Chapter 5: Competitive Rivalry and Competitive Dynamics 149
technology systems (resources). In addition to competing aggressively against each other
in North America, the firms share many other country markets in common. Thus, the
rivalry between these two firms is intense.
When performing a competitor analysis, a firm analyzes each of its competitors with
respect to market commonality and resource similarity. The results of these analyses can
be mapped for visual comparisons. In Figure 5.3, we show different hypothetical intersec-
tions between the firm and individual competitors in terms of market commonality and
resource similarity. These intersections indicate the extent to which the firm and those
with which it compares itself are competitors. For example, the firm and its competitor
displayed in quadrant I have similar types and amounts of resources (i.e., the two firms
have a similar portfolio of resources). The firm and its competitor in quadrant I would
use their similar resource portfolios to compete against each other in many markets that
are important to each. These conditions lead to the conclusion that the firms modeled in
quadrant I are direct and mutually acknowledged competitors.
In contrast, the firm and its competitor shown in quadrant III share few markets and
have little similarity in their resources, indicating that they aren’t direct and mutually
acknowledged competitors. Thus a small, local, family-owned restaurant concentrating
on selling “gourmet” hamburgers does not compete directly against McDonald’s. The
mapping of competitive relationships is fluid as companies enter and exit markets and as
rivals’ resources change in type and amount, meaning that the companies with which a
given firm is a direct competitor change over time.
Kellogg has held a dominant market position in cold cereal sales for a long time but
its sales of cereals have begun to decline as explained in the Strategic Focus. Its major
competitors are responding better to the changes in the market than Kellogg. Kellogg
seems to be trying to force its products on the market rather than changing its product
lines to satisfy consumer needs. General Mills’ purchase of Yoplait is positioning that
firm to advance in the newer breakfast food market. Kellogg’s response appears to be
weak and is likely to be ineffective. Without major changes, Kellogg is likely to suffer
additional decline.
Figure 5.3 A Framework of Competitor AnalysisPortfolio of resources AThe shaded area represents the degree of market commonality between two firms.
Portfolio of resources BResource
SimilarityMarket
CommonalityLow HighHighLowII I
III IVSource: Adapted from M. J. Chen, 1996, Competitor analysis and inferfirm rivalry: Toward a theoretical integration,
Academy of Management Review, 21: 100–134.