1. Competing for Advantage
PART III
CREATING COMPETITIVE ADVANTAGE
Chapter 6
Competitive Rivalry and Competitive Dynamics

2. The Strategic Management Process
Figure 1.6: The Strategic Management Process – A logical approach for responding to 21st century competitive challenges. Provides an outline of the content of the textbook by each chapter.
Creating Competitive Advantage
Business-level strategy – competitive advantages the firm will use to effectively compete in specific product markets
Competitive rivalry and dynamics – analysis of competitor actions and responses is relevant input for selecting and using specific strategies
Cooperative strategy – an important trend of forming partnerships to share and develop competitive resources
Corporate-level strategy – concerns the businesses in which the company intends to compete and the allocation of resources in diversified organizations
Acquisition and restructuring strategies – primary means used by diversified firms to create corporate-level competitive advantages
International strategy – significant sources of value creation and above-average returns

3. Introduction to New Age of Competition
Dramatic increase in competitive actions and reactions between firms
Decreased decision making time
Increased speed of new ideas and products
Soaring speed at which knowledge “pulses” between competitors
Fast firms generate advantages and market power.
Faster firms generate more advantages and greater market power.
Introduction to New Age of Competition – Hypercompetitive conditions (see Chapter 1) are having a distinct impact on the nature of competition between firms, increasing complexity in the form of interdependencies between firms and their competitors.
Discussion points:
The time firms have to make decisions has decreased due to the accelerating rate of marketplace actions and reactions.
The speed with which new ideas are created and brought to market has increased.
The speed at which data, information, and knowledge pulse between competitors has skyrocketed.
No advantages are guaranteed to last long.
These effects are occurring in technological and global industries where they can be expected.
Example: Handheld communications devices
They are also occurring in industries where some stability might be expected (for instance, the food industry).
Examples: Campbell Soup and Heinz
Competition in virtually all industries is dynamic and intense.
The essence of this chapter’s topics is that a firm’s strategies should also be dynamic in nature.

4. Competitive Rivalry Key Terms Competitors Competitive rivalry
Firms operating in the same market, offering similar products, and targeting similar customers
Competitive rivalry
Ongoing set of competitive actions and competitive responses occurring between competitors as they contend with each other for an advantageous market position
Discussion points:
Competitors Example: FedEx and UPS
Competitive rivalry
Influences a firm’s ability to gain and sustain competitive advantages
Affects the scope and nature of firm operations
Affects the success of strategies both by initial actions and by anticipating and responding to rival attacks
Most dominant influence is on business-level strategies
Strategies which enable methods of value creation which differ from competitors position firms to successfully engage in competitive rivalry

5. Competitive Rivalry Key Terms Competitive behavior
Set of competitive actions and competitive responses the firm takes to build or defend its competitive advantages and to improve its market position
Competitive dynamics
Total set of actions and responses taken by all firms competing within a market
Multimarket competition
Firms competing against each other in several product or geographic markets
Discussion points:
Competitive behavior
Attempts to position the firm relative to the five forces of competition (see Chapter 3)
Attempts to defend and use current competitive advantages while building advantages for the future
Competitive dynamics – relationships among competitors, competitive rivalry, and competitive dynamics illustrated in Figure 6.1 and on Slide 6
Multimarket competition
Example: Boeing and EADS commercial and military airplanes
Example: Embraer and Bombardier regional jets
Implication that rival’s response may take place in a different market than the initial competitive action
Intensified by current trend in most industries to expand geographic scope
More and increasingly diverse competitors impacting pattern of competitive rivalry
Stronger effect of competitive rivalry on strategic success than in the past
Decreased financial performance from intensified rivalry

6. From Competitors to Competitive Dynamics
Figure 6.1: From Competitors to Competitive Dynamics – shows the relationships among competitors, competitive rivalry, competitive behavior, and competitive dynamics
What determines the success of a strategy?
The firm’s initial competitive actions
How well the firm anticipates competitors’ responses to its initial actions
How well the firm anticipates and responds to its competitors’ initial actions

