A Typology of Competitive Actions
Dissertation by Tomi Nokelainen
Tampere University of Technology
March 2008
Opponent
Walter Ferrier, Ph.D.
Gatton College of Business & Economics
University of Kentucky
A Sensible, Intuitive Model of “Competitive Dynamics”
Competitive
Outcomes
Rivalry
Organizational
Characteristics
External
Characteristics
Prehistoric Competitive Rivalry
Karjala
Lapin
Kulta
Lapin
Kulta
Page 3
Complex Head-to-Head Rivalry
Page 4
Dynamic, Adaptive, Opportunistic Rivalry
Page 5
Competitive Dynamics
• Relatively young field of study
– Ming-Jer Chen’s dissertation, University of Maryland, 1988
• Rapid rate of extensions
– Organizational, industry & network antecedents/drivers
– Unique levels of aggregation
• Small field, but has significant visibility and impact
– Citation counts*
•
•
•
•
•
•
Chen, Smith & Grimm (1992) = 141
Miller & Chen (1994) = 203
Ferrier, Smith & Grimm (1999) = 115
Ferrier (2001) = 66
Gnyawali & Madhavan (2001) = 173
Chen, Su & Tsai (2007) = 2
* Google Scholar
Page 6
Competitive
Outcomes
Rivalry
Coke’s Actions
a
b
c
d
Pepsi’s Actions
e
a
b
c
d
e
Types of Actions *
• Pricing
a
• Marketing
b
• New Product
c
• Distribution
d
• Service
e
* For illustration purposes only
Page 8
Competitive Action-Reaction Dyads
Action
Pair 1
Coca-Cola
Pepsi
b
Action
Pair 2
Action
Pair 3
b
c
b
a
c
Action
Pair 4
a
e
time
Competitive Action “Repertoires”
b
b
b
Coca-Cola
Pepsi
b
c
Year-End
Tallies
a
b
c
e
time
b
Competitive Attack
Coke
a
a
Pepsi
a
b
b
c
d
a
b
b
c
c
c
d
d
e
e
e
time
d
c
e
a
a
b
Observed Sequence
a
b
c
d
e
c
b
Observed Sequence
Page 11
Coke Competitive Attack Predictability
Coke in time1
a
a
Coke in time2
a
b
a
b
c
b
c
c
d
c
d
d
e
e
a
d
a
b
c
Observed Sequence
e
a
d
b
c
c
e
b
e
e
Observed Sequence
Page 12
Pepsi Competitive Attack Unpredictability
Pepsi in time1
a
a
Pepsi 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 13
Coke Competitive Attack [Long] Duration
a
a
a
a
b
b
c
c
d
c
d
d
e
e
e
time
a
d
e
c
a
c
d
b
a
e
Observed Sequence of Competitive Actions
Page 14
Pepsi Competitive Attack [Short] Duration
a
a
b
c
c
c
d
d
e
time
c
a
c
d
Observed Sequence of Competitive Actions
Page 15
Market Share in the Fizzy Beverage Industry
Market
Share
Coke
Pepsi
1950
1960
1970
1980
1990
2000
2005
Page 16
Athletic Shoes
Market
Share
(U.S.)
