Predicting Your Competitor’s Reaction
Predicting Your Competitor’s Reaction
In order for a company to gain competitive advantage in the consumer/business markets it needs to not only carefully prepare its “plan of action”, but also analyze, study and predict its competitors reaction to its strategic move. However, many companies undermine the importance of such analysis due to its complication in nature. But study shows, unlike in chess, where you have to predict up to hundreds of combinations that follow each possible move, most companies respond fairly predictable to a particular competitor’s action such as price changes or new-product launches. Without difficult modeling and game theory manipulation, authors’ research demonstrates that you could study your rival’s reaction by answering the following questions: Will the competitor react at all? What options your competitor will consider? And finally, which options will your competitor choose?
One of the most important aspects of this analysis is finding answer to the first question. For competitors to take any action, we need to make sure that you firm’s moves are noticeable. Due to lack of data, the chances are that, on average, only 23% of executives will learn about competitor’s new-product launch early to take any action vs only 12% when it came to price-changes. And out of these companies, only small percentage who feel seriously threatened or disturbed will consider reacting only if priority of response is significant and depending how it would affect the organization internally at other levels of management.
As you narrow down your choices, you then need to study the possible options your competitor would consider taking. According to the research, majority (75%) of companies will consider less then four options, usually two to three, which seem to be the most obvious ones - the counteractions. Companies also tend to look at their pervious actions taken in similar situations within their business unit or company’s other units;
In order for a company to gain competitive advantage in the consumer/business markets it needs to not only carefully prepare its “plan of action”, but also analyze, study and predict its competitors reaction to its strategic move. However, many companies undermine the importance of such analysis due to its complication in nature. But study shows, unlike in chess, where you have to predict up to hundreds of combinations that follow each possible move, most companies respond fairly predictable to a particular competitor’s action such as price changes or new-product launches. Without difficult modeling and game theory manipulation, authors’ research demonstrates that you could study your rival’s reaction by answering the following questions: Will the competitor react at all? What options your competitor will consider? And finally, which options will your competitor choose?
One of the most important aspects of this analysis is finding answer to the first question. For competitors to take any action, we need to make sure that you firm’s moves are noticeable. Due to lack of data, the chances are that, on average, only 23% of executives will learn about competitor’s new-product launch early to take any action vs only 12% when it came to price-changes. And out of these companies, only small percentage who feel seriously threatened or disturbed will consider reacting only if priority of response is significant and depending how it would affect the organization internally at other levels of management.
As you narrow down your choices, you then need to study the possible options your competitor would consider taking. According to the research, majority (75%) of companies will consider less then four options, usually two to three, which seem to be the most obvious ones - the counteractions. Companies also tend to look at their pervious actions taken in similar situations within their business unit or company’s other units;