7. Model of Competitive Rivalry
Figure 6.2: A Model of Competitive Rivalry – Firm rivalry tends to be more dynamic and complex than the model indicates, but this is a straightforward and integrative model of competitive rivalry for firms which provides a useful way to discuss various aspects of competitive dynamics. It explains competition between a particular firm and each of its competitors, and the sum of all individual rivalries occurring in a particular market reflects that market’s competitive dynamics.
Discussion points:
Major components of the competitive rivalry model:
Competitor Analysis
Drivers of Competitive Behavior
Competitive Rivalry
Outcomes
Competitive rivalry evolves from patterns of action and response over time
Mutual interdependence:
One firm’s competitive actions have noticeable effects on competitors
One firm’s competitive actions elicit competitive responses from competitors
Competitors feel each other’s actions and responses
Marketplace success is a function of both individual strategies and the consequences of their use
Intensity of rivalry

8. Intensity of Rivalry The total number of competitors
Market characteristics
Quality of individual firms' strategies
Drivers of competitive behavior
Intensity of Rivalry – Many factors influence and determine the intensity of rivalry within a market.
On a global scale, firms that develop and use effective business-level strategies tend to outperform competitors in particular product markets, even when experiencing intense competitive rivalry. Example: Google

9. Competitor Determinants
Market Commonality
Resource Similarity
Firms with high market commonality and highly similar resources are clearly direct and mutually acknowledged competitors.
Competitor Analysis – The concept of competitor analysis was introduced in Chapter 3 as a technique to understand the competitive environment. It is now extended to describe what firms study as the first step to being able to predict the nature of rivalry with each competitor and to predict competitors' behavior in the form of its competitive actions and responses.
Competitor Determinants – building blocks of a competitor analysis – determine the extent to which firms are competitors
Discussion points
Market commonality – the number of shared markets
Resource similarity – the similarity in resources
Being direct competitors does not necessarily mean that rivalry between the firms will be intense

10. Market Commonality Key Terms Market commonality
Number of markets with which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each
Market Commonality – Market commonality, multimarket competition, and the potential to respond competitively across markets complicate and impact the rivalry between competitors.
Discussion points:
By concentrating on the needs of different unique customer groups, markets can be more deeply subdivided. Example: Financial services industry
In general, competitors agree about the different characteristics of individual markets that form an industry.
Example: Transportation industry
The potential to respond to competitive actions in multiple markets complicates rivalry between competitors.
Research indicates that firms with greater multimarket contact are less likely to initiate an attack, but more likely to move aggressively in response to an attack.
In general, multimarket competition can reduce competitive rivalry.
In what ways can markets be subdivided?
Market segments
Product segments
Geographic regions
Provide some examples of industries and competitors where multimarket competition is present.
McDonald’s and Burger King – compete in multiple geographic markets around the world
Prudential and CIGNA – compete in several market segments (institutional and retail) as well as product markets (life insurance and health insurance)
Airlines
Chemicals
Pharmaceuticals
Consumer foods

11. Resource Similarity Key Terms Resource similarity
Extent to which the firm's tangible and intangible resources are comparable to competitors' resources in terms of both type and amount
Resource Similarity – Firms with similar types and amounts of resources are likely to have similar strengths, weaknesses, and strategies.
Example: Hotel industry
Assessing competitor resources is difficult (particularly when resources are intangible).

12. Framework of Competitive Analysis
Figure 6.3: Framework of Competitive Analysis – maps the results of a firm’s competitive analysis for visual comparison
Discussion points:
Mapping a firm's competitor analysis can show the extent to which firms in an industry compete.
Firms in Quadrant I are direct and mutually-acknowledged competitors. Examples: FedEx and UPS, Marriott and Hilton
Firms in Quadrant III share few markets and have little resource similarity, indicating that they aren’t direct and mutually acknowledged competitors.
Mapping competitive relationships with rivals is fluid as firms enter and exit markets and as companies’ resources change in type and amount. Thus, the companies with which the firm is a direct competitor change over time.

