Shaw - R - 2016 - DBA Thesis With Guides PDF

CRANFIELD
UNIVERSITY

Richard Shaw

The formulation of competitive actions in practice

School of Management
International Executive Doctorate

DBA

Academic year: 2012 – 2016

Supervisor: Professor Mark Jenkins

November 2016

Page 2

Abstract

This is a study of what managers do in relation to the formulation of competitive actions.
The study started with Project 1 (P1), a literature review that looked at managers’
cognitions in respect of competitive positioning and competitive strategy. A gap was
found in how individual competitive actions are formulated and executed. A gap was
also found concerning what managers do in response to interpretations of their
competitive environments.

Following the literature review, a series of semi-structured interviews were undertaken
with managers and 26 individual competitive actions were recorded and analysed in
Project 2 (P2). A structure to the formulation of competitive actions was discerned and
developed into a processual model that is triggered by a stimulus, followed by the
manager envisaging desired outcome and setting objectives, then deciding which levers
to use, developing the action and refining it. Its application to practice was developed
in Project 3 (P3) through an aide memoir tool to assist managers.

The study makes a contribution to theory by providing a framework that captures the
way in which managers construe and formulate competitive actions. In P2 it was found
that managers tend to follow a largely homogenous process and that the tools and
techniques offered in the extant literature are seldom used. The managers interviewed
in mature industries were far more aware of who their competitors were in more when
compared to nascent industries. This had a bearing on the formulation of competitive
actions insofar as companies operating in mature industries formulated competitive
actions to fend off or compete with their competitors more effectively while companies
operating in nascent industries tended to formulate competitive actions with the aim of
exploiting gaps in the market.

It was found in P2 that managers’ backgrounds, including their functional and
educational, as well as their nationalistic and cultural backgrounds, had a bearing on
how they construed their competitors and the competitive actions they formulated. It
was also found that competitive actions were formulated and executed on an iterative
process, whereby managers would refine their actions applying the learnings from
previous actions. Managers, particularly those with more experience, relied heavily on
intuition and tacit knowledge, as well as input from colleagues and customers, when
formulating competitive actions. Contrary to the assertions many in much of the extant
literature about companies not deviating from industry norms when formulating
competitive actions, the study found that managers would often do so in search of
abnormal profits.

The study makes a contribution to practice by providing a guide to assist in formulating
competitive actions. The guide is based on the processual model developed in P2 and
was summarised in five key steps, comprising Stimulus, Objectives, Levers, Actions and
Refinement, and abbreviated ‘SOLAR’.
Page 3

Page 4

Acknowledgements

I would like to thank my Supervisor, Professor Mark Jenkins, as well as my other panel
members, Dr Palie Smart, and the chair, Professor Cliff Bowman, for their guidance,
encouragement and their invaluable insights. I would also like to thank the DBA Director,
Professor Emma Parry, my cohort leader, Dr Silvia Rossi Tafuri, and the DBA Programme
Manager, Alison Wilkerson, for their support.

I am very grateful to the managers from around the world that I interviewed, that
discussed my findings with me at length and that contributed to the research, not only
in terms of providing indispensable data, but also in terms of their insights and ideas. I’d
like to thank my father, Dr Sandy Shaw, for proofreading my material and offerings ideas
on how I could improve this study.

I’d like to thank my fellow cohort members, including Hamed al Hashemi, Sean Bowler,
John Carr, Adam Manikowski, Ali Al-Moulani, Gary Cundill, Thierry Fausten, Frits Wiegel
and Leslie Pidcock, as well as Saleh Bawazir, for their support and companionship. Last
but not least, I’d like to thank my partner, Linda, for bearing with me while I spent hours
upon hours over weekends and holidays working on this Doctorate.
Page 5

Page 6

Table of contents

Abstract ............................................................................................................................ 3
Acknowledgements .......................................................................................................... 5
Table of contents .............................................................................................................. 7
Linking document ........................................................................................................... 13
Background and rationale .......................................................................................... 15
Summary of research projects and methods .............................................................. 17
Project 1: Systematic literature review ...................................................................... 21
Methods and objectives ......................................................................................... 22
Findings and contributions to knowledge .............................................................. 23
P1 propositions ...................................................................................................... 24
Project 2: Competitive actions in practice .................................................................. 24
P1 propositions ...................................................................................................... 26
Emergent phenomena ............................................................................................ 29
Project 3: Formulating competitive actions ................................................................ 31
Limitations of study and areas for further research ................................................... 35
Project 1: Systematic literature review .......................................................................... 37
Introduction ................................................................................................................ 39
Relevant appendices ................................................................................................... 41
Methodology .............................................................................................................. 41
The systematic literature review process ............................................................... 42
The review panel .................................................................................................... 42
Search strategy ....................................................................................................... 42
Keywords ................................................................................................................ 43
Search strings ......................................................................................................... 44
Databases ................................................................................................................... 48
Cross-referencing ................................................................................................... 49
Page 7

