152 Part 2: Strategic Actions: Strategy Formulation
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Small competitors, such as A&T Grocery, find it difficult to respond to
the competitive threat that exists with Walmart. Yet, they must find a
way to respond, perhaps by offering personalized services, in order to
survive such a threat.with a resource disadvantage.^43 For example,
Walmart initially used a focused cost leader-
ship strategy to compete only in small com-
munities (those with a population of 25,000
or less). Using sophisticated logistics systems
and efficient purchasing practices, among
other methods, to gain competitive advan-
tages, Walmart created a new type of value
(primarily in the form of wide selections of
products at the lowest competitive prices) for
customers in small retail markets. Local com-
petitors lacked the ability to marshal needed
resources at the pace required to respond
to Walmart’s actions quickly and effectively.
However, even when facing competitors with
greater resources (greater ability) or more
attractive market positions, firms should
eventually respond, no matter how daunt-
ing the task seems. Choosing not to respond
can ultimately result in failure, as happened
with at least some local retailers who didn’t
respond to Walmart’s competitive actions.
Today, with Walmart as the world’s largest
retailer, it is indeed difficult for smaller competitors to have the resources required to
effectively respond to its competitive actions or competitive responses.^445-4 Competitive Rivalry
The ongoing competitive action/response sequence between a firm and a competitor
affects the performance of both firms. Because of this, it is important for companies to
carefully analyze and understand the competitive rivalry present in the markets in which
they compete.^45
As we described earlier, the predictions drawn from studying competitors in terms
of awareness, motivation, and ability are grounded in market commonality and resource
similarity. These predictions are fairly general. The value of the final set of predictions
the firm develops about each of its competitors’ competitive actions and responses is
enhanced by studying the “Likelihood of Attack” factors (such as first-mover benefits and
organizational size) and the “Likelihood of Response” factors (such as the actor’s reputa-
tion) that are shown in Figure 5.2. Evaluating and understanding these factors allow the
firm to refine the predictions it makes about its competitors’ actions and responses.5-4a Strategic and Tactical Actions
Firms use both strategic and tactical actions when forming their competitive actions and
competitive responses in the course of engaging in competitive rivalry.^46 A competitive
action is a strategic or tactical action the firm takes to build or defend its competitive
advantages or improve its market position. A competitive response is a strategic or
tactical action the firm takes to counter the effects of a competitor’s competitive action.
A strategic action or a strategic response is a market-based move that involves a signif-
icant commitment of organizational resources and is difficult to implement and reverse.
A tactical action or a tactical response is a market-based move that is taken to fine-tuneA competitive action is a
strategic or tactical action the
firm takes to build or defend
its competitive advantages or
improve its market position.
A strategic action or
a strategic response
is a market-based
move that involves a
significant commitment of
organizational resources and
is difficult to implement and
reverse.
A tactical action or a
tactical response is a
market-based move that is
taken to fine-tune a strategy;
it involves fewer resources
and is relatively easy to
implement and reverse.
A competitive response is
a strategic or tactical action
the firm takes to counter
the effects of a competitor’s
competitive action.