Domino's Pizza

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Model of Interfirm Rivalry Likelihood of Attack
and Response
Drivers of Competitive Behavior
Outcomes
Ability for Action and Response
Interfirm Rivalry Attack Response
Competitive
Market Types
Awareness
Slow, Standard
Motivation
Relative Size
or Fast Cycle
Likelihood of Attack
Capability
First Mover Incentives
Speed
Competitive
Innovation
Outcomes
Likelihood of Response
Sustained
Quality
Type of Competitive
Competitive
Competitor Analysis
Action
Advantage
Actors Reputation
Temporary
Dependence on the
Advantage
Market
Evolutionary
Resource Availability
Outcomes
Entrepreneurial
Growth-Oriented
Feedback
or Market-Power
Actions
2
Model of Interfirm Rivalry Likelihood of Attack
and Response
Drivers of Competitive Behavior
Do managers understand the key characteristics of
competitors?
Awareness
Motivation
Capability
3
Model of Interfirm Rivalry Likelihood of Attack
and Response
Drivers of Competitive Behavior
Awareness
Does the firm have appropriate incentives to
attack or respond?
Motivation
Capability
4
Model of Interfirm Rivalry Likelihood of Attack
and Response
Drivers of Competitive Behavior
Awareness
Motivation
Does the firm have the necessary resources to
attack or respond?
Capability
5
Model of Interfirm Rivalry Likelihood of Attack
and Response
Competitor Analysis
Market Commonality
Do firms compete with each other in multiple
markets?
Resource Similarity
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Model of Interfirm Rivalry Likelihood of Attack
and Response
Competitor Analysis
Multipoint competition tends to reduce
competitive interactions, but increases the
likelihood of response where interaction occurs
Market Commonality
Resource Similarity
For example, airlines price flights similarly,
but respond quickly when competitors introduce
promotional prices
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Model of Interfirm Rivalry Likelihood of Attack
and Response
Competitor Analysis
Market Commonality
Resource Similarity
Do competitors possess similar types or amounts
of resources?
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Model of Interfirm Rivalry Likelihood of Attack
and Response
Competitor Analysis
Market Commonality
Firms are less inclined to attack a firm that is
likely to retaliate
Resource Similarity
Firms with similar resources are more likely to
be aware of each others competitive moves
Firms with dissimilar resources are more likely
to attack
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Model of Interfirm Rivalry Likelihood of Attack
and Response
Interfirm Rivalry Attack Response
Likelihood of Attack
First Mover Incentives
Likelihood of Response
Type of Competitive
Action
Actors Reputation
Dependence on the
Market
Resource Availability
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First Mover
Firms that take an initial competitive action
Generally possess the resources and capabilities
that enable them to be pioneers in new products,
new markets or new technologies
Can earn above average profits until competitors
respond
Gain customer loyalty, helping to create a
barrier to entry by competitors
Advantage depends upon difficulty of imitation
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Second Mover
Second Mover
Firms that respond to a First Movers actions
Second Movers frequently imitate First Movers
Speed of response often dictates success
Should evaluate customers response before moving
Fast Second Movers can capture some of initial
customers and develop some brand loyalty
Avoid some of the risks associated with First Move
Must possess necessary capabilities to imitate
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Model of Interfirm Rivalry Likelihood of Attack
and Response
Interfirm Rivalry Attack Response
Likelihood of Attack
First Mover Incentives
Likelihood of Response
Type of Competitive
Whether a competitor is likely to respond depends
on several key factors
Action
Actors Reputation
Dependence on the
Market
Resource Availability
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Types of Competitive Actions
Significant commitments of specific distinctive
organizational resources
Strategic Actions
Difficult to implement
Difficult to reverse
Major Acquisition
Example
Undertaken to fine tune strategy
Tactical Actions
Relatively easy to implement
Relatively easy to reverse
Price cut
Example
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Gauging the Likelihood of Response
Type of Competitive Action -Tactical or Strategic
Easier to respond to
Require fewer resources to mount a response
Actors Reputation
Market leaders are more likely to be copied
Risk taking firms are less likely to be copied
Price Predators are less likely to be copied
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Gauging the Likelihood of Response
Market Dependence
Firms that are more dependent on a single
industry are more likely to respond than are
diversified firms
Industry dependent firms will likely respond to
either strategic or tactical actions
Competitor Resources
Smaller firms are more likely to respond to
tactical actions
Limited resources may lead to alternatives such
as Strategic Alliances
16
Model of Interfirm Rivalry Likelihood of Attack
and Response
Ability for Action and Response
Firm size can have opposing effects on
competitive dynamics
Relative Size
Speed
Innovation
Quality
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Model of Interfirm Rivalry Likelihood of Attack
and Response
Ability for Action and Response
Large firms may exert market power over rivals
and erect barriers to entry against smaller
competitors
Relative Size
However, smaller competitors may be more nimble
and innovative
Speed
Innovation
Quality
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Model of Interfirm Rivalry Likelihood of Attack
and Response
Ability for Action and Response
Think and act big and well get smaller. Think
and act small and well get bigger.