Nike
Reebok
Adidas
1980
1990
2005
Page 17
U.S. Retailing
Market
Share
Wal-Mart
Sears
JC Penney
1950
1960
1970
1980
1990
2000
Page 18
Commercial Aircraft
Market
Share
Boeing
McDonnellDouglass
Airbus
1950
1960
1970
1980
1990
2000
Page 19
Levels of Analysis
Firm
Finnair
Page 20
Levels of Analysis
Firm
Finnair
Dyad
Finnair
SAS
Page 21
Levels of Analysis
Firm
Finnair
Triad
Dyad
Finnair
SAS
Finnair
SAS
Blue 1
Page 22
Levels of Analysis
Firm
Triad
Dyad
Finnair
Finnair
SAS
Finnair
SAS
Blue 1
Network
Lufthansa
Virgin
Finnair
US Airways
KLM
Page 23
Levels of Analysis
Firm
Triad
Dyad
Finnair
Finnair
SAS
Finnair
SAS
Blue 1
Network
Group
Lufthansa
Lufthansa
Virgin
Air France
KLM
eos
SAS
Finnair
US Airways
Brussels
Blue 1
Ryanair
KLM
Page 24
Levels of Analysis
Firm
Triad
Dyad
Finnair
Finnair
SAS
Finnair
SAS
Blue 1
Network
Group
Industry
(or Population)
Lufthansa
Lufthansa
Virgin
Air France
KLM
eos
SAS
Finnair
US Airways
KLM
Finnair
Lufthansa
Virgin
eos
Brussels
Blue 1
British Airways
US Airways
Ryanair
Alitalia
Ryanair
KLM
Page 25
Levels of Aggregation
Individual Action
(or response)
New
Product
Introduction
Page 26
Levels of Aggregation
Individual Action
(or response)
New
Product
Introduction
Action-Response
Dyad
Price
Cut
Ad
Campaign
Page 27
Levels of Aggregation
Individual Action
(or response)
New
Product
Introduction
Action-Response
Dyad
Price
Cut
Ad
Campaign
Competitive
Repertoire
6 x Price
1 x Product
4 x Ads
2 x Signaling
1 x Law Suit
Page 28
Levels of Aggregation
Individual Action
Action-Response
Dyad
(or response)
New
Product
Introduction
Price
Cut
Competitive
Repertoire
Ad
Campaign
6 x Price
1 x Product
4 x Ads
2 x Signaling
Competitive
Attack
1 x Law Suit
attack
Coke
Ad
Signal Product
Price
Legal
counter attack
Pepsi
Ad Ad
Product
Price Price
time
Page 29
What is Competitive Dynamics?
…a
…a
…a
…a
…a
…a
…a
paradigm
theory
pre-theory
view
reasoning
lens
method
– Research design element
– Observational mechanism
– Measurement technique
Page 30
Pre-Theory of Competitive Inter-Action
Emerging Theoretical Features and Boundary Conditions
1. Competitive “action” as fundamental element
•
“…a visible, externally-directed competitive move carried
out to improve a firm’s relative competitive position”
2. Dynamic
• Explicitly accounts for:
–
–
–
–
–
Time
Change
Evolution
Contingencies
Processes
Page 31
A Pre-Theory of Competitive Inter-Action:
3. Actor relativity/interdependence
•
The firm relative to:
–
–
–
–
–
•
Itself (over time)
Dyadic partners
Groups
Industry members
Other non-rivals
On factors/dimensions such as:
–
–
–
–
Competitive actions
Resources/capabilities
Firm characteristics
Outcomes
Page 32
Pre-Theory of Competitive Inter-Action
4. Has impact/consequences on:
•
Performance
–
–
•
•
Behavior of other firms
Supply chain members
–
–
•
•
•
Relative
Absolute
Customers
Suppliers
Regulators
Investors
Society
Page 33
Pre-Theory of Competitive Inter-Action
• Other
• Uncertainty, unknowability
• Imperfect information
• Thought, intent, purpose
• Not costless
Page 34
An Emerging Theory of Competitive Dynamics
Firm 1
Strategy
Awareness
Organizational
Drivers
External
Drivers
Competitive
Inter-Action
Performance
Firm 2
Strategy
Page 35
Implicit Drivers of Competitive Action
• Awareness
• Alertness - attention
• Vision
• Scanning
• Filtering
Awareness
• Motivation
• Intention
• Valence
• Emotion
• Desire
• Capability
• Organizational enablers/constraints
• Contextual enablers/constraints
Page 36
An Emerging Theory of Competitive Dynamics
Firm 1
Strategy
Awareness
Organizational
Drivers
External
Drivers
Competitive
Inter-Action
Performance
Firm 2
Strategy
Page 37
Phenomenological and Theoretical Diversity
• Information processing
• Social networks
• Managerial cognition
• Multi-market competition
• Prospect/Threat-rigidity
• First-mover
• Institutional theory
• Complexity
• Communication
• Knowledge
• Signaling
• Resource-based view
• Real option theory
• Game theory
• Upper echelons
• Strategic groups
• Structure-conduct-perform.
