YOUR RIVALS? Learn Who They Are & What Can You do About It!

Summary

The video script discusses the concept of competitive rivalry between businesses, using the example of a small burger shop called Steph's in rural Utah and the global giant McDonald's. It explains that for rivalry to exist, firms must be aware of each other, motivated to act, and possess the ability to respond. The script emphasizes the importance of understanding competitive behavior through awareness, motivation, and ability, and encourages viewers to consider how they might counter potential threats from competitors.

Takeaways

• 🍔 The story of Steph's, a small burger shop in Utah, illustrates the concept of competitive rivalry in business.
• 🏗 Awareness in business rivalry means that firms must be aware of each other's existence and potential market impact.
• 🔍 Market commonality and resource similarity are factors that influence how much two firms know about each other.
• 🚫 Without awareness, there is no competitive rivalry, as seen with McDonald's not knowing about Steph's.
• 💡 Motivation is a key driver of competitive behavior, where firms are prompted to act when their market position is threatened.
• 📈 The ability to act or respond to competitive threats is crucial for firms to maintain their market position.
• 💡 The example of McDonald's opening a new location across from Steph's shows how a larger firm's actions can threaten a smaller one.
• 🤔 Steph's, despite being aware and motivated, may lack the resources to effectively counter a competitive threat from McDonald's.
• 🛡 For competitive rivalry to exist, firms must not only be aware and motivated but also have the capability to defend their market position.
• 🤝 Understanding the framework of awareness, motivation, and ability can help businesses assess their competitive landscape.
• 🌟 The script encourages businesses to consider their relationships with competitors and the potential threats they may pose.

Q & A

What factors determine if there is competitive rivalry between two firms?

For competitive rivalry to exist between two firms, they must be aware of one another, motivated to either attack or defend their market position, and have the ability to either attack or defend their position.

How does awareness influence competitive rivalry?

Awareness considers how much two firms know about each other and how each one could affect the success of the other. It is often influenced by market commonality and resource similarity.

Why was there no competitive rivalry between Steph's burger shop and McDonald's?

There was no competitive rivalry because McDonald's likely didn't know that Steph's burger shop existed, and even though the owners of Steph's knew about McDonald's, there wasn't a location nearby, so it didn't matter.

What role does motivation play in competitive rivalry?

Motivation is a driver of competitive behavior. It determines whether a firm is willing to engage in competitive actions. For instance, Steph's might be motivated to act if McDonald's opened a location nearby, threatening its existence.

Why might McDonald's not be motivated to respond to a promotion by Steph's?

McDonald's likely wouldn't be motivated to respond to a promotion by Steph's because the effect on their customer base would be small, especially if the McDonald's location was 20 miles away.

What is meant by the 'ability to act' in the context of competitive rivalry?

The 'ability to act' refers to a firm's resources and capabilities that enable it to engage in competitive behavior. For example, McDonald's could easily open a new location to pose a competitive threat, but Steph's might lack the resources to respond similarly.

What could happen if McDonald's opened a new location across the street from Steph's?

If McDonald's opened a new location across the street from Steph's, Steph's entire existence would be threatened, and they would be highly motivated to react if they had the ability to do so.

Why might Steph's not be able to respond effectively to a competitive threat from McDonald's?

Steph's might be aware of McDonald's and motivated to act, but they might lack the resources and capabilities to respond effectively to a competitive threat, such as McDonald's opening a nearby location.

What is the importance of resource similarity in competitive rivalry?

Resource similarity affects a firm's ability to act in a competitive environment. Firms with similar resources are more likely to be able to respond to competitive threats effectively.

How can the Awareness, Motivation, and Ability framework help a company understand its competitors?

The Awareness, Motivation, and Ability framework helps a company assess its relationship with competitors by evaluating how aware they are of each other, how motivated they are to compete, and whether they have the ability to take competitive actions.