13. Drivers of Competitive Actions and Responses
Awareness
Motivation
Ability
Resource Dissimilarity
Drivers of Competitive Actions and Responses – In addition to market commonality and resource similarity, these organizational characteristics heavily influence competitive behavior. Understanding these factors helps firms predict the likelihood of an attack or of a rival response to competitive actions.
Discussion points:
Awareness
Extent to which competitors recognize the degree of their mutual interdependence and the potential consequences of competitive behavior
Tends to be greatest when competitors have highly similar types and amounts of resources and compete with each other in multiple markets
Examples: Oil field service companies, pharmaceutical firms, and entertainment competitors
A lack of awareness can lead to excessive competition and have a negative effect on all competitors’ performance
Motivation
Firm's incentive to take action or to respond to a competitor's attack as it relates to perceived gains and losses
Example: Walmart rivalry with Carrefour or Alibaba Group
Market commonality affects perceptions and resulting motivation
All else being equal, firms are more likely to attack rivals with low market commonality because of the high stakes of attacking a rival who competes with the firm in multiple markets
Ability
Firm's resources that allow competitive action and flexibility of responsiveness
Firms with similar resources are likely to have the ability to respond in like to competitive attacks
Resource dissimilarity
Resource disadvantages that delay speed of response to competitive actions
The greater the resource imbalance between a firm and its competitors, the longer it takes for the firm with a resource disadvantage to respond Example: Walmart
Even when facing competitors with greater resources/abilities or more attractive market positions, firms must eventually respond or face failure

14. Strategic and Tactical Actions
Key Terms
Competitive action
Strategic or tactical action the firm takes to build or defend its competitive advantages or improve its market position
Competitive response
Strategic or tactical action the firm takes to counter the effects of a competitor's action
Tactical action (or response)
Market-based move that is taken to fine-tune a strategy
Competitive Rivalry – It is important to study the ongoing competitive action-response sequence between competitors because of its effect on performance and the successful use of strategies.
Discussion points:
When engaging in competitive rivalry, firms use both strategic and tactical actions to form their competitive actions and responses.
A strategic action or response is a market-based move that involves a significant commitment of organizational resources and is difficult to implement and reverse.
Examples of strategic action: URS Corp. purchase of Flint Energy Services Ltd., UPS bid for TNT Express NV, Dunkin’ Donuts agreement with Jubilant FoodWorks
Example of strategic response: Starbuck’s JV with Tata Global Beverages
A tactical action or response involves fewer resources and is relatively easy to implement and reverse.
Examples of tactical action: Airline pricing of services and offer of rebates
Example of tactical response: Offering short-term rebates in response to those offered by competitors
Predictions of competitive behavior are fairly general. Greater understanding of competitors and better predictions come from a study of the “Likelihood of Attack” factors beginning on Slide 16 and the “Likelihood of Response” factors beginning on Slide 28.

15. Differences Between Strategic and Tactical Actions/Responses
Strategic actions/responses are market-based moves that signify a significant commitment of organizational resources to pursue a specific strategy. They are difficult to implement and reverse.
Tactical actions/responses are market-based moves that are taken to fine-tune a strategy that is already in place, involving fewer resources. They are relatively easy to implement and reverse.
Differences Between Strategic and Tactical Actions/Responses

16. Likelihood of Attack First mover incentives Organizational size
Quality
Likelihood of Attack – Several factors (other than market commonality, resource similarity, and the drivers of competitive behavior) affect the likelihood a firm will use strategic and tactical actions to attack its competitors.

17. Timing of Competitive Behavior
Key Terms
First mover
Firm that takes an initial competitive action to build or to defend its competitive advantages or to improve its market position
Second mover
Firm that responds to the first mover's competitive action, typically through imitation
Late mover
Firm that responds to a competitive action, but only after considerable time has elapsed after the first mover's action and the second mover's response
First Mover Incentives – Firms are categorized within a marketplace based on the timing of their competitive behavior. This timed behavior affects their strategy and their likelihood of taking competitive actions.

18. First Movers
Often build upon a strategic foundation of superior research and development skills
Tend to be aggressive and willing to experiment with innovation
Tend to take higher, yet reasonable, risks
Need to have liquid resources that can be quickly allocated to support actions
First Movers – Being a first mover is often critical in industries experiencing rapid technological developments and relatively short product life cycles.
Discussion points:
Organizational slack, measured by available resources, is required for significant R&D investments and to successfully produce and market a steady stream of innovative products.
Overall, outcomes of a first mover’s competitive actions may provide an effective blueprint for second and even late movers as they determine the nature and timing of their competitive responses.
First movers should identify effective second mover competitors who can be expected to study their innovative market entries and prepare for a quick response. Example: Intel and Texas Instruments
First movers can expect industry late movers to respond only after the second mover has achieved success.
Although exceptions exist, late movers’ competitive actions are relatively ineffective compared with those of first and second movers.
What types of investments do first movers allocate funds for?
Product innovation and development
Aggressive advertising
Advanced research and development
What is organizational slack?
Slack is the buffer or cushion which actual or obtainable resources provide that are not currently in use and that are in excess of the minimum resources needed to produce a specific output level.

