What is a Competitive Response?
Competitive response is a type of competitive action carried out by a firm in direct or indirect reaction to an initial action from a rival firm. Then based on individual firm grading parameters, determine the extent to which the response objective was achieved or fulfilled.
Information from an analysis of the competitor's objectives, assumptions, strategy, and capabilities can be compiled into a response profile of possible moves that might be made by the competitor. This profile includes both potential offensive and defensive moves. For example, Increasing price and improving quality by introducing a new product to bracket the attacking brand. Launching a low-price fighter line or creating a separate lower-price brand to combat competition. The company may selectively respond to such price cuts to avoid an all out war. For instance, the company may give quantity discounts. It may engage in value pricing, i.e., charge a higher price from customers who want more features, and lesser price from those who want a stripped down version of the product. When a firm considers initiating a price change, it must consider customers’ and competitors’ reactions.
If there was no
competition in the markets, companies would neglect technological
development and cost reduction efforts. If one manufacturer monopolized
one market by ousting its rivals, there would be no competition in the market.
As a result, we would not be able to choose products of better quality and
lower prices. The lack of competitive pressure
makes it possible for a monopolist to gain at the expense of efficiency. Thus,
when competition is weak or totally absent, markets will fail to allocate goods efficiently the available quantity without paying. National defense and a
just legal system are two examples of public goods. Although knowledge of a
competitor’s size, objectives and capability (strengths and weaknesses) can
provide the strategist with a reasonable understanding of possible response to
company move such as price cuts, the launch of new products, and so on, other
factors need to be examined.
The intent of a competitor analysis is to develop a
profile of the nature and success of the likely strategy changes each
competitor might make, each competitor's probable response to the range of
possible strategic moves other firms could initiate, and each competitor's
feasible reaction to the range of industry changes and broader environmental
shifts that might occur.
Profiling your competitors allows you to understand a range of key information about their business – including what prices they charge for their products, where they find their customers and how they advertise.
Researching competing businesses to create a competitor profile will help you to see gaps in the market that your business can meet. For example, if your competitors do not have an online presence, you might be able to attract customers by offering your products and services online.
One of the most important of these is the organization’s
culture, which ultimately determines how the firm will do business and hence
how it will act in the future. SBI decided to take competition head-on from the
private MNC banks in India; hence invested heavily on ATMs, CRM technology and
staff training.
It decided to give debit cards to all its customers and
directed all seven SBI affiliates to follow the same track. It displayed the
board Tully computerized branch’ at branch entrances. But SBI staff was
reluctant to follow the technological practices in the beginning and they
adhered to government procedures and RBI manuals. They refuse to take the risk
associated with data mismatch or non-display of transactions.
Finally
the customers who followed the e-campaign were trapped, with no assistance. SBI
later sorted out this problem by infusing cultural changes and changing the
mindset of its frontline staff by portraying the pride of government against
the competitor s image (mainly that of ICICI bank).
It was
in March 2004, that the first major price war between HUL and P&G broke
out. ... This time around, P&G has effected an across-the-board cut of 20%
and Tide is priced at Rs 56/kg, down from Rs 70/kg and Tide
Naturals will now cost Rs 40/kg, down 20% from Rs 50/kg
TheCincinati-headquartered multinational was also effectively repositioning Tide
in the popular segment. Since P&Gs market share, in most of the categories
that it had a presence in, was less than 10%it was little over that in
detergentsit had little to lose by unleashing a price war. On the other hand,
for a market leader like HUL, which had all along commanded a share of 50% of
the detergents market, it meant coming down the price ladder, cutting prices by
almost 20% and taking a hit on margins unless it wanted to risk market share
and volumes. Of course, HUL had little choice but to lower prices. Other players followed the trend
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