• Dynamic limit pricing
• Austrian economics
• Corporate entrepreneurship
• Dominant firm/Oligopoly
• Force field (from psychology)
• Population ecology
• Internationalization/multinationals
Page 38
Non-Organizational Theories and Techniques
• Physics
• Physical
• Optical
• Quantum mechanics
• Biology
• Molecular/DNA
• Virology
• Music
• Perception/appreciation
• Composition theory
• Experimental aesthetics
• Perception
• Interpretation
• Subjective judgment
• Medicine
• Neurology
• Psychiatry
• Kinesiology
Page 39
What is the next “big thing”?
• Phenomena
• Constructs
• Measures
• Levels of analysis or aggregation
• Data
• Unobservables
• Analytical techniques
• Theory
Page 40
An Emerging Mess of Competitive Dynamics
Organizational
Drivers
Industry
Structure
Drivers
Firm 1
Strategy
Awareness
Competitive
Inter-Action
Performance
Cognitive
Drivers
Institutional
Drivers
Firm 2
Strategy
SocioRelational
Drivers
Other?
Page 41
Definitional, Typological and
Measurement Diversity
• What is a competitive action?
–
–
–
–
Externally-directed
Market-based
Visible, observable
Others
~ 20 different definitions
• What are types of competitive actions?
–
–
–
–
–
Pricing
Marketing
New products
Alliances
Others
~ 20 different typologies
Page 42
Unrestrained, Chaotic Growth?
Diversity of
Theoretical and
Empirical
Research
Diversity of Phenomena Studied
Page 43
Problems with Unrestrained, Chaotic Growth
• Imprecise, messy constructs and measures
– 20 different definitions of action
– 20 different classification schemes
• Reduces generalizability of findings
– Action related to performance in different ways, depending on
definition and type
• Inhibits advancement and evolution of the field
– Action is fundamental building block of an emerging theory of
competitive dynamics, but…
– 20 different definitions of action
– 20 different classification schemes
Page 44
Return to Fundamentals
& Theoretical Refinement
Diversity of
Theoretical and
Empirical
Research
Action
Definition
and Types
Diversity of Phenomena Studied
Page 45
Nokelainen Contributions
• Impact on definition and measurement of action-based
constructs
– Internal actions
– Non-market actions
– Undetectable actions
– Action in situ
– Comprehensive range of action types
• Theoretically-derived action typology
– Financial
– Physical
– Human
– Informational
– Relational
• Recognition of intentional ”non-actions”
Conceptual examples
Response delay
Competitive repertoire simplicity
Competitive attack predictability
Page 46
Competitive attack duration
Types of Actions
• Pricing
a
• Marketing
b
• New Product
c
• Distribution
d
• Non-Action
n
Page 47
Non-Actions and Non-Responses…?
Action
Pair 1
Coca-Cola
Pepsi
b
Action
Pair 2
Action
Pair 3
n
c
b
a
c
Action
Pair 4
a
n
Difference in Competitive Repertoires…?
b
b
n
Coca-Cola
Pepsi
n
c
Year-End
Tallies
n
b
c
n
time
n
Pepsi Competitive Attack Unpredictability…?