19. First Mover Benefits Competitive advantage Above-average returns
Customer loyalty
Industry standards
Market share
First Mover Benefits – Although first mover benefits are never absolute, they can be substantial, especially in fast-cycle markets where changes occur rapidly and where it is virtually impossible to sustain a competitive advantage for any period of time.
Discussion points:
Achieve competitive advantage by taking innovative actions
Experience five to ten times the valuation and revenue of second movers, until competitors respond to successful competitive actions
Chance to gain customer commitment to products which make it to market first
Set or influence the industry standards
Gain market share that can be difficult for competitors to take through future rivalry

20. First Mover Risks Difficulty to accurately estimate potential returns
Substantial costs of product innovation, which reduces organizational slack available for other opportunities
Low likelihood of introducing or converting to the product that eventually becomes the dominant design or industry standard as the market evolves
First Mover Risks – suggest the importance of carefully studying competitors to understand their success or willingness to act as a first mover

21. Second Movers More cautious than first movers
Tend to study customer reactions to product innovations
Tend to learn from the mistakes and avoid the large investments required of first movers, reducing their risks
Can take advantage of time to develop more efficient processes and technologies than first movers, reducing their costs
Will not benefit from first mover advantages, lowering potential returns
Second Movers – characteristics of second movers compared to first movers
Discussion points:
Again, outcomes of first mover’s competitive actions may provide an effective blueprint for second and even late movers as they determine the nature and timing of their competitive responses.
Second movers should be prepared to respond with a product that creates customer value exceeding initial product value.
Successful second movers can rapidly and meaningfully interpret market feedback and quickly and productively respond to first mover innovations. Example: TI and Intel
Second movers can expect industry late movers to respond only after first and second movers have achieved market success.
Although exceptions exist, late movers’ competitive actions are relatively ineffective compared with those of first and second movers.

22. Late Movers
Respond to market opportunities only after considerable time has elapsed after first and second movers, substantially reducing risks and returns
Typically, a late response is better than no response at all
Late Movers – characteristics of late movers compared to first and second movers
Discussion points:
Any success achieved from late competitive response tends to be slow and considerably less than that of first and second movers.
Late movers’ competitive actions will allow only average returns, and only when enough time elapses to fully understand how to create value that can attract customers of first and second mover products.
Again, although exceptions exist, late movers’ competitive actions are relatively ineffective compared with those of first and second movers.

23. Organizational Size Small firms Nimble and flexible competitors
Rely on speed and surprise to defend their competitive advantage
Greater variety of competitive behavior options available
Organizational Size – An organization's size affects its likelihood of taking competitive actions.
The difference between large and small firms in terms of their likelihood of taking competitive actions:
Small firms are nimble and flexible competitors who rely on speed and surprise to defend their competitive advantage. This allows greater variety of competitive behavior options available to the small firm.
Large firms have a greater likelihood to initiate competitive and strategic actions over time because they often have greater organizational slack. However, they tend to rely on a limited variety of competitive actions, which can ultimately reduce their competitive success.

24. Organizational Size Large firms Often have greater slack
Greater likelihood to initiate competitive and strategic actions over time
Tend to rely on a limited variety of competitive actions, which can ultimately reduce their competitive success
Organizational Size – In addition to affecting its likelihood of taking competitive actions, an organization's size also affects the types and timing of competitive actions it will take.
What are the differences between large and small firms in terms of their likelihood of taking competitive actions?
Small firms are nimble and flexible competitors who rely on speed and surprise to defend their competitive advantage or to develop new ones. This allows greater a variety of competitive behavior options which are available to the small firm.
Large firms have a greater likelihood to initiate more and stronger competitive and strategic actions over time because they often have greater organizational slack. However, they tend to rely on a limited variety of competitive actions, which can ultimately reduce their competitive success.

