Michael_A._Hitt,_R._Duane_Ireland,_Robert_E._Hosk

162 Part 2: Strategic Actions: Strategy Formulation

Apple largely competes in fast-cycle markets; with the introduction of the new apple

watch, Apple and its rivals are changing a typical standard cycle market to a fast-cycle

market with ‘smart’ watches. Some analysts suggested that Apple had orders for at least

a million watches before the official launch date. But, Apple’s watch enters a market in

which the product not only serves functional purposes but often is used as a ‘fashion

statement’ for the owner. Apple’s entry is inviting significant competition. As noted in the

Opening Case, Google has partnered with TAG Heuer and Intel to develop a prestigious

‘smart watch’. Apple may also experience some difficulties with its pricing for the watch.

The base price for the watch is $349 with an aluminum case and elastic wrist band. The

high-end price is $17,000 that comes with an 18-caret gold case, leather wrist band, and

a brass buckle. Apple’s watch is reported to continue its tradition of technological excel-

lence which is difficult for competitors to match or beat. This new product market will

have significantly interesting competitive dynamics.^105

As our discussion suggests, innovation plays a critical role in the competitive dynam-

ics in fast-cycle markets. For individual firms then, innovation is a key source of compet-

itive advantage. Through innovation, the firm can cannibalize its own products before

competitors successfully imitate them and still maintain an advantage through next-

generation products.

As explained in the Strategic Focus, Aldi is having a major effect in the retail food

markets across countries, especially in the United Kingdom, United States, and Australia.

Aldi’s extreme emphasis on low cost is hurting many of the major supermarket chains in

each of those countries, and Aldi is gaining market share and expanding in all of them.

The competitive rivalry is gaining strength. The retail food industry has largely operated

as a standard-cycle market and sold products with small margins. With Aldi’s growing

power in the markets, firms are forced to operate with even smaller margins and reduced

profits or cut their costs in order to compete on prices. It will be interesting to observe

the winners and losers in this “war” in each country.

5-7c Standard-Cycle Markets

Standard-cycle markets are markets in which the firm’s competitive advantages are partially

shielded from imitation, and imitation is moderately costly. Competitive advantages are par-

tially sustainable in standard-cycle markets, but only when the firm is able to continuously

Figure 5.5 Developing Temporary Advantages to Create Sustained Advantage

Returns from

a Series of

Replicable

Actions

Counterattack

Exploitation

Launch

Time (years)

5 15 20

etc.

Firm Has Already

Advanced to

Advantage No. 2

10

Source: Adapted from I. C. MacMillan, 1988, Controlling competitive dynamics by taking strategic initiative, Academy of

Management Executive, II(2): 111–118.

Standard-cycle markets
are markets in which the
firm’s competitive advantages
are partially shielded from
imitation and imitation is
moderately costly.