Panel recommendations ........................................................................................ 49
Selection criteria for articles .................................................................................. 49
Selected articles ..................................................................................................... 51
Quality appraisal .................................................................................................... 53
Data synthesis ........................................................................................................ 53
Findings ....................................................................................................................... 53
Managers’ cognitive categorisations of competitors ............................................. 54
Influences on managers’ frames of reference ........................................................ 60
Shared intra-industry management cognitions ...................................................... 62
Automatic versus controlled processing ................................................................ 68
Functional biases in the perception of competitive strategy ................................. 72
Does deviating from industry norms result in lower profits? ................................ 73
Competitive Intelligence ........................................................................................ 75
The alignment of strategy and performance management ................................... 77
Strategy as an iterative process ............................................................................. 80
Discussion ................................................................................................................... 83
Gap in knowledge and scope for further research ..................................................... 84
Project 2 Proposal ....................................................................................................... 86
Limitations and reflections ......................................................................................... 87
Project 2: Qualitative research ....................................................................................... 88
Introduction ................................................................................................................ 90
The review panel .................................................................................................... 92
Relevant appendices ................................................................................................... 92
Background ................................................................................................................. 93
Aim of the research .................................................................................................... 95
Research objective ...................................................................................................... 96
Research design .......................................................................................................... 97
Research population ................................................................................................... 98
Recruitment of participants ................................................................................... 98
Eligibility criteria ......................................................................................................... 98
Inclusion criteria ..................................................................................................... 99
Exclusion criteria .................................................................................................... 99
Page 8

Research Outcomes .................................................................................................... 99
Research procedure .................................................................................................. 100
Pilot study ............................................................................................................. 101
Analysis ................................................................................................................. 102
Summary of sample demographics ...................................................................... 107
Summary of sample population ............................................................................... 108
Summary of competitive actions .............................................................................. 111
Discussion ................................................................................................................. 116
Proposition 1 – Environmental dependency of managers’ approaches ............... 116
Proposition 2 – Managers’ approaches are influenced by their backgrounds ..... 123
Proposition 3 – Manager’s focus on a narrow subset of their competitors ......... 128
Proposition 4 - Competitive actions are formulated in an iterative manner ....... 129
Emergent themes ................................................................................................. 130
Conclusions ............................................................................................................... 142
Summary of findings ................................................................................................. 146
Limitations and reflections ....................................................................................... 147
Project 3: Development of a guide for the formulation of competitive actions .......... 149
Introduction .............................................................................................................. 151
Relevant appendices ................................................................................................. 152
Research objective .................................................................................................... 152
Research design & methods ..................................................................................... 153
Research Procedure ............................................................................................. 153
Summary of sample population ............................................................................... 155
Competitive action guide development ................................................................... 156
Research outcomes .................................................................................................. 157
Scope for further research ........................................................................................ 158
Limitations and reflections ....................................................................................... 158
References .................................................................................................................... 159
Appendix 1: Competitive actions guide & resources manual version 1 ....................... 171
Page 9

Appendix 4: Competitive actions guide version 4 ........................................................ 177
Appendix 5: Resources manual version 4 ..................................................................... 179
Appendix 6: Competitive actions guide version 5 ........................................................ 181
Appendix 7: Resources manual version 5 ..................................................................... 183
Appendix 8: Previous consulting assignments & businesses ........................................ 185
Appendix 9: Quality appraisal criteria applied to articles ............................................ 186
Appendix 10: Data extraction form .............................................................................. 187
Appendix 11: Summary of Key Findings from Literature ............................................. 188
Appendix 12: CIMO Maps ............................................................................................ 201
Competitive action 1 - Luxury car 'It's closer than you think' campaign .................. 202
Competitive action 2 - 'It's closer than you think' media selection and placement . 202
Competitive action 3 - Used car warranty programme ............................................ 204
Competitive action 4 - Product development by a UK IT services company ............ 205
Competitive action 5 – Action to fend off threat from smaller competitor ............. 206
Competitive action 6 - New mortgage product developed by a bank ...................... 207
Competitive action 7 – Market segmentation by flooring business ......................... 208
Competitive action 8 – 4G service with voice & data in an emerging market .......... 209
Competitive action 9 – Sales to fellow state institutions in the last fiscal quarter ... 210
Competitive action 10 – Bundling of mobile and fixed-line services ........................ 211
Competitive action 11 – Bundling of services by large financial software vendor ... 212
Competitive action 12 – Product repricing by credit default swaps underwriter .... 213
Competitive action 13 – Re-launch of a luxury motorcar brand .............................. 214
Competitive action 14 – Strategic acquisition by media group ................................ 215
Competitive action 15 – Bundling of value added services by a media group ......... 216
Competitive action 16 – Product discontinuation by drinks manufacturer ............. 217
Competitive action 17 – Product line expansion by a confectionary manufacturer 218
Competitive action 18 – Product development by FMCG manufacturer ................. 219
Competitive action 19 – Product development by drinks manufacturer ................. 220
Competitive action 20 – Product line extension by a FMCG manufacturer ............. 221
Competitive action 21 – Product development by brake pad manufacturer ........... 222
Competitive action 22 – Geographical expansion of an auto-financing company ... 223
Page 10