Pepsi in time1
a
a
b
b
c
b
b
c
d
n
Pepsi in time2
c
c
d
n
n
d
a
b
c
Observed Sequence
n
n
n
n
b
b
c
c
n
n
n
n
Observed Sequence
Page 50
Pepsi Competitive Attack of Short Duration…?
a
a
b
c
c
c
d
e
n
n
n
n
n
n
n
time
n
n
n
c
a
c
n
n
n
n
Observed Sequence of Competitive Actions
Page 51
General Contributions of Nokelainen Dissertation
Given that competitive action is fundamental building block of
competitive dynamics research…
–Theoretically-derived definition and typology of
competitive action are vital to:
– Refinement, extensions and evolution of theory of
competitive dynamics
– Improvements in construct validity
– Improved empirical precision and generalizability of
findings
– Exploration of relationship between internal organizational
resources/processes and externally-directed, market-based
events and processes
– Robust and valuable inclusion of qualitative research
approaches
Page 52
Questions
Page 53
Action Type Exemplars Spot-Check
Evidence
Resource
Domain
Elementary
Domain
Internal vs.
External
Detectable
Ford sells Land Rover and Jaguar to Tata
Motorola spins off mobile phone division
Nokia forms partnership with AT&T to
provide carrier-customized mobile phones
Starbuck’s fires CEO
Apple introduces iPhone
Nike creates ad campaign for 2008 Olympics
Ford Europe cuts prices on Sierra models
by 20-25%
Toyota implements new IT system with
artificial intelligence to track global supply
inventory
Wärtsilä installs Nescafe espressocappuccino machines in each department
Page 54
Detectability of Actions
A twist on the old adage…
• If a tree lands in the forest and
no one is there to hear it, does
it make a noise?
• If an action is carried out but is
not detected by any observers,
is it an action?
Page 55
Detectability of Actions
A twist on the old adage…
• If a tree lands in the forest and no
one is there to hear it, does it
make a noise?
• If an action is carried out but is not
detected by any observers, is it an
action?
Are non-detectable internal actions, for example, really actions?
Perhaps non-detectability is due to observer inattention, blindness, or
ambivalence?
Is action nondetection on the same plan as unobservables?
Page 56
Planned Actions vs. Emergent Actions
Intended
Actions
Actions
Carried Out
Dropped
Actions
Emergent
Actions
Page 57
Planned Actions vs. Emergent Actions
Intended
Actions
Actions
Carried Out
Dropped
Actions
Emergent
Actions
How do you account for emergent actions that are opportunistic, reactive,
reflexive/automatic, or instinctive?
Page 58
Planned Non-Actions
Involuntary non-action due to threat-rigidity response
(Staw, Sandelands & Dutton, 1981)
Page 59
Planned Non-Actions
Involuntary non-action due to threat-rigidity response
(Staw, Sandelands & Dutton, 1981)
Must a “non-action” carry intention or result from planning?
Page 60
Resources and Actions
Competitive advantage “…is never the resources
themselves, which are the inputs to the production process,
only the services that the resources can render…”
Penrose, 1959
“…resources and products are two sides of the same coin.”
Wernerfelt, 1984; Porter, 1991
“…what is a resource’s cloud chamber?”
Barney, 1994
Page 61
Resources and Actions
Competitive advantage “…is never the resources
themselves that are the inputs to the production process,
only the services that the resources can render…”
Penrose, 1959
“…resources and products are two sides of the same coin.”
Wernerfelt, 1984; Porter, 1991
“…what is a resource’s cloud chamber?”
Barney, 1994
What do these statements mean?
Do you agree with them?
Page 62
Resource-advantage as Basis for Action Types
Resources
Competitive Actions
Informational
Distribution
Physical
Relational
Price
Product
Financial
Marketing
Page 63
Resource-advantage as Basis for Action Types
Resources
Competitive Action
Informational
Physical
Relational
Financial
Evidence of this action:
• Apple rehires Steve Jobs as CEO
• Apple acquires Synaptics Inc.
• Apple devotes $210 million for R&D
• Apple introduces iPhone
Page 64
Resource-advantage as Basis for Action Types
Resources
Competitive Actions
Informational
Distribution
Physical
Relational
Price
Product
Financial
Marketing
Do must your action types have a direct, unitary, or otherwise one-to-one
correspondence with their resource-based conceptual anchors?
