Chapter 11: Managing Global Competitive Dynamics

Competitive dynamics

Actions and responses undertaken by competing firms.

Competitor analysis

The process of anticipating rivals' actions in order to both revise a firm's plan and prepare to deal with rivals' response.

Collusion

Collective attempts between competing firms to reduce competition.

Tacit collusion

Firms indirectly coordinate actions by signaling their intention to reduce output and maintain pricing above competitive levels.

Explicit collusion

firms directly negotiate output and pricing and divide markets.

Cartel (trust)

An output- and price-fixing entity involving multiple competitors.

Antitrust law

Law that outlaws cartels (trusts).

Prisoners' dilemma

In game theory, a type of game in which the outcome depends on two parties deciding whether to cooperate or to defect.

Game theory

A theory that studies the interactions between two parties that compete and/or cooperate with each other.

Concentration ratio

The percentage of total industry sales accounted for by the top four, eight, or twenty firms.

Price leader

A firm that has a dominant market share and sets "acceptable" prices and margins in the industry.

Capacity to punish

Sufficient resources possessed by a price leader to deter and combat defection.

Market commonality

The overlap between two rivals' markets.

Multimarket competition

Firms engage the same rivals in multiple markets.

Mutual forbearance

Multimarket firms respect their rivals' spheres of influence in certain markets, and their rivals reciprocate, leading to tacit
collusion.

Cross-market retaliation

Retaliatory attacks on a competitor's other markets if this competitor attacks a firm's original market.

Competition policy

Government policy governing the rules of the game in competition.

Antitrust policy

Government policy designed to combat monopolies and cartels.

Collusive price setting

Price setting by monopolists or collusion parties at a level higher than the competitive level.

Predatory pricing

An attempt to monopolize a market by setting prices below cost and intending to raise prices to cover losses in the long run after eliminating rivals.

Dumping

An exporter selling goods below cost.

Antidumping law

Law that makes it illegal for an exporter to sell goods below cost abroad with the intent to raise prices after eliminating
local rivals.

Resource similarity

The extent to which a given competitor possesses strategic endowment comparable, in terms of both type and amount, to those of the focal firm.

Attack

An initial set of actions to gain competitive advantage.

Counterattack

A set of actions in response to attack.

Blue ocean strategy

Strategy that focuses on developing new markets ("blue ocean") and avoids attacking core markets defended by rivals, which is likely to result in a bloody price war or a "red ocean.

Defender

Strategy that centers on local assets in areas in which MNEs are weak.

Extender

Strategy that centers on leveraging homegrown competencies abroad.

Dodger

Strategy that centers on cooperating through joint ventures with MNEs and sell-offs to MNEs.

Contender

Strategy that centers on a firm engaging in rapid learning and then expanding overseas.