Question

Q4:    Distinguish between market commonality and resource similarity. Apply these concepts to two rival firms that you are familiar with.

Q5:    Discuss the ethics of cooperating with rival firms.

Q6:      Give some advantages and disadvantages of cooperative versus competitive strategies.

Answer 1

Market Commonality

Number of markets firms and competitors are jointly involved in
-firms that have market commonality also have mulitmarket comp.

Resource similarity

extent to which the firms tangible and intangible resources are comparable to a competitor.

The importance of market commonality and resource similarity

The building blocks for competitor analysis because it indicates the extent to which firms are competitors.

Market commonality and resource similarity quadrants

• the firms show high market commonality and high resource similarity (directly and mutually acknowledge as competitors)
• low m.c and r.s meaning that although in similar markets they aren't directly and mutually acknowledged as competitors

The greater the commonality and resource similarity, the more direct the competitors

Three more specific factors that affect the likelihood a competitor will take competitive actions

• First Movers: take an initial competitive action, gain loyal customers and earn AAR
• Second Movers: (Firms response to the first movers) evaluating and reacting to the first movers product, can avoid first entrants mistakes
• Late Movers: respond a long time after the original action took place (low performers, less competition)

Q5

Cooperative Strategy

• -A strategy in which firms work together to achieve a shared objective

Cooperating with other firms in a strategy that:

• -creates value for the customer

• establishes a favorable position relative to competitors

For a company's Strategy to qualify as "ethical" it is important

• For the strategy not to entail actions or behaviors that cross the moral line from "should do" to "should not do" (because such actions are unsavory, unconscionable, injurious to others, or unnecessarily harmful to the environment).

The need to keep strategy in step with changing market conditions and shifting buyer needs and preferences

• New management ideas for improving the strategy
• A need to respond to the newly-initiated actions and competitive moves of rival firms.

Q6

• Cooperative strategies are generally less costly than competitive strategies.Cooperative strategies between domestic and foreign companies can facilitate entry intoworld markets. However, competitive strategies recognize that survival of the fittest is anunderlying philosophy of business in the United States and most of the rest of the world.Identifying competitors ’ strengths and weaknesses is, thus, an integral and vital part ofthe external audit.