Competitive action 23 – Re-positioning in the Chinese market by fashion brand ... 224
Competitive action 24 – Geographic expansion of alcoholic drink .......................... 224
Competitive action 25 – Product customisation for USA market ............................ 226
Competitive action 26 – New fruit juice brand in an emerging market ................... 227
Appendix 13: Internal & external factors relevant to competitive actions .................. 228
Appendix 14: Points to be covered in the semi-structured interviews ........................ 240
Company and environmental factors ....................................................................... 240
Factors concerning the background of the manager ................................................ 240
Execution of the competitive action ......................................................................... 240
Setting performance targets ..................................................................................... 241
Competitive action formulation ............................................................................... 241
Mental maps of competitors and the industrial structure ....................................... 241
Competitive intelligence ........................................................................................... 242
Appendix 15: Example of CIMO-based coding system ................................................. 243
Appendix 16: Example of a manager interview ............................................................ 248
UK IT services company ............................................................................................ 248
Introduction ......................................................................................................... 248
Interview .............................................................................................................. 248
Appendix 17: Summary of iterations of the guide ....................................................... 255
Initial guide development – Version 1 ...................................................................... 255
Category 1 - Stimuli .............................................................................................. 256
Category 2 - Objectives ........................................................................................ 256
Category 3 - Competitive environment ................................................................ 256
Category 4 - Company-level variables .................................................................. 256
Category 5 - Manager-level variables ................................................................... 256
Second iteration – Version 2 .................................................................................... 257
Third iteration – Version 3 ........................................................................................ 258
Fourth iteration – Version 4 ..................................................................................... 259
Fifth iteration – Version 5 ......................................................................................... 261
Page 11

Page 12

Linking document

Page 13

Page 14

Background and rationale

My field of interest is competitive actions and how they are formulated in practice.
Competitive actions can be described as the actions that either underlie a plan to
improve a company’s competitive position or actions taken in response to a particular
stimulus, such as the threat of a new rival, the emergence of a new competitive product
or service or a change in consumer behaviour or tastes. Competitive actions are far more
granular than competitive strategies insofar as a particular strategy may have many
different actions associated with it and actions may be used as a means of executing the
strategy.

My interest is grounded in my experience as an entrepreneur and a management
consultant. I participated in many assignments involving competitive positioning and the
formulation of competitive strategies, as well as having founded, managed and sold
three companies that operated in highly competitive environments. The main
assignments and businesses that contributed towards the development of my interest
are described briefly in appendix 8. This experience piqued my interest in the field and
informed my research. I made use of the contact network I had developed during my
career, for both the interviews that were conducted as part of the second qualitative
research project, and to validate and refine the guide that was developed in P3. My
personal aim, in relation to this study, has been to develop a tool that managers can use
in practice and being able to apply the findings of the research to my work in assisting
managers and their companies.

The research aim of this DBA study was to establish what managers actually do in
practice in formulating competitive actions and to offer a guide to assist them in this
regard. This encompasses the material processes they employ, the inputs they use and
their cognitions. The scope of the research is limited to the competitive actions taken to
better position companies relative to their competitors in the context of marketing
actions. These are actions ultimately taken to optimise profits. The competitive action
was the unit of analysis and the research was limited to actions taken in the private
sector and with the objective of improving the company’s competitive position. The
overarching research question for the DBA study was:

How do managers formulate the competitive actions they take?

In the context of the research question, the formulation includes the antecedents to the
execution and the outcomes of competitive actions, specifically:

• How managers view their competitive environments and categorise their
competitors
• How they formulate actions to compete more effectively
• Their cognitions in relation to competitive actions and the inputs, including
tools and techniques, that inform these actions
Page 15

In the context of this study, competitive positioning refers to the way in which managers
map their rivals’ competitive positions and their own brands or products’ relative prices
and benefits. The term ‘competitive action’ refers to specific actions or mechanisms that
managers plan and take with the objective of competing more effectively. This includes,
inter-alia, actions to change the price or the benefits associated with their brands or
products. The research was not concerned with actions that managers take to
streamline their operations, to procure inputs more economically or any other actions
they take to become more profitable that are related to the operations of the business
rather than the prices and benefits associated with their products, services and brands.

The research topic at the time of embarking on the study was ‘Competitive positioning
in practice’ and the research planned to focus on the cognitive and practical processes
that managers employ to define their competitive positions relative to those of their
rivals, as well as what they do to reposition their brands, products or services.

The question for P1, the Systematic literature review, was:

What are managers’ cognitions in respect of competitive positioning and competitive
strategy?

The research question for P2, the qualitative research project, was:

How do managers construe the competitive actions they take?

The research question for P3 was:

How could managers improve their approaches to the formulation of competitive
actions?
Page 16

Summary of research projects and methods

The study is broken into three projects, namely:

1. Project 1 (‘P1’), a Systematic Literature Review
2. Project 2 (‘P2’), field research to understand what happens in practice
3. Project 3 (P3), the development of a guide to assist managers in the formulation of competitive actions

The table below summarises the methods used, the key findings and the contributions to knowledge made in this study.

P1 P2 P3
Research What are managers’ cognitions in How do managers construe the How could managers improve their
question respect of competitive positioning and competitive actions they take? approaches to the formulation of
competitive strategy? competitive actions?
Methods A systematic literature review was 20 semi-structured interviews were The findings and the processual
carried out and a total of 3,187 articles carried out and 26 competitive structure discerned in P2 was
were identified, of which data from 91 actions were recorded and analysed evolved into a guide, which was
was extracted and analysed using CIMO maps (please refer to validated and refined through 7
page 20 for ‘CIMO’ meaning) interviews with 4 managers
Key findings Gaps in the extant literature were The propositions developed in P1 Further interviews were carried out
identified, including that very little were explored and several findings in order to evolve the processual
research has been carried out in relation were made, including: model developed in P2 and the
to individual competitive actions, as • Managers tend to follow processes following findings were made in the
opposed to competitive strategies or that are largely homogenous in context of formulating competitive
positioning, and that not much is known formulating competitive actions. actions:
about how managers respond to their • The tools and techniques offered • Managers objectives are limited
views of their competitive environments. in the extant literature are seldom to either recovering, maintaining
used in practice.
Page 17

