Competitive Dynamics: Competition as Action-Response

Abstract

This note provides a guide for exploring interfirm rivalry through the dyadic lens and for predicting competitive responses using the awareness-motivation-capability perspective, with the goal of expanding strategists' understanding and management of competitive engagements at the most basic level. Competitive dynamics is the analysis of competition at the action and response level to predict how a firm will act or react against opponents. Understanding engagements at this level is essential because this is where firms enact their strategies, test their opponents' mettle and capabilities, defend their reputations, and signal their toughness--that is, where business rivalry occurs. The dyadic or pair-wise approach of competitive dynamics makes possible focused analysis that complements Michael Porter's conventional industry structure and its extension, the strategic groups approach.

Excerpt

UVA-S-0123

Rev. Oct. 30, 2018

Competitive Dynamics: Competition as Action-Response

Competitive dynamics research has emerged in the strategic management literature over the last decade or so. Though geared primarily to an academic audience, this line of research also has strong practical implications. It has two basic premises:

Competition (or the rivalry between firms) can best be understood and managed at the action-response level.

Competitor analysis, with the ultimate purpose of predicting how a firm will act or react against its opponent(s), should be carried out in pairs.

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Keywords: competitive dynamics, interfirm rivalry