
a
b
c
d
e
f
g
h
Sequence Applications...
COMPUTER PROGRAM:
Jab...Jab…Uppercut
LANGUAGE:
qcheaTiueissesne.
hsiT si a cesneueq.
This is a sequence.
MUSIC:
DNA:
CAGTACATAGTACGATACGA
BOXING:
data actions2;
subj = _n_;
do i = 1 to max;
output = matrix;
end;
run;
Competitive Actions Over Time
Coke
a
a
Pepsi
a
b
b
c
d
a
b
b
c
c
c
d
d
e
e
d
c
e
e
a
a
b
Observed Sequence
a
b
c
d
e
c
b
Observed Sequence
Page 26
Coke Strategic Non-Conformity
Coke
a
a
Industry Norm
a
b
b
c
d
a
b
b
c
c
c
d
d
e
e
d
c
e
e
a
a
b
Observed Sequence
a
b
c
d
e
c
b
Observed Sequence
Page 27
Pepsi Strategic Conformity
Pepsi
a
Industry Norm
a
b
a
a
b
c
c
d
b
b
c
d
d
e
c
e
e
a
b
d
e
c
Observed Sequence
a
a
b
c
d
e
c
b
Observed Sequence
Page 28
Coke Strategic Unpredictability
Coke in time1
a
a
Coke in time2
a
b
a
b
c
b
b
c
d
c
d
c
d
e
e
a
d
a
b
c
Observed Sequence
e
e
d
b
b
c
c
e
a
Observed Sequence
Page 29
Pepsi Strategic Predictability
Pepsi in time1
a
a
Pepsi in time2
a
b
a
b
c
c
c
d
b
b
c
d
d
e
e
a
d
a
b
c
Observed Sequence
e
e
a
d
b
c
c
e
b
Observed Sequence
Page 30
King of the Hill – Fizzy Beverages
Market
Share
Other ?
Coke
Pepsi
1950
1960
1970
1980
1990
2000
Page 31
“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
Page 32
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?
Page 33
Scoring the Fight
Coke
Total Actions
Pepsi
Faster Responses
More Complex Repertoire
Unpredictable Attacks
Who will win?
Page 34
Implications for CI:
Predict Future Behavior of Rivals
Rivals’ prior behavior
Drivers of Behavior
• Patterns
• Management orientation
• Tendencies
• Decision-making
• Type & order of moves
• Financial constraints
• Proactiveness
• Industry characteristics
• Reactiveness
Page 35
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 36