• Smaller companies tend to or developing their previous
formulate offensive actions while competitive positions.
larger companies tend to • There is a dichotomy between
formulate defensive actions actions that are proactive and
• Older managers tend to rely more result from management or
on tacit knowledge and shareholder plans and those
interactions with others, while that are reactive and result from
younger managers tend to rely emergent factors.
more on tools and formal training
in formulating competitive actions.
Contributions Four propositions were developed for A contribution to knowledge was A contribution to practice was
further research, including: made by developing a processual made in P3 by evolving the
model for capturing the way processual model developed in P2

1. Managers’ approaches to the

formulation of competitive actions are managers construe and formulate was into guide to assist managers.
environment-dependent competitive actions. The model is The guide was arranged into a 5-
2. Managers’ backgrounds influence their based on the structure discerned step work-flow, abbreviated as
competitive actions through the semi-structured SOLAR, including: Stimuli,
3. Managers focus on narrow sub-sets of interviews in P2 and the findings of Objectives, Levers, Actions
their competitor universes P1 and P2. The CIMO maps prepared Refinement. Ideas and
4. Competitive actions are carried out in in P2 were consolidated into seven recommendations for the
an iterative manner clusters and evolved using the finds formulation of competitive actions
from the extant literature to provide are also offered based on the
a way of understanding competitive findings of P1 and P2.
actions.

Table 1: Summary of research findings and contributions
Page 18

A constructivist epistemology was used in developing the research that spans projects
1, 2 and 3 insofar as knowledge was constructed through the research process and a
number of different methods and philosophical approaches were used in developing
this knowledge. These methods included the systematic literature review in P1, semi-
structured interviews with managers in P2 and the development of a framework (the
guide) for improving the formulation of competitive actions that were reviewed,
updated and validated through further interactions with managers in P3. Once the
interviews in P2 were complete, they were organised into CIMO1 maps and the results
were analysed. The table overleaf depicts the research process followed in P2. The figure
below depicts a high-level process flow chart for the research following the scoping
study.

P1 – Systematic literature review

The Systematic review of literature was concerned with managers’

cognitions in respect of competitive positioning and competitive strategy.
Predefined search strings were used, 91 relevant articles were identified
and analysed, of which 10 core articles were used as the basis for the P2
research.

P2 – Qualitative research

Semi-structured interviews were used to identify a number of competitive

actions carried out by managers at a range of different companies. In
interviewing the managers, their actions were mapped using the CIMO
framework. The context, interventions, mechanisms and outcomes were
mapped using simple process flow charts to establish how managers’
construe and formulate competitive actions

P3 – Development of a guide to use in the formulation of competitive
actions

In P3 a guide was developed for strategy and marketing managers to use

in the formulation of competitive actions

Figure 1: Study process flow

In the context of this study, competitive strategy refers to the plans managers make and
the decisions they take to compete as effectively as possible. Competitive strategy is

1
CIMO is an abbreviation for ‘Context, Intervention, Mechanism, Outcome’, a framework developed by
Denyer et al. (2008).

one stimuli to the proactive competitive actions companies take to change the price or
the benefits associated with their brands, products or services, as well as corporate
actions, including mergers and acquisitions, that are taken to compete more effectively
with their rivals. Competitive actions are also triggered by reactive stimuli, such as
external or environmental changes.

This study has strong links to practice, realised through repeated interactions that took
place with industry practitioners during the research process. These interactions
included a pilot qualitative research project, semi-structured interviews and interactions
with a different set of managers during the production of the guide in P3. Five versions
of the guide were produced in P3 through an iterative process in which managers
reviewed it and the guide was then updated accordingly, until they were no longer
contributing anything substantially new.

A body of knowledge was assimilated through the systematic literature review in P1 that
was used to inform P2. Several propositions were also developed in P1 that were
validated in P2 through a deductive process. These propositions were explored in P2 by
including questions about each one in the semi-structured interviews that were
conducted with managers. The key findings from P1 were also summarised and noted
for discussion in the interviews.

An interpretive epistemology was used to understand the phenomena being researched
in P2. The epistemological stance on interpretive approaches is that knowledge of reality
is gained only through social construction such as language, shared meanings, tools,
documents etc. (Walsham, 1993). This epistemological approach was well suited to P2
because there were no predefined dependent or independent variables. Instead, P2
focused on the complexity of human sense-making as the research participants’
competitive environments emerged.

The CIMO framework (Denyer et al., 2008) was used in P2 to structure the interviews,
insofar as the framework guided the data sought and, therefore, the questions asked in
the interviews. The data gathered was mapped in a logical and easily understandable
format using CIMO maps. Specifically, the four categories of the framework were used
in the following manner:

• Context (C) was used to articulate the stimulus to the action and the applicable
environmental settings, such as the intensity of rivalry and the levels of
education and experience of the manager or managers involved in formulating
the action.
• Intervention (I) was used to describe the approach the manager or managers
took in formulating the action, including the data and tools that were used.
• Mechanism (M) was used to describe the actual action that was executed in
response to the stimulus and as a result of the intervention.
• Outcome (O) was used to articulate the end-result, or results, that the action or
Mechanism produced.
Page 20

The output of P2 was, therefore, a set of 26 CIMO maps and an analysis of the findings,
which were used to develop the first draft of the guide for formulating competitive
actions in P3. Development of the guide was preceded by the identification and
documentation of patterns and approaches to different types of competitive actions
from P2.

