Competitors - Competitive Behavior and Rivalry

Competitors are firms operating in the same market, offering similar products, and targeting similar customers (Hitt, 2011). Wal-Mart and Target are competitors, as are McDonald's, Burger King and Wendy's. These names are quiet familiar to us as we are continuously exposed to their marketing, advertisements and product lines. As organizations are essential for the survival of an industry, industries can only grow when fair competition is present and performing efficiently.

Competitive rivalry is defined by Hitt, Ireland, and Hoskisson as "the ongoing set of competitive actions and competitive responses that occur among firms as they maneuver for an advantageous market position." (2011) These types of actions and responses allow industries to grow and the economy to perform effectively. The rivalry between Wendy's and Mc Donald's has allowed the fast food industry to grow in size, presentation, products and demand.

Competitive behavior is defined as "the set of competitive actions and responses the firm takes to build or defend its competitive advantages and to prove its market position." (Ireland, Hitt, Hoskisson, 2011) These behaviors can be seen in marketing campaigns and advertisements on television and other marketing mediums. An example of competitive behavior is the automotive industry. Every year many members of this industry introduce newer models of automobile to the general consumer that are focused on popular demands of their lifestyle. Automobile marketers are continuously inventing new and creative programs to induce customers to purchase and reconsider their brand. Ford's Swap Your Ride marketing, for example, aims at changing consumer perceptions about Ford by giving consumers the chance to exchange their competitive-make vehicle and experience a new Ford for a week (Ford Media, 2011). This marketing campaign represents part of the competitive dynamic of Ford.

Competitive dynamics is defined by Hitt, Ireland, and Hoskisson as "the total set of actions and responses taken by all firms competing within a market." (2011) These dynamics allow the consumer to enjoy innovative features in the products we purchase as well as gain a better value to the products that are available to purchase. Through the presence of competition consumers are able to shop for the right product that fits their need at the right price.

The level of competition in a market is tied to the number of different markets that the firm and the competitors are jointly involved with. Referred to as market commonality it pertains to the degree of importance of the individual markets to each. There are many firms competing against one another in many market areas which engage them in multimarket competition. Firms with more multimarket contacts are less likely to initiate an attack, but more likely to respond aggressively when they are attacked. The degree of multimarket contact between two firms determines whether they are direct and immediate competitors.

Within a common market firms must assess what resources their competitors share to determine the best competitive strategy. Resource similarity refers to how comparable the firm's tangible and intangible resources are to a competitor's in terms of both types and amounts. Firms with similar types and amounts of resources are likely to have similar strengths, similar weaknesses, and use similar strategies. Assessing resource similarity can be difficult if critical resources are intangible rather than tangible.

Two firms will recognize their competitive relationship if they compete in the same markets and develop comparable market personalities. In a competitive situation, a firm has to be motivated to act or react, regardless of its capability (Chen, 2004). Motivation is a necessary condition and prereq for behavior, and is a more direct predictor of inter-firm rivalry than is capability (Chen, 2004).

These two concepts are the building blocks for a competitor's analysis. This analysis is used to help firms understand their competitors. The firm will study the competitor's future objectives and current strategies. By doing the competitor analysis, firms are able to predict the competitor's behaviors when forming their competitive actions and response. If you line the two side by side, market commonality and resource similarity coincides with one another when putting a competitor analysis together. Traits from both area allow all necessary information to be analyzed and compiled into a complete analysis. In market commonality it allows the firm to put number on all the firms within the market and how each acts/works within that market and against each other. In resource similarity is shows how comparable the firms are in both areas and how they compare to one another in each of those markets they are involved in.

Market commonality and resource similarity both influence the awareness, motivation, and ability of the competitive actions and responses which drive competitive behavior. Awareness is the preceding factor for any competitive action or response. The extent of action and reaction to an activity is based upon the level of awareness by the firm. The level of awareness is typically higher for firms when they have similar resources in both type and amounts. Joint awareness, between two competing firms within the same market, allows those firms to understand each other in terms of their similar business activities.

Motivation provides the incentive for a firm to take action against a competitor's activities. These actions relate to the perceived gains and/or losses that may occur from the actions of the competitor. The motivation behind the response or action from one firm to another may depend on the overall goals of the particular firm. For instance, a firm may be aware of the competitive activities of their competitor, but do not recognize enough incentive to provide the motivation for action. Market commonality is one of the biggest