25. Quality Key Terms Quality
Customer perception that the firm's goods or services perform in ways that are important to the customer to meet or exceed their expectations
Discussion points:
In the eyes of the customer, quality involves doing the right things relative to performance measures that are important to them.
Some evidence suggests that quality is one of the most critical components of being able to satisfy a firm’s customers.
Quality is only possible when top-level managers support it and when its importance is part of the organizational culture.
Managers need to create an organizational culture that focuses on quality across all value chain activities.
When employees and managers value quality, they are vigilant about continuously finding ways to improve it.
Quality is a universal theme in the global economy.
Quality is a necessary, but not sufficient, condition for competitive success.
How does quality affect competitive rivalry?
If a firm has poor quality, its competitors can predict that it has higher costs and declining sales revenue until its quality issues are resolved.
Firms with poor quality are likely to take less aggressive competitive actions until problems are corrected.
Once market credibility of a firm with poor quality is restored, it is likely to take competitive actions which emphasize significant product quality improvements.
Example: Hyundai
Name some examples of product dimensions that customers use to measure quality.
Performance
Features
Flexibility
Durability
Conformance
Serviceability
Aesthetics
Perceived quality
Name some examples of service dimensions that customers use to measure quality.
Timeliness
Courtesy
Consistency
Convenience
Completeness
Accuracy

26. Dimensions of Quality
Table 6.1: Quality Dimensions of Products – Customers may measure the quality of a firm’s products against a broad range of dimensions.
Discussion points:
Without quality, products and services lack credibility in the marketplace – customers will not see them as viable options to satisfy their needs and expectations. Example: Jaguar

27. Likelihood of Response
Types of competitive action
Actor’s reputation
Dependence on the market
Competitive dynamics
Likelihood of Response – In addition to the factors previously discussed, several factors affect the likelihood a firm will competitively respond to actions by its competitors.
The success of a firm’s competitive action is affected both by the likelihood a competitor will respond to it and by the type (strategic or tactical) and effectiveness of that response.
Discussion points:
Firm is likely to respond to a competitor’s action when:
it significantly strengthens the position of the competitor
it significantly weakens the firm’s competitive position
Types and effectiveness of the competitive action
Reputation of the firm making competitive actions
Firm’s level of dependence on the market for its survival
If the action significantly strengthens or weakens the firm's competitive position

28. Types of Competitive Action
Strategic actions elicit different responses than tactical actions.
Strategic actions generally elicit strategic responses.
Tactical actions generally elicit tactical responses.
Strategic actions elicit fewer total competitive responses.
Actions that target a large number of a rival’s customers are likely to elicit strong responses.
Types of Competitive Action – Competitive responses are affected by the type (strategic or tactical) and effectiveness of competitive actions.
Discussion points:
Competitive responses to strategic actions differ from responses to tactical actions.
These differences allow firms to predict likely responses.
Generally, strategic actions receive strategic responses, and tactical actions are countered with tactical responses.
In contrast to the time required to respond to a strategic action, a competitor likely will respond quickly to a tactical action.
Example: Airlines almost immediately match a competitor’s price reduction in specific markets
If the effects of a competitor’s action on the focal firm are significant (e.g., loss of market share or loss of major resources such as critical employees), a response is likely to be swift and strong.
Why do strategic actions elicit fewer competitive responses?
Strategic responses involve a significant commitment of resources.
Strategic responses are difficult to implement and reverse.
The time needed for a strategic action to be implemented delays the competitor’s response.
The time needed to assess the effectiveness of strategic actions delays the competitor’s response.

29. Actor’s Reputation Key Terms Actor Reputation
Firm taking an action or response (in the context of competitive rivalry)
Reputation
Positive or negative attribute ascribed by one rival to another based on past competitive behavior
Actor’s Reputation – A firm's reputation to its competitors influences the likelihood of a competitive response to their competitive actions.
Discussion points:
A positive reputation may be a source of competitive advantage and high returns, especially for producers of consumer goods.
Consequently, firms usually act aggressively to protect or defend their reputations. Example: Johnson & Johnson’s Tylenol
Examine a firm’s reputation for responding to attacks to predict the likelihood of response to a planned action.
Examples: P&G and J&J
Competitors are more likely to respond to actions taken by market leaders. In particular, successful actions will be quickly imitated.
Example: Personal computers: Apple, IBM, followers
Competitors are less likely to respond to companies with reputations for competitive behavior which is risky, complex, and unpredictable.
Example: Price predators contrasted to Walmart

30. Dependence on the Market
Key Terms
Market dependence
Extent to which a firm's revenues or profits are derived from a particular market
Dependence on the Market – Competitors with high market dependence are likely to respond strongly to attacks threatening their market position.
Examples: Wrigley, Lincoln Electric, and United Airlines
Interestingly, they may not respond quickly, but often take a more calculated approach to increase the effectiveness of the response.
Example: Cooper Tire & Rubber Co.

