148 Part 2: Strategic Actions: Strategy Formulation
fulfilled by Amazon, which has become a top 10 retail account for Pampers,” a disposable
diaper product.^27
Competitors tend to agree about the different characteristics of individual markets
that form an industry. For example, in the transportation industry, the commercial air
travel market differs from the ground transportation market, which is served by such
firms as YRC Worldwide (one of the largest, less-than-truckload—LTL—carriers in
North America and selected as Walmart’s LTL Carrier of the Year) and its major com-
petitors Arkansas Best, Con-way, Inc., and FedEx Freight.^28 Although differences exist,
many industries’ markets are partially related in terms of technologies used or core com-
petencies needed to develop a competitive advantage. For example, although railroads
and truck ground transport compete in a different segment and can be substitutes, dif-
ferent types of transportation companies need to provide reliable and timely service.
Commercial air carriers such as Southwest, United, and Jet Blue must therefore develop
service competencies to satisfy their passengers, while ground transport companies such
as YRC, railroads, and their major competitors must develop such competencies to satisfy
the needs of those using their services to ship goods.
Firms sometimes compete against each other in several markets, a condition called
market commonality. More formally, market commonality is concerned with the number
of markets with which the firm and a competitor are jointly involved and the degree of
importance of the individual markets to each.^29 Firms competing against one another in
several or many markets are said to be engaging in multimarket competition.^30 Coca-Cola
and PepsiCo compete across a number of product markets (e.g., soft drinks, bottled
water) as well as geographic markets (throughout North America and in many other
countries throughout the world). Airlines, chemicals, pharmaceuticals, and consumer
foods are examples of other industries with firms often competing against each other in
multiple markets.
Firms competing in several of the same markets have the potential to respond to
a competitor’s actions not only within the market in which a given set of actions are
taken, but also in other markets where they compete with the rival. This potential
creates a complicated mosaic in which the competitive actions or responses a firm
takes in one market may be designed to affect the outcome of its rivalry with a partic-
ular competitor in a second market.^31 This potential complicates the rivalry between
competitors. In fact, research suggests that a firm with greater multimarket contact is
less likely to initiate an attack, but more likely to move (respond) aggressively when
attacked. For instance, research in the computer industry found that “firms respond to
competitive attacks by introducing new products but do not use price as a retaliatory
w e a p o n .”^32 Thus in general, multimarket competition reduces competitive rivalry, but
some firms will still compete when the potential rewards (e.g., potential market share
gain) are high.^335-2b Resource Similarity
Resource similarity is the extent to which the firm’s tangible and intangible resources are
comparable to a competitor’s in terms of both type and amount.^34 Firms with similar
types and amounts of resources are likely to have similar strengths and weaknesses and
use similar strategies on the basis of their strengths to pursue what may be similar oppor-
tunities in the external environment.
“Resource similarity” describes part of the relationship between FedEx and United
Parcel Service (UPS). These companies compete in many of the same markets, and thus
are also accurately described as having market commonality. For example, these firms
have similar types of truck and airplane fleets, similar levels of financial capital, and rely
on equally talented reservoirs of human capital along with sophisticated informationMarket commonality is
concerned with the number
of markets with which the
firm and a competitor are
jointly involved and the
degree of importance of the
individual markets to each.
Resource similarity is the
extent to which the firm’s
tangible and intangible
resources are comparable to a
competitor’s in terms of both
type and amount.