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fortune.com, October 15.F
irms operating in the same market, offering similar products, and targeting similar
customers are competitors.^1 Google has many competitors because it competes in a
number of markets. For example, Google competes against Bing and Yahoo in the general
search market and against AT&T and Verizon in the wireless Internet market. Its planned
entry into the smartphone market will compete against Apple and Samsung, among oth-
ers. Thus, Google engages in a significant amount of competitive behavior (defined fully
below, competitive behavior is essentially the set of actions and responses a firm takes as
it competes against its rivals).
Firms interact with their competitors as part of the broad context within which they
operate while attempting to earn above-average returns.^2 Another way to consider this is
to note that no firm competes in a vacuum; rather, each firm’s actions are part of a mosaic
of competitive actions and responses taking place among a host of companies seeking
the same objective—superior performance. And evidence shows that the decisions firms
make about their interactions with competitors significantly affect their ability to earn
above-average returns.^3 Because of this, firms seek to reach optimal decisions when con-
sidering how to compete against their rivals.^4
Competitive rivalry is the ongoing set of competitive actions and competitive
responses that occur among firms as they maneuver for an advantageous market posi-
tion.^5 Especially in highly competitive industries, firms constantly jockey for advantage
as they launch strategic actions and respond or react to rivals’ moves.^6 It is important for
those leading organizations to understand competitive rivalry because the reality is that
some firms learn how to outperform their competitors, meaning that competitive rivalry
influences an individual firm’s ability to gain and sustain competitive advantages.^7 Rivalry
results from firms initiating their own competitive actions and then responding to actions
taken by competitors.^8
Competitive behavior is the set of competitive actions and responses a firm takes to
build or defend its competitive advantages and to improve its market position.^9 As explained
in the Opening Case, Google takes many major actions to compete but also responds to
rival’s strategic action as exemplified by its Android Pay in response to similar services
offered by Apple and Samsung. Through competitive behavior, Google seeks to successfully
position itself relative to the five forces of competition (see Chapter 2) and to defend its
current competitive advantages while building advantages for the future (see Chapter 3).
Increasingly, competitors engage in competitive actions and responses in more than
one market which can be observed with Google and Apple and with Google and Amazon,
for example.^10 Firms competing against each other in several product or geographic mar-
kets are engaged in multimarket competition.^11 All competitive behavior—that is, the
total set of actions and responses taken by all firms competing within a market—is called
competitive dynamics. The relationships among all of these key concepts are shown in
Figure 5.1.Competitors are firms
operating in the same market,
offering similar products, and
targeting similar customers.
Competitive rivalry is the
ongoing set of competitive
actions and competitive
responses that occur among
firms as they maneuver for
an advantageous market
position.
Competitive behavior
is the set of competitive
actions and responses a firm
takes to build or defend its
competitive advantages
and to improve its market
position.
Multimarket competition
occurs when firms compete
against each other in several
product or geographic
markets.
Competitive dynamics
refer to all competitive
behaviors—that is, the total
set of actions and responses
taken by all firms competing
within a market.