31. Competitive Dynamics – Three Market Types
Slow-cycle markets
Fast-cycle markets
Standard-cycle markets
Competitive Dynamics – To explain competitive dynamics, we discuss the effects of varying rates of competitive speed in different markets (called slow-cycle, fast-cycle, and standard-cycle markets) on the behavior (actions and responses) of all competitors within a given market. Sustainability of competitive advantage is an important difference among the three market types that are outlined.
Discussion points:
Recall that competitive dynamics concerns the ongoing actions and responses taking place among all firms competing within a market for advantageous positions.
The following discussion will establish that innovation substantially influences competitive dynamics as it affects the actions and responses of all companies competing in a slow-cycle, fast-cycle, or standard-cycle market.

32. Slow-Cycle Markets Key Terms Slow-cycle markets
Markets in which the firm's competitive advantages are shielded from imitation for what are commonly long periods of time and where imitation is costly
Slow-Cycle Markets – Competitive advantages are relatively sustainable in slow-cycle markets.

33. Competitive Advantages in Slow-Cycle Markets
One-of-a-kind proprietary competitive advantage
Orient competitive behavior to protecting, maintaining, and extending that advantage
Competitive Advantages in Slow-Cycle Markets
Discussion points:
Building a one-of-a-kind proprietary competitive advantage leads to competitive success in a slow-cycle market.
It can be sustainable if it is difficult for competitors to understand.
Once a proprietary advantage is developed, the firm’s competitive behavior in a slow-cycle market is oriented to protecting, maintaining, and extending that advantage.
Thus, the competitive dynamics in slow-cycle markets involve all firms concentrating on competitive actions and responses that enable them to protect, maintain, and extend their proprietary competitive advantage.
Examples: Walt Disney Co. proprietary characters and the pharmaceutical industry (see Figure 6.4 or Slide 34 for an illustration of the competitive dynamics that can be applied to the market for new drugs)
From Chapter 4, what leads to difficult-to-understand and costly-to-imitate competitive advantages?
Unique historical conditions
Causal ambiguity
Social complexity
What can become the foundation for one-of-a-kind proprietary competitive advantages?
Copyrights
Geography
Patents
Ownership of an information resource

34. Gradual Erosion of Sustained Competitive Advantage
Figure 6.4: Gradual Erosion of Sustained Competitive Advantage – Figure 6.4 shows the competitive dynamics generated by firms competing in slow-cycle markets.
Discussion points (applied to the market for new drugs):
In slow-cycle markets, firms launch a product (e.g., a new drug) that has been developed through a proprietary advantage (e.g., R&D) and then exploit it for as long as possible while the product is shielded from competition.
Eventually, competitors respond to the action with a counterattack.
In markets for drugs, this counterattack commonly occurs as patents expire, creating the need for another product launch by the firm seeking a shielded market position.

35. Fast-Cycle Markets Key Terms Fast-cycle markets
Markets in which the firm's capabilities that contribute to competitive advantages are not shielded from imitation and where imitation is often rapid and inexpensive
Fast-Cycle Markets – Competitive advantages are not sustainable in fast-cycle markets.

36. Conditions in Fast-Cycle Markets
Complex and rapid strategic decisions
Relatively easy imitation
Unprotected technology
High volatility
Conditions in Fast-Cycle Markets – The pace of competition in fast-cycle markets is almost frenzied as companies rely on ideas and the innovations resulting from them as the engines of their growth.
Discussion points:
High-velocity environments place considerable pressure on top managers to make effective strategic decisions quickly.
Often substantial competition and a technology-based strategic focus make the strategic decisions complex, increasing the need for a comprehensive approach integrated with decision speed.
Competitors can use reverse engineering to quickly gain the knowledge required to imitate or improve the firm’s products, usually in only a few months. Example: PC industry
Technology is diffused rapidly in fast-cycle markets, making it available to competitors in a short period of time.
The technology often used by fast-cycle competitors is not proprietary, nor is it protected by patents, as it is in slow-cycle markets.
Example: Of the parts used to assemble a computer, only a few (such as the microprocessor chip) have patent protection
Fast-cycle markets are more volatile than slow-cycle markets and standard-cycle markets.
Because prices fall quickly in these markets, companies need to introduce new or improved products faster.
Example: Prices of Intel and Advanced Micro Devices microprocessor chips