Page 65
Resource-advantage as Basis for Action Types
Nokelainen
Porter’s Value Chain Activities
• Financial
• Physical
• Legal
• Human
• Organizational
• Informational
• Relational
• Product attributes
• Inbound logistics
• Operations
• Outbound logistics
• Marketing
• Service
• Procurement (purchasing)
• Technology development (R&D)
• Human resource management
• Adminstrative (legal, IT, finance, org
structure, culture)
Page 66
Resource-advantage as Basis for Action Types
Nokelainen
Porter’s Value Chain Activities
• Financial
• Physical
• Legal
• Human
• Organizational
• Informational
• Relational
• Product attributes
• Inbound logistics
• Operations
• Outbound logistics
• Marketing
• Service
• Procurement (purchasing)
• Technology development (R&D)
• Human resource management
• Adminstrative (legal, IT, finance, org
structure, culture)
Porter’s value-chain emphasizes a generalizable set of firm activities, whereas
your action types emphasize resource-linked domains of actions. Why reinvent
the wheel, so to speak?
Page 67
Resource-advantage as Basis for Action Types
Nokelainen
Grimm & Smith Action Domains
• Financial
• Physical
• Legal
• Human
• Organizational
• Informational
• Relational
• Product attributes
• Ricardian
– Resource strengths
• Entrepreneurial
– Opportunity-seeking, alertness,
resolve uncertainty
• Deterrence/preemptive actions
– Aggressive behavior
• Cooperative actions
– Alliance, coopetition
Page 68
Nokelainen Typology
Physical
Resource
Domain
Human
Informational
Product
Elementary Action Domains
Page 69
plus…Situational Domains of Action
Physical
Human
Informational
Product
Cooperative
Deterrence
Entrepreneurial
Ricardian
Page 70
Resource-advantage as Basis for Action Types
Nokelainen
Grimm & Smith Action Domains
• Financial
• Physical
• Legal
• Human
• Organizational
• Informational
• Relational
• Product attributes
• Ricardian
– Resource strengths
• Entrepreneurial
– Opportunity-seeking, alertness,
resolve uncertainty
• Deterrence/preemptive actions
– Aggressive behavior
• Cooperative actions
– Alliance, coopetition
Is the formation of an R&D alliance with a competitor, for example, a relational
action? …does it not also have more/less Ricardian, entrepreneurial,
deterrence and/or cooperative character?
Page 71
Within-Type Taxonomic Variation
Prior research defined (and tested some) of the
following generalizable attributes of competitive
action:
– Scope
– Intensity
– Magnitude
– Radicality
– Visibility
– Newsworthiness
– Centrality
– Implementation requirement
– Irreversibility
– Execution speed
– Response difficulty
Page 72
Within-Type Taxonomic Variation
Physical
Human
Informational
Execution speed
Product
Irreversibility
Implementation requirement
Radicality
Page 73
Within-Type Taxonomic Variation
Prior research defined (and tested some) of the
following generalizable attributes of competitive
action:
– Scope
– Intensity
– Magnitude
– Radicality
– Visibility
– Newsworthiness
– Centrality
– Implementation requirement
– Irreversibility
– Execution speed
– Response difficulty
Can an action borne of managerial intent to bring about and leverage, for
example, a human resource vary with respect to its radicality, implementation
requirement and/or irreversibility?
Page 74
Situational Qualifiers of Action Type
GM has too much
inventory in large
SUV segment
Starbucks closes 400
units; Dunkin’ Donuts
goes on the attack
Intel to introduces new
3GHz Dual Core
microprocessor
GM
Cuts Prices
Dunkin’ Donuts
Cuts Prices
AMD
Cuts Prices
Page 75
Situational Qualifiers of Action Type
GM has too much
inventory in large
SUV segment
Starbucks closes 400
units; Dunkin’ Donuts
goes on the attack
Intel to introduces new
3GHz Dual Core
microprocessor
GM
Cuts Prices
Dunkin’ Donuts
Cuts Prices
AMD
Cuts Prices
Is a price cut simply a price cut?
How does your typology really account for situational differences?
Page 76
Thank you
Page 77