Relative Size
Speed
Herb Kelleher, CEO, Southwest Airlines
Innovation
Quality
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Model of Interfirm Rivalry Likelihood of Attack
and Response
Ability for Action and Response
Relative Size
Quick response is crucial to both the first mover
and the fast second mover
Speed
Innovation
Quality
20
Model of Interfirm Rivalry Likelihood of Attack
and Response
Ability for Action and Response
Relative Size
Speed
Consistent innovation is required for market
leadership in many dynamic industries
Innovation
Quality
21
Model of Interfirm Rivalry Likelihood of Attack
and Response
Ability for Action and Response
Relative Size
Speed
Innovation
Exceeding customer expectations is a necessity to
compete in the 1990s
Quality
22
Model of Interfirm Rivalry Likelihood of Attack
and Response
Outcomes
Competitive Market Types
Slow, Standard or Fast Cycle
Competitive Outcomes
Sustained Competitive
Advantage
Temporary Advantage
Evolutionary Outcomes
Evolutionary Actions Growth-Oriented Actions
Market-Power Actions
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Model of Interfirm Rivalry Likelihood of Attack
and Response
Outcomes
Competitive Market Types
Slow cycle markets are frequently shielded by
monopoly power or very strong brand loyalties
Slow, Standard or Fast Cycle
Competitive Outcomes
Sustained Competitive
Advantage
This market outcome and lack of interfirm rivalry
may lead to sustained competitive advantage
Temporary Advantage
Evolutionary Outcomes
Evolutionary Actions Growth-Oriented Actions
Market-Power Actions
24
Model of Interfirm Rivalry Likelihood of Attack
and Response
Outcomes
Standard cycle markets often lead to highly
competitive pressures despite world class products
Competitive Market Types
Slow, Standard or Fast Cycle
Competitive Outcomes
Sustained Competitive
Advantage
Firms with multimarket competition may dampen
rivalry somewhat
Temporary Advantage
Evolutionary Outcomes
Evolutionary Actions Growth-Oriented Actions
Market-Power Actions
Sustained competitive advantage is a possible
outcome in this instance
25
Model of Interfirm Rivalry Likelihood of Attack
and Response
Outcomes
Fast cycle markets are intensely dynamic and a
first mover advantage is often unsustainable
Competitive Market Types
Slow, Standard or Fast Cycle
Competitive Outcomes
Sustained Competitive
Firms may cannibalize older generation products
while introducing new innovative premium products
Advantage
Temporary Advantage
Evolutionary Outcomes
Evolutionary Actions Growth-Oriented Actions
Market-Power Actions
Sustainable competitive advantage is unilkely
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Sustained Competitive Advantage which Eventually
Erodes
Returns from a Sustained Competitive Advantage
Exploitation
Counterattack
Launch
Time (years)
10
27
Some Firms Maintain Competitive Advantage in
Fast-Cycle Markets by Seizing the Initiative
Disrupting the Status Quo
1
Identify new opportuntites to serve the customer
by shifting the rules of competition through
speed and variety
Creating Temporary Advantage
2
Use superior knowledge of the customer,
technology and the future to enhance customer
orientation and empower workers
Seizing the Initiative
3
Move aggressively into new areas of competition
to create new advantage and undermine a
competitors old advantage
Sustaining the Momentum
4
Take several actions in a row in order to seize
the initiative and create momentum to develop new
advantages
28
Obtaining Temporary Advantages to Create
Sustained Advantage
Returns from a Sustained Competitive Advantage
Firm has already moved on to Advantage No. 2
Exploitation
Counterattack
Launch
10
5
15
Time (years)
29
Obtaining Temporary Advantages to Create
Sustained Advantage
Returns from a Sustained Competitive Advantage
Firm continues to move on to the next Advantage
Exploitation
Counterattack
Launch
10
5
15
Time (years)
30
An Action-Based Model of the Industry Life Cycle
Key Task
Key Task
Key Task
Exploiting Open Niches (Blind Spots) and
Competitive Uncertainty
Exploiting Factors of Production
Exploiting Market Position
Firm Resource Market Strength
Market-Power Actions
Growth-Oriented Actions
Entrepreneurial Actions
Emerging Stage
Growth Stage
Mature Stage
Time