37. Competitive Advantages in Fast-Cycle Markets
Rapid and continuous development of new competitive advantages – innovation
Temporary competitive advantage
Avoid loyalty to products – willingly cannibalize own products
Competitive Advantages in Fast-Cycle Markets – Innovation has a dominant effect on competitive dynamics in fast-cycle markets.
Firms competing in fast-cycle markets recognize the importance of speed – time is considered a precious resource.
Discussion points:
Focus is on learning how to rapidly and continuously develop new competitive advantages that are superior to those they replace – innovation.
This is contrary to slow-cycle markets where the emphasis is on protecting, maintaining, and extending competitive advantages.
Continually try to move on to another temporary competitive advantage before competitors can respond to the first one.
Avoid loyalty to any of their products, possibly cannibalizing their own current products to launch new ones before competitors learn how to do so through successful imitation.

38. Obtaining Temporary Advantages to Create Sustained Advantage
Figure 6.5: Obtaining Temporary Advantages to Create Sustained Advantage – shows the competitive behavior of firms competing in fast-cycle markets.
Discussion points:
In fast-cycle markets, firms take competitive actions oriented to rapid and continuous product introductions and the use of a stream of ever-changing competitive advantages.
The firm launches a product as a competitive action and then exploits the advantage associated with it for as long as possible.
However, the firm also tries to move to another temporary competitive action before competitors can respond to the first one.
Thus, competitive dynamics in fast-cycle markets, in which all firms seek to achieve new competitive advantages before competitors learn how to effectively respond to current ones, often result in rapid product upgrades as well as quick product innovations.
To repeat, innovation is a key source of competitive advantage in fast-cycle markets.

39. Standard-Cycle Markets
Key Terms
Standard-cycle markets
Markets in which the firm's competitive advantages are moderately shielded from imitation and where imitation is moderately costly
Standard-Cycle Markets – Competitive advantages are partially sustainable in standard-cycle markets.

40. Competitive Advantages in Standard-Cycle Markets
Continuously upgrade quality
Serve many customers and gain a large market share
Gain customer loyalty through brand names
Deliver consistent customer experiences
Competitive Advantages in Standard-Cycle Markets – Firms can achieve competitive success in medium-velocity environments through these efforts.
Discussion points:
Competitive advantages can be partially sustained if quality is continuously upgraded.
Carefully controlled operations are essential to provide customers with a consistently positive experience.
Capabilities on which competitive advantages are based are not particularly specialized.
Imitation is faster and less costly for standard-cycle firms than for those competing in slow-cycle markets.
Imitation is slower and more expensive in these markets than in fast-cycle markets.
The quickness of imitation is reduced and becomes more expensive for standard-cycle competitors when a firm is able to develop economies of scale by combining coordinated and integrated design and manufacturing processes with a large sales volume.
Because of large volumes, the size of mass markets, and the need to develop scale economies, the competition for market share is intense in standard-cycle markets. Example: Battles between Coca-Cola and PepsiCo

41. Ethical Question
When competing against one another, firms jockey for a market position that is advantageous, relative to competitors. In this jockeying, what are the ethical implications associated with the way competitor intelligence is gathered?

42. Ethical Question
Second movers often respond to a first mover’s competitive actions through imitation. Is there anything unethical about a company imitating a competitor’s good or service as a means of engaging in competition?

43. Ethical Question
The standards for competitive rivalry differ in countries throughout the world. What should firms do to cope with these differences? What guidance should a firm give to employees as they deal with competitive actions and competitive responses that are ethical in one country but unethical in others?

44. Ethical Question
In slow-cycle markets, effective competitors are able to shield their competitive advantages from imitation by competitors for relatively long periods of time. However, this is not the case in fast-cycle markets. Do these conditions have implications in terms of ethical business practices? Do ethical standards in slow-cycle markets differ from those in fast-cycle markets?

45. Ethical Question
Is it ethical for the firm competing against a competitor in several markets to launch a competitive response in a market that differs from the one in which that competitor took a competitive action against the local firm? Why or why not?