Question 1: Who are competitors? How are competitive rivalry, competitive behaviour and competitive dynamics defined in the chapter?
Competitors are firms or organizations operating in the same market that offer similar products and services and also target the same customers.
Competitive rivalry is defined an ongoing series of competitive actions that takes place between competitors as they assert to attain market positions that are advantageous over their competitors.
Competitive behaviour is a series of tactical competitive actions and responses taken by an individual firm while it is actively involved in competitive rivalry.
Competitive dynamics are a set of actions or responses that are taken by all firms or organizations that are competing within a certain market.
Question 3: How do awareness, motivation and ability affect the firm’s competitive behaviour?
Awareness is defined as the extent to which market competitors recognize their mutual interdependence degree that essentially results from resource similarity and high market commonality. Resource similarity refers to the extent or level to which an organization’s resources are comparable to those of competitors in terms of amount and type. Market commonality is the number of active markets in which an organization and its competitor are mutually involved in and the degree of importance of each market. In light of this, awareness is actually one of the primary drivers of any competitive behaviour. It is a prerequisite to all competitive actions or even responses adopted by any organization or firm. Awareness tends to be highest when organizations have a great number of similar resources.
Motivation is an organization’s incentive to respond to a rival firms attack or to attack a competitive firm. A high level of motivation increases the possibility that a firm that has been attacked will respond to the actions taken by the competitor. Motivation is also increased by a high level of market commonality.
Ability refers to the quality of an organization’s resources and the litheness these resources provide. The possession of knowledge of a competitor’s abilities increases the accuracy of an organization’s predictions about the potential actions and responses of a competitor.
Question 1: What is corporate-level strategy and why is it important?
Corporate Level Strategy is a set of strategic options adopted by a firm to acquire competitive advantage through management of several business units that are competing in various industries, product markets or geographical locations. This strategy affects an organization as whole. A corporate level strategy is essentially concerned with two primary points:
- The business that an organization should be involved in
- How the corporate office should manage its group of businesses
Corporate level strategies are in real sense aimed at enhancing an organization’s strategic competitiveness as well as contributing to earn returns that are above average.
Question 4: How do firms create value when using a related diversification strategy?
Companies often implement diversification strategies that are related in order to attain and develop economies of scope as well as build competitive advantage by building on already existing capabilities, core competencies and resources between different business units. Economies of scope are the cost savings that are accredited to the transference of competencies and capabilities developed in one business to relatively new business without considerable additional costs. In simple terms, firms realize economies of scope when they are able to transfer core competencies and capabilities from one specific business without actually incurring additional costs. The creation of value from the economies of scope is through corporate relatedness and operational relatedness. Operational relatedness refers to the sharing of activities while corporate relatedness refers to the sharing of core competencies. In operational relatedness, firms should strive to share both primary and support activities efficiently so as to create economies of scope while in corporate relatedness; the sharing should mainly be concentrated on intangible resources because they form the essential foundation of the core competencies.
Hanson, D., Hitt, M. A., Ireland, R. D., & Hoskisson, R. E 2013, Strategic management: Competitiveness and globalisation.