COMPETITIVE DYNAMICS Session I

Business is a game of war and sports

-Andre Maurois (1885-1967)

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COMPETITION
• Competition in an industry is defined as a tension between the value generated from
transactions that a firm undertakes with a given set of agents and the forgone value
it could have generated from transactions with other agents. (Brandenburger and
Harborne, 1996); Article published in HBR entitled, ‘ The New Dynamics of
Competition’.

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GAME THEORY
Propounded by: John von Neumann and Oskar Morgenstern
Book: Theory of Games and Economic Behaviour, 1944
Zero Sum Game
Prisoner’s Dilemma
Any alternative?
Answer for head-too-head collusion?

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TYPE OF STRATEGIC INTERACTION
Strategic interactions occur when a firm’s business model affects the performance of
its competitors, suppliers, customers, and complementors. Four types of strategic
interactions can occur along two dimensions:
Value creation(creating a bigger pie)
Value capture (How to divide the pie)
Competitive interaction (how others might shrink the pie)
Cooperative interaction (how a firm work with others to make the pie bigger)

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FOUR TYPES OF STRATEGIC INTERACTIONS

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 A Dynamic Process Model for Managing
Marketplace Competition

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MICHAEL PORTER’S INTEGRATIVE FRAMEWORK
FOR PLAYER ANALYSIS

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 Google’s Competitive Landscape

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MARKET PLACE POSITIONS
Total market share
New customers
New markets
More usage
Different usage

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 Examples of Marketplace Positions

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 SUV Competitive-Strength Assessment

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 Examples of Companies That
Changed the Game

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 The Comparative Ad War
Between Audi and BMW

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TYPES OF DEFENSE STRATEGIES

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MARKET CHALLENGERS
Define the strategic objective and opponents
Choose a general attack strategy
 Frontal attack
 Flank attack
 Encirclement attack
 Bypass attack
 Guerilla warfare
 Attack from regional champions

Choose a specific attack strategy

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MARKET FOLLOWERS
Counterfeiter

 Cloner
 Imitator
 Adapter

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NICHE STRATEGIES
Create
Expand
Protect

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JUDO STRATEGY
Article: Judo Strategy: The competitive Dynamics of Internet times
Author(s): David B. Yoffie and Michael A. Cusumano
Year: 1999
What is Judo Strategy?
Judo strategy is based on three elements:
•Rapid movement
•Flexibility
•Leverage

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PRINCIPLES
1. Move rapidly to uncontested ground to avoid head –to-head conflict
2. Be flexible and give way when attacked directly by superior forces
3. Exploit leverage that uses the weight and strength of opponents against them

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SALES AND PROFIT LIFE CYCLES

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COMMON PLC PATTERNS: GROWTH-SLUMP-
MATURITY

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COMMON PLC PATTERNS: CYCLE-RECYCLE

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COMMON PLC PATTERNS: SCALLOPED

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STYLE, FASHION, AND FAD LIFE CYCLES

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MARKETING IN AN ECONOMIC DOWNTURN
Invest
Get close to customers
Review budgets
Use a compelling value proposition
Fine-tune offerings

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 Marketing
Resources and
Capabilities

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