how to measure competition
TRANSCRIPT
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Which industry is more
competitiveBeverages like soft drinks (Coke andPepsi), - Dabur
Milk: Nestle, Britannia, Amul, motherdairy, vishaka, Paras
Health drinks (Complan, Horlicks, Boost) Modi, CEAT, Dunlop, Good Year,Brigestone, Michelin India
Microsoft vs. Apple (Operating system)0r Airrbus and Boeing in (Aircraftindustry)
Binani, Ultratech, Ambuja, ACC, IndiaCements, Madras cements, JK cements,Lafarge India
Nestle and Cadbury in chocolate market Mars, Hershey, Nestle, Kraft foods and
Cadbury in GermanyNestle and Hindustan Unilever in Coffeesegment
France Unilever, Colgate-Palmolive,Henkel and Procter and Gamble fordetergent in France
Google vs. Bing
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Behavioral Approach Intent of Top management team
Compete in open market
Collude and fix the market especially in multi marketcompetition
Intent reflected in activities
Intent can be measured through
- Competitive Intelligence/ Competitive Orientation
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Firms ability to act and respond would be reflected incompetitive activities it takes
Hence, intensity of competition can be measured fromcompetitive dynamics theory by virtue of focusing oncertain competitive (generally market based activities)
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Measuring competition: By virtue of activity or
actionFerrier, Smith and Grin Behavioral Theory
of Competitive dynamics
Focus on five types of activities
Pricing action rebate, discount
Marketing action promote, distribute, campaign
Capacity action expand, boost output
Legal action sue, litigate, infringement copy right
infringement, defaming competitor by virtue of ads Signaling action: True or false promises, vows, seeks,
aims
Language wars
Spying (not generally visible)
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Oracle hiring detective agency to spy on Microsoft
Detective agency stole two laptops to obtain certaindata for the bribe of $ 1, 200
P&G hired competitive intelligence consulting firm togain information on hair care business of Unilever
Luxury goods retailer hired Deloitte and Touch whichprovided consultancy in computer forensics
They entered as repairmen in closed offices to copyhard drives of three key employees
In India, information on sales figure
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Based on these parameters Total competitive activity
Speed of response of competitive activity
Sony video games vs. Microsoft 2 days
New version Car earlier 3-5 years now just 20 months
Action repertoire simplicity: share or proportion of
competitive actions in the particular action category pi
2, where pi = proportion of one type of competitiveaction to total number of competitive actions.
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Attack imitation: Similarity of moves Leading toinstitutionalization
Competitive action speed: actual time gap betweenvarious strategic actions taken by a particular firm
Strategic action announcement - implementationtime lag
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Predicting cartel formation Tata Swach vs. Pureit
Gujrat Ambuja, ACC cements and Ultratech Cements
Meausring competitive activities For the last year i.e. 2011
Competitive intensity: Average of total sum ofactivities taken by firms
- Filter water 4 activities
- Cement industry 0.2
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Complexity of actions:
- Distribution channel enhancement (tie ups with
NGOs)- Brand promotion through health campaigns andcelebrity endorsement
- Legal infringement for notifying false quality
standards-Launch of new variants of purifier in low cost category
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After calculation 0.25
For cement industry 2.24
Only capacity expansion decision and new variantcement launch by Gujrat Ambuja
Attack Imitation
- water purifier industry: capacity expansion
announcement almost simultaneously, similar type ofhealth awareness promos
-new variants both firms working on
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Attack imitation is more visible in insurance andautomobile industry making a particular activityalmost critical success factor
- sharing distribution resources of banks
Cement industry capacity expansion
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Competitive action speed
- for water purifier 15 days
- for cement industry more than 200 days
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Growth measures and internal measures like efficiencynot considered
Eg: technology transfer for process improvement, if oracquisition to gain complementary assets to buildcapabilities
Poaching can have direct impact on competitive
intensity
If firms take more such activities, their performancewill improve and will have implication for
competitiveness also
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Magnitude of response not measured
Eg: resource exhausted in capacity expansion orcelebrity endorsement, no more activities can be done
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Strategic market based actions gap:
- In strategic: consider other activities across value
chain which can have direct impact oncompetitiveness of the firm
In water purifier industry the gap was 2 on an averageand in cement gap was 3.8
Magnitude of activity: Assign weights to activities
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