Competitive Dynamics

Actions taken by one firm often elicit responses from competitors. These responses, in turn, typically result in responses from the firms that acted originally The series of competitive actions and competitive responses among firms competing within a particular industry creates COMPETITIVE DYNAMICS. Such dynamic competitive interaction often shapes the competitive position of firms undertaking the business-level strategies and to some extent, corporate strategies (product diversification, international diversification, and cooperative strategies).

Overtime, firms competing in an industry are involved with a number of competitive actions and competitive responses. Competitive rivalry exists when two or more firms jockey with one another in the pursuit of an advantageous market position. Competitive rivalry takes place between and among firms because one or more competitors feel pressure or see opportunities to improve their markel position. In most industries, a firm's competitive actions have observable effects on its competitors and may cause responses designed to counter the action.

Mutual Independence among firms means that strategic competitiveness and above-average returns result only when companies recognize that their strategies are not implemented in isolation from their competitors' actions and responses.

Competitor Analysis begins with analyzing competitor awareness and motivation to attack and respond to competitive action. AWARENESS refers to whether or not the attacking or responding firm is aware of the competitive market characteristics such as the market commonality and the resource similarity of a potential attacker