The guide was discussed with managers and updated accordingly in a total of five
iterations. The objective of these discussions was to validate the assertions made in the
guide, as well as its practical applicability. These discussions also sought to capture
divergent views and emergent issues expressed by the participants. Before these
discussions were held with the participants, the guide was sent to them to review. Based
on this approach, the unit of analysis was the competitive action.

The validity and applicability of the guide was based on the complexity of human sense
making, as the outcomes of the discussions with managers were based solely on how
they interpreted the validity and applicability of the guide relative to their own
experiences. The interpretive approach is inductive and concerned with discovering and
interpreting social patterns (Chen and Hirschheim, 2004).

The research revealed that the sources of competitive actions are either proactive or
reactive. Proactive actions are often the outcomes of a plan that the shareholders or
management have. These plans include competitive strategies and the actions could
form part of the strategy. In this context, competitive strategy can be viewed as an
aggregation of competitive actions, which can be viewed as individual routines
associated with the strategy. The focus of the study was on how managers construe both
these competitive actions, as well as reactive ones, as well as the tools they use and the
processes they follow to formulate them.

The corollary of this study, and the focus of P3, is a guide based on the findings of the
research that offers managers insights into how competitive actions are formulated.
Furthermore, it provides them with a process to follow and recommendations and
points to consider when formulating their own competitive actions.

Project 1: Systematic literature review

The research question was:

strategy?

The main contribution to theoretical knowledge of P1 was the identification of a gap in
the extant literature in relation to competitive actions. It was found that the fields of
competitive strategy and competitive positioning have been researched extensively but
Page 21

that little has been carried out in relation to individual competitive actions. Extensive
literature is also available on how managers interpret their competitive environments
but not much is available regarding how managers respond to these interpretations and,
specifically, how they formulate and execute competitive actions as a result. In fact, the
following search strings yielded 1,433 results using the EBSCO, ProQuest and Science
Direct databases:

• manag* perception AND competition
• manag* perception AND competitive advantage
• manag* perception AND competitive strategy

Using the search string ‘competitive actions in practice’ and limiting the search to
academic journals and the fields of marketing, economics, business and management,
yields 565 results, of which not a single article was concerned with the formulation of
competitive actions in practice. Amongst the 565 results, there were only three practical
studies, which are:

• In ‘Supporting strategy with competitive analysis’ (Coburn, Greenwood and
Matteo, 2002) a case study of Boehringer Ingelheim Pharmaceuticals Inc. is used
to illustrate how competitive analysis can be used to support managers’ efforts
in developing strategies.
• In ‘Competitor analysis – A prize-centred approach’ Otenfeldt and Moore (1981)
provide an approach that they’ve termed the ‘Prize-centred’ approach, to
analyse the competitive environment.
• The article ‘Understanding competitors’ strategies: the practitioner-academic
gap’ (Lyndon, 1997) is predicated on a study of how well companies understand
their competitors and to what extent they monitor their rivals’ strategies and
tactics in the British electronics industry.

The abovementioned studies are all concerned with how managers construe their
competitors. Not a single study was found on how managers formulate the competitive
actions they take. Neither was anything found regarding the formulation of competitive
strategies in practice. In summary, no evidence of research having been carried out
regarding what managers actually do in practice to formulate competitive strategies or
actions could be found and P2 sought to address this gap.

Methods and objectives

The units of analysis in P1 were the company’s competitive position and its competitive
strategy. P1 was used as a foundation for research that was to be carried out
subsequently in P2. The term ‘foundation’ means a basis from which to start the
research and to build on what was already known.

Page 22

Six interviews were carried out with industry practitioners when scoping the study and
they showed that there are certain processes and techniques that are applied in
practice. This informed the research question and the findings of the interviews were
explored further in P1.

The Systematic Literature Review (‘SLR’) sought to review and catalogue the literature
that is available and relevant to management cognitions and sense-making in the
context of competitive positioning and the development and execution of competitive
strategy in practice. The scope of P1 was limited to the decisions senior managers make
and the actions they take to position their firms in relation to their competitors in order
to optimise their profits, in the context of marketing actions involving price, brand and
product or service attributes.

P1 covered both the cognitions employed by managers in understanding their
competitive environments and their relative positions, as well as the cognitions
employed by managers’ in formulating competitive strategies. The starting point was
how they construe and, as a result, define their competitors and how they make
decisions to respond to competitive forces and compete more effectively.

The EBSCO, ProQuest and Science Direct databases were searched using a number of
pre-defined search strings. The search yielded a total of 3,187 articles, which were
reduced to 91 after removing duplicates and after title, abstract and full title screenings.
The data was synthesised with the objective of describing, analysing and drawing
conclusions from the research evidence gathered, and to summarise it so it could
effectively be used to inform the qualitative research carried out in P2.

Findings and contributions to knowledge

From the literature reviewed, it was clear that understanding the competitive landscape
is the first step in the process of developing competitive strategies. This is because
knowing where a brand or product is positioned relative to its competitors is antecedent
to understanding what its ideal or desired position should be, as well as the formulation
of a plan with actions to attain that position.

One of the conclusions of P1 was that further research was needed into the link between
the competitive positioning tools and techniques offered in the extant literature and the
processes employed in practice, and vice versa. The scope of this DBA study was further
developed and refined to focus on the formulation of competitive actions in the
subsequent projects, as it was revealed that a gap existed in this area of the extant
literature. Based on the findings of P1 and the gaps found in the extant literature, the
focus of P2 and P3 was on competitive actions, rather than competitive positioning or
competitive strategy.

Page 23

P1 propositions

As a result of the findings of P1, four propositions that required clarification were
developed, namely:

1. Manager’s approaches to the formulation of competitive actions are
environment dependent
2. Managers’ backgrounds influence their competitive actions
3. Managers focus on narrow sub-sets of their competitor universes
4. Competitive actions are carried out in an iterative manner

While these propositions are covered thematically in the extant literature, the findings
appeared inconclusive in certain respects and required additional research, which I
tried to undertake as part of P2.
Project 2: Competitive actions in practice

Based on the findings of P1 and, specifically, the gaps in relation to researching
competitive actions that were found in the extant literature, the unit of analysis in P2
and P3 was the competitive action.

The contribution to theoretical knowledge of P2 is an understanding of how competitive
actions are formulated and executed in practice. The objective of P2 was to address the
gaps and the propositions identified in P1 and to explore the processes managers
followed and the tools and techniques they used in formulating and executing of
competitive actions.


The research sought to identify and explore the links and the chain of causality between
managers’ interpretations of their competitive environments and the actions they took
as a consequence. This was a practical study involving a number of senior managers who
are responsible for the formulation and execution of competitive actions at companies
across a number of different industries. Semi-structured interviews were used to
understand the mental maps that managers use to construe their competitive
environments, the subsequent decisions they take to compete more effectively, and
what informs those decisions.

A range of processes for developing competitive strategies are prescribed by academic
literature but there is little evidence that these processes are used in practice or, indeed,
of what processes practitioners actually follow in this regard. P2 sought to realise a
broad understanding of what practitioners do and, rather than limiting the study to a
particular industry sector, size of company or a particular territory, P2 sought to use a
Page 24

broad sample set so that the results of the research could be applied to a wide range of
different environments and competitive situations.

Step Description
1 Identify and recruit suitable participants
Managers were located using both my personal network of contacts and
through the contact networks of the Cranfield Centre for Customised
Executive Development and the current Cranfield DBA cohorts. The
participants were all managers involved in the formulation and execution of
competitive actions within their respective organisations.
2 Identify specific competitive actions
Each participant was asked to identify at least one specific competitive action
(action) to be included in the research. A review of participants’ organisations
websites and documentation related to the action allowed for the
triangulation of the interview findings.
3 Gather information about the environment and the participating managers’
backgrounds
Information regarding the company and the environment related to the
action, as well as the participating managers’ backgrounds, were gathered
before they were interviewed.
4 Interview participating managers
In most cases, the interviews were voice recorded and extensive notes were
always taken. Additionally, interviewees were asked for documentation that
supported the formulation and the execution of the competitive action.
5 Transcribe, code and analyse interviews and the associated material
The interviews were transcribed and then coded. To add more depth to the
information gathered in the interviews, the associated material, such as
business plans, advertising briefs and advertising material was collating and
analysed.
6 Produce CIMO2 maps
The coded interviews, as well as other information, were used to produce
CIMO maps
7 Analyse CIMO maps in response to the two propositions
The maps were analysed in response to the two propositions, namely that:
1. The formulation and execution of competitive actions is environment
dependent
2. The formulation and execution of competitive actions is influenced by the
relevant managers’ backgrounds
8 Compare and contrast ‘CIMO’ maps
The maps were compared and contrasted in order to identify anomalies and
differences in managers’ approaches to the formulation and execution of
competitive actions and to draw conclusions in this regard.

Table 2: P2 Research procedure

2
Context, Intervention, Mechanism, Outcome
Page 25

In every one of the 20 interviews and the 26 competitive actions that were discussed,
the four propositions developed in P1 (see page 24) were explored by asking the
interviewees questions specifically related to them. This yielded data that was then
analysed using CIMO maps to respond to the propositions.


A number of findings were made in P2, including an understanding of the influences that
managers’ environments and backgrounds have on the way in which they formulate and
execute competitive actions, as well as an understanding of how managers’ use tools
and techniques to support the formulation and execution of competitive actions. The
sections below have been organised according to the four propositions developed in P1,
followed by the findings and the contributions to knowledge in relation to emergent
phenomena.

P1 propositions

The findings in relation to the four propositions that were developed in P1 are listed
and discussed below.

Proposition 1 - Manager’s approaches to the formulation of competitive actions are
dependent on environmental competitiveness

Walsh (1995) explains that managers in non-hypercompetitive environments are able to
base both their own actions and their interpretations of others' actions on a cognitive
framework that includes beliefs shared within the firm, as well as beliefs shared among
companies. Bogner & Barr argue that many of these beliefs are no longer shared
between managers in hypercompetitive environments. P2 sought to provide an
understanding of how varying competitive environments affect the sophistication of the
formulation of competitive actions by managers. The state of development of the
macro-economy and the maturity of industry in which actions were formulated were
used as proxies for environmental competitiveness.

No relationship could be found between the degree of development of the economy in
which the action was formulated and the sophistication of methods used. Neither could
a difference in the types of competitive actions or the methods used to formulate and
execute them be found between those carried out in developed markets, developing
markets and emerging markets. The conclusion is that the sophistication of methods
used in the formulation and execution of competitive actions is not influenced by the
nature of the macro-economic environments, whether the economy developed,
developing or emerging.

Based on the sample, the structure of the industry in any specific market is normally
related to its maturity. In mature industries, such as the automotive or the Fast Moving
Page 26

Consumer Goods (FMCG) industries, managers were very aware of whom their
competitors were and their relative positions in the market. As a result, they acted with
very specific objectives when gathering market intelligence and when formulating and
executing competitive actions. The managers who were interviewed at IT companies,
whose industrial structures were still evolving and, therefore, their competitive sets
were not as clearly defined as those of the automotive or FMCG industries, gathered
market intelligence and formulated and executed competitive actions with objectives
that were less clear.

Ten industries were covered in the research. None of these could be considered stable
without change or innovation taking place. From the interviews we can conclude that
the reasons for competitive actions and the ways in which they are formulated and
executed, are not functions of the rate of change or the level of innovation of a particular
industry. Rather, they are situation-specific and such situations relate to specific
changes in the competitive landscape, corporate actions, economic crises, desired
changes in customer perceptions or poor sales performance as perceived by managers.

Proposition 2 – Managers’ backgrounds influence their competitive actions

The second proposition was that managers’ approaches are influenced by their national,
cultural, educational, functional and experiential backgrounds. It is noteworthy that two
of the youngest managers interviewed were very sophisticated in their approaches to
formulating and executing competitive actions and they accounted for two of only four
managers that used a tool or technique to assist them. These two managers also
possessed high levels of relevant formal training. In contrast, managers in the
automotive and fashion industries with no relevant formal training but many years
experience relied on the tacit knowledge they had accumulated over many years, as well
as dialogues with other managers, sales staff and customers in formulating competitive
actions.

Regarding managers’ training and the size of their organisations relative to the
sophistication of the methods used in formulating and executing competitive actions, a
very distinct relationship is evident between the level of managers’ training, as well as
between the sizes of their organisations, and the sophistication of the methods used.
Therefore, it is not clear whether larger organisations use more sophisticated methods
because they tend to place greater emphasis on qualifications when employing
managers or because the size, culture and the processes employed within larger
organisations cause them to use more sophisticated methods.

It was clear that managers’ functions within their organisation have a bearing on the
types of actions they formulate and execute and the methods they use. Bowman &
Daniels (1995, pg. 165) found that “When managers are asked to reflect their firms’
situations, there is evidence of functional bias”. The interviews confirmed that
functional biases exist in the formulation and execution of competitive actions and this
was pervasive across the study. For example, marketing managers used surveys to
Page 27

gather information while those with sales backgrounds replied more on personal
dialogues and managers with engineering backgrounds placed more emphasis on the
technical differentiators of their product or service offerings.

It was also evident that managers operating in their home markets had an advantage
insofar as they had an affinity with local cultural and national norms, while managers
operating in foreign markets had an advantage insofar as they were able to apply
learned experiences from previous actions and tacit knowledge gained in their home
markets to the new ones. However, in every instance of managers from foreign markets
successfully formulating and executing competitive actions, they did so with the support
of local managers.

Proposition 3 - Managers focus on narrow sub-sets of their competitor universes

The third proposition derived from the Systematic Literature Review is that manager’s
focus on narrow subsets of their competitors due to their limited capacities to rigorously
comprehend and analyse their comprehensive competitive sets. These assertions were
confirmed in the interviews that were conducted. The interviews also affirm the
existence of strategic groups (Porter, 1980) and cognitive oligopolies as described by
Porac, Thomas and Baden-Fuller (1989), who used the term to refer to the tendency of
managers to limit their competitive subsets.

A manager at a mobile telephony company, for example, was only really aware of his
two closest competitors, their business models and their competitive advantages. It is
also evident from the interviews that oligopolies act in a coordinated fashion in relation
to their competitive actions.

Proposition 4 - Competitive actions are carried out in an iterative manner

The fourth proposition from P1 was that the formulation and execution of competitive
actions are carried out on an iterative basis. P2 sought to understand how the complete
strategy process, or loop, could function in an integrated manner and what the benefits
would be. The interviews not only confirm that competitive actions are indeed carried
out in an iterative manner but also showed that interactions with customers are often
relied on in the formulation of competitive actions. Specifically, 15 of the 26 competitive
actions covered in this study relied on customer interactions to inform and guide their
formulation and execution and 10 of them relied on multiple customer interactions.

In other words, a customer’s comments may trigger the competitive action process and,
as certain tasks are completed, customers, as well as other managers and business
partners, are engaged again to provide guidance. Knowledge gained from previous
competitive actions, most often tacit knowledge, is also used to inform the formulation
of competitive actions.

Page 28

Emergent phenomena

Phenomena that emerged during the interview are:

The link between academic tools & techniques and practitioners’ practices is weak

One of the most significant findings from the early research carried out as part of the
scoping study that was confirmed in P2 is that tools and techniques, such as those
discussed by Rigby (2001) are seldom used. In fact, of the 26 competitive actions
included in the research only three used a tool or technique and these were:

• Competitive Compass
• Michael Porter ‘s Five Forces framework (1980)
• A tool developed internally by an FMCG company to estimate sales volume and
value, as well as the requisite marketing investment. This tool was used in two
of the competitive actions covered.

This is an interesting observation insofar as it shows that, in the context of the P2
research, the link between practice and the tools offered in the extant literature,
including those discussed in Rigby’s 2001 study, is weak. Of course, the question that
could be asked is whether or not a greater use of these tools and techniques would, in
fact, improve the endeavours of managers in relation to the formulation of their
competitive actions. Interestingly, in 13 of the 26 competitive actions, structured
interviews or surveys were used by the respondents.

Offensive vs. defensive actions

The research showed that smaller companies that are still growing tend to formulate
competitive actions from an offensive stance with the objective of gaining market share
from the incumbent competitors. By contrast, larger, more established companies that
were firmly entrenched within their strategic groups, tended to act defensively when
formulating and executing competitive actions with the objective of maintaining their
market positions.

In summary, the larger companies tended to develop and execute competitive actions
in order to fend off competitive threats from smaller competitors or as a reaction to
shrinking sales figures or market share. Smaller companies, by contrast, tended to
develop and execute competitive actions with the objective of growing their businesses.

Formulating competitive actions is an intuitive and iterative process

The interviews in P2 suggest that the formulation and execution of competitive actions
is an intuitive and iterative process. Managers, particularly those that are more
experienced, were found to rely very heavily on direct interactions with other managers,
Page 29

business partners and their customers when formulating and executing competitive
actions. It was also found that competitive actions are carried out in an iterative manner,
where the learned experiences from one competitive action, or a set of competitive
actions, are used to inform future iterations of the same action or actions, as well as
new and unrelated actions.

The conclusions drawn from actions taken are often stored as tacit knowledge held by
individual managers, rather than institutional knowledge held formally. This tacit
knowledge is then applied to future actions by the relevant managers. It was revealed
in P2 that more experienced managers rely more on the tacit knowledge they hold and
less on tools, techniques and methods they’ve learnt through formal territory education
than younger, less-experienced managers.

Greater deviation from the norms of strategic groups exists than the extant
literature indicates

Strategic groups are part of the way strategists organise and make sense of their
competitive environments (Reger & Huff, 1993). Porter (1980) defined a strategic group
as a group of companies in the same industry making similar decisions in key areas. As
part of this study, managers were asked to list their competitors, as well as the
competitors they considered in the formulation of competitive actions. Based on the
results, the existence of strategic groups was evident. The managers’ responses also
confirmed that they focus on narrow sets of competitors in defining their competitive
environments. However, based on the 26 competitive actions analysed, there appears
to be far more divergence from the norms of strategic groups in the formulation of
competitive actions than indicated in the extant literature.

Gresov and Drazin (1997) assert that efficiency and efficacy are optimised in the
structures and processes adopted by the strategic group and that deviating from them
results in compromised performance. While the study found there to be mimicking
between competitors in the same strategic groups, in relation to marketing campaigns,
product development and product or pricing policy updates, there were many instances
where the managers interviewed deviated from industry norms with the objective of
achieving or sustaining profit levels above industry norms. An FMCG company launched
a refill pouches initiative in response to the market becoming more and more
commoditised and consumers becoming more and more price sensitive. A
telecommunications company bundled fixed-line and mobile-line products together to
offer a service that none of its competitors could.

Another explanation for managers being reluctant to deviate from industry norms could
be because taking actions that appear to be in their organisations’ best interests may
induce retaliatory actions from their competitors (Baum and Korn, 1996). In the 26
interviews that make up this study, not a single example of this retaliatory fear
behaviour could be found.

Page 30

Managers formulating competitive actions in their home environments vs. in foreign

environments

The interviews found that managers operating in their home environments had an
advantage over managers operating in foreign environments. However, managers
operating in foreign environments also had an advantage in that the most effective
competitive actions were formulated by teams comprising a mix of the requisite skills
and experiences. It is impossible to state which of the two is more advantageous.

Project 3: Formulating competitive actions

The contribution to practice of this DBA study is a guide that was produced to assist
managers in formulating competitive actions. The guide makes use of the findings of P1
and P2 to offer insights and recommendations to managers at every step of the
competitive action formulation process. These insights and recommendations were
explored and further developed in P3 through a number of interviews with a different
set of managers to those interviewed in P2. A processual model was discerned and has
been distilled into a five-step process, with the acronym ‘SOLAR’, comprising:

1. Stimulus – the trigger to the action
2. Objectives – The objectives or desired outcomes to the action
3. Levers – A set of five different levers, including price, product, place, business
model and communication, that could be used
4. Actions – The action or actions themselves
5. Refinement – The process of repeating the action and adjusting or refining it in
doing so

Each of these has been clustered in accordance with the findings of the research. The
recommendations offered in this guide are predicated on the use of different resources
depending on the stimuli and the objectives related to the action, the levers available to
the manager or managers formulating the action, and their respective constraints.

Page 31


Step Description
1 Patterns and approaches relevant to the formulation of competitive actions
were identified and documented based on the findings of P1 and P2.
2 A guide for formulating competitive actions based on the patterns and
approaches identified and documented in step 1 was developed. Process flow
charts and tables were used as far as possible to describe the guide in a succinct
manner.
3 Four suitable managers involved in the formulation of competitive actions
within their respective organisations were identified and recruited to review
and comment on the guide. The criteria used to recruit these managers and a
summary of those selected is provided in the ‘Research population’ section
below.
4 The guide was discussed with the participating managers and updated
accordingly after every discussion to reflect their particular experiