competitive analysis

Marketing Letters 5:3, (1994): 271-287
© 1994 K|uwer Academic Publishers, Manufactured in the Netherlands.

Competitive Analysis
ROHIT DESHPANDÉ
E. B. Osborn Professor of Marketing, Amos Tuck School, Dartmouth College, Hanover, NH
03755, [phone]

HUBERT GATIGNON
Associate Professor of Marketing, Wharton School, University of Pennsylwmia, Philadelphia,
PA 19104, [phone].

Key words: competitive analysis information, competitive marketing decision making
A bstract

Despite the strategic importance of understanding competitive structure and the dynamics of competitive behavior, there has been almost no empirical study of how managers perform these analyses. We provide a conceptualization of how competitive analyses can be framed by decision makers and for researching how human biases in decision making and corporate culture impact on the nature and use of competitive analysis information.
Competitive analysis is considered essential for understanding the environment in which a firm operates. It has a significant effect on the strategies that the firm adopts in order to achieve and to sustain a competitive advantage and, consequently, to improve performance. However, there is surprisingly little empirical work on competitive decision making, especially in marketing. This paper describes the major perspectives that have been used to understand competitive analysis by showing how such analyses can be or are framed by decision makers.
Figure 1 provides an overview of how information processing and cultural biases influence the strategies and p e r f o r m a n c e of firms. As can be seen in Figure 1, we can conceive of competitive anlayses being framed within individual and organizational contexts. Each of these contexts produce certain biases that affect the nature of decisions made. Our paper proceeds by first describing the methods for understanding competitive structure - for understanding the actions taken and
strategies

References: Bazerman, M. H., and J. S. Carroll. (1987). "Negotiator Cognition." In B. M. Staw and L. L. Brown, John Seeley. (1993). "Keynote Address: Seeing Differently." Marketing Science Institute conference, Wharton School, Philadelphia, February 18. Buzzell, Robert D., Bradley T. Gale, and Ralph G. M. Sultan. (1975). "Market Share: A Key to Profitability," Harvard Business Review (January-February), 97-106. CA Magazine. (1992). "Competitiveness Linked to Quality" (April), 15-16. Carpenter, Gregory S., Lee G. Cooper, Dominique M. Hanssens, and David Midgley. (1988). Carpenter, Gregory S., and Donald R. Lehmann. (1985). "A Model of Marketing Mix, Brand Switching, and Competition," Journal of Marketing Research, 22 (August) 318-329. Cooper, Lee G., and Masao Nakanishi. (1988). Market-Share Analysis: Evaluating Competitive Marketing Effectiveness Cyert, Richard M., and James G. March. (1965). A Behavioral Theory of the Firm. Englewood Cliffs, NJ: Prentice-Hall. Day, Diana L., Wayne S. DeSarbo, and Terence A. Oliva. (1987). "Strategy Maps: A Spatial Representation of Intra-Industry Competitive Strategy," Management Science, 33(12) (December), 1534-1551. Day, George S., and Prakash Nedungadi. (1993). "Managerial Representations of Competitive Advantage." Working Paper, Wharton School, University of Pennsylvania. Day, George S., and Allan D. Shocker. (1976). "Identifying Competitive Product-Market Boundaries: Strategic and Analytical Issues." Working Paper No. 76-112, Cambridge, MA: Marketing Science Institute. Day, George S., Allan D. Shocker, and Rajendra K. Srivastava. (1979). "Customer-Oriented Approaches to Identifying Product-Markets," Journal of Marketing, 43 (Fall), 8-19. Deshpandé, Rohit, and Frederick E. Webster, Jr. (1989). "Organizational Culture and Marketing: Defining the Research Agenda," Journal of Marketing, 53 (January), 3-15. Deshpandé, Rohit, John U. Farley, and Frederick E. Webster, Jr. (1993). "Corporate Culture, Customer Orientation, and Innovativeness in Japanese Firms: A Quadrad Analysis," Journal oJ Einhorn, H., and R. Hogarth. (1981). "Behavioral Decision Theory: Processes of Judgements and Choice," Annual Review of Psychology, 32, 53-88. Feldman, Martha, and James G. March. (1981). "Information in Organizations as Signal and Symbol," Administrative Science Quarterly, 26, 171-186. Fischhoff, Baruch. (1982). "Latitude and Platitudes: How Much Credit Do People Deserve?" In Gerardo Ungson and Daniel Braunstein (eds.), Decision Making: An Interdisciplinary lnquiry Gatignon, Hubert. (1984). "Competition as a Moderator of the Effect of Advertising on Sales," Journal of Marketing Research, 21, 4 (November), 387-398. Gatignon, Hubert, Erin Anderson, and Kristiaan Helsen. (1989). "Competitive Reactions to Market Entry: Explaining Interfirm Differences," Journal of Marketing Research, 26, 1 (February), 44-55. Ghoshal, Sumantra, and D. Eleanor Westney. (1991). "Organizing Competitor Analysis Systems," Strategic Management Journal, 12, 17-31. Grover, Rajiv, and V. Srinivasan. (1987). "A Simultaneous Approach to Market Segmentation and Market Structuring," Journal of Marketing Research, 24 (May), 139-153. Hambrick, Donald C. (1983). "Some Tests of the Effectiveness and Functional Attributes of Miles and Snow 's Strategic Types," Academy of Management Journal, 26(1), 5-26. Hambrick, Donald C., James W. Frederickson, Lester B. Korn, and Richard M. Ferry. (1989). Hanssens, Dominique M. (1980). "Market Response, Competitive Behavior and Time Series Analysis," Journal of Marketing Research, 17(4) (November), 470B85. Hofstede, Geert. (1980). Culture 's Consequenees: International Differences in Work-Related Values. Beverly Hills, CA: Sage. Hofstede, Geert, Bram Neuijen, Denise Ohayu, and Geert Sanders (1990), "Measuring Organizational Cultures: A Qualitative and Quantitative Study Across Twenty Cases," Administrative Seience Quarterly Kamakura, Wagner A., and Garry J. Russell. (1989). "A Probabilistic Choice Model for Market Segmentation and Elasticity Structure," Journal of Marketing Resarch, 26 (November), 379391. Kahn, Alfie. (1992). No Contest: The Case Against Competition. Boston: Houghton Miffiin. Lambin, Jean-Jacques. (1976). Advertising, Competition and Market Canduct in Oligopoly Over Time Lambin, Jean-Jacques, Philippe Naert, and Alain Bultez. (1975). "Optimal Marketing Behavior in Oligopoly," European Economic Review, 6, 105-128. Lattin, James J., and Leigh McAlister. (1985). "Using a Variety Seeking Model to Identify Substitute and Complementary Relationships Among Competing Products," Journal of Marketing Research, 22 (August), 330-339. Leeflang, Peter S. H., and Dick Wittink. (1992). "Diagnosing Competitive Reactions Using (aggregated) Scanner Data," International Journal of Research in Marketing, 9, 39-57. March, James G., and Guje Sevon. (1984). "Gossip, Information, and Decision Making." In Lee Sproull and Patrick Larkey (eds.), Advances in Information Processing in Organizations March, James G., and Zur Shapira. (1982). "Behavioral Decision Theory and Organizational Decision Theory." In Gerardo Ungson and Daniel Braunstein (eds.), Decision Making: An Inter~ disciplinary Inquiry (pp March, James G., and Herbert A. Simon. (1958). Organizations. New York: Wiley. McKee, D. O., P. R. Varadarajan, and W. M. Pride. (1989). "Strategic Adaptability and Firm Performance: A Market-Contingent Perspective," Journal of Marketing, 53 (July), 21-35. Metwally, M. M. (1978). "Escalation Tendencies of Advertising," Oxford Bulletin of Economics and Statistics, 40 (May), 153-163. Miles, R. E., and C. C. Snow. (1978). Organizational Strategy, Structure and Process. New York: McGraw-Hill. Newell, Allan, and Herbert A. Simon. (1972). Human Problem Solving. Englewood Cliffs, NJ: Prentice-Hall. Oliva, Terence A., Diana L. Day, and Wayne DeSarbo. (1987). "Selecting Competitive Tactics: Try a Strategy Map," Sloan Management Review, 28, 5-15. Porter, Michael E. (1980). Competitive Strategy: Techniques for Analyzing lndustries and Competitors. New York: Free Press. Quinn, Robert E. (1988). Beyond Rational Management. San Francisco: Jossey-Bass. Ramaswamy, Venkatram, Hubert Gatignon, and David J. Reibstein. (1994). "Competitive Marketing Behavior in Industrial Markets," Journal of Marketing, Forthcoming. Reibstein, David, and Hubert Gatignon. (1984). "Optimal Product Line Pricing: The Influence of Elasticities and Cross-Elasticities," Journal of Marketing Research, 21(3) (August), 259-267. Robinson, William T. (1988). "Marketing Mix Reactions to Entry," Marketing Science, 7(4) (Fall), 368-385. Scherer, F. M. (1980). Industrial Market Structure and Economic Performance. Boston: Houghton Miffiin. Simon, Herbert A. (1957)• Models of Man. New York: Wiley.