The DNA of Industrial Competitors

By Ho, Jonathan C.; Lee, Chung-Shing | Research-Technology Management, July 2008 | Go to article overview

The DNA of Industrial Competitors

Ho, Jonathan C., Lee, Chung-Shing, Research-Technology Management

A competitor's strategic moves and responses to a rival's actions are driven by the DNA embedded in its value creation activities.

OVERVIEW: Competitor analysis is critical to strategy formulation and implementation. Firms are able to develop and deploy better strategies if their competitors' responses can be analyzed or even predicted. However, a competitor may initiate certain strategic actions to improve its position. A strategic approach to analyzing competitor responses to a rival's actions in order to achieve a better position would greatly help in the formulation of a firm's business strategy. A DNA analogy shows the way.

KEY CONCEPTS: competitor DNA, value chain, strategy, business ecosystem.

A systematic description of a competitor's strategy is fundamental to formulating a business strategy (1). However, strategy is studied through many lenses. A firm's competitive strategy greatly depends on its current positions, such as market share, capabilities and existing behavioral patterns. Mintzberg uses the five Ps- namely, plan, ploy, position, pattern, and perspective- to conceptualize strategy (2). Porter argues from a value-creation perspective that strategy is about forming a value network that is difficult to imitate (3). In order to systematically analyze competitors, an appropriate selection of these interrelated strategic concepts regarding firms is required.

By providing opportunities for business growth, or else by imposing constraints on it, the business environment has an important bearing on a firm's strategic actions. Due to the increasingly complex and constantly changing business environment, analyzing a rival's strategic actions is necessary but not at all easy. Globalization and the opening of emerging markets are giving rise to both threats to and opportunities in the business environment of both your firm and its rivals. In addition, advances in information and communication technologies (ICTs), and complicated business value networks increase the diversity of a rival's strategic actions.

When we draw an analogy between a business environment and an ecological system, firms become species in changing surroundings. In this paper we analyze how a species engages in strategic actions in response to both changes in the environment and the movements of other species within the ecosystem.

The traditional strengths, weaknesses, opportunities, and threats (SWOT) analysis is used to generate strategic alternatives that fit an organization's internal capabilities and external possibilities. It is a purely descriptive model in that it does not offer the analyst explicit strategic recommendations. In the SWOT analysis, the strengths and weaknesses are not systematically connected as a sequence of value-creating activities. Weaknesses are often broader than expected, and strengths are usually narrower than anticipated. As a result, analysts are often overly optimistic in their assessment of an organization's strengths and opportunities versus its weaknesses and threats. In addition, major competitors are seldom included in the SWOT analysis, so interactions among competitors are frequently ignored.

The aim of this study is to develop a framework for competitive analysis in high-tech industries. The framework is based on the integrated theories of strategic management and competitor analysis, and is made operational by means of a step-by-step procedure that is applied to the mobile-phone industry from the perspective of two Taiwanese firms.

Analyzing Competitor DNA

Deoxyribonucleic Acid (DNA) carries genetic information through which traits of a life are reproduced from generation to generation. When we see a firm as a living thing, it carries certain traits that have been embedded inside it and are difficult to change within a short time. This analogy implies that firms, like human beings, exhibit patterns of strategic behavior. This strategic behavior can be either deliberate or emergent, and consequently may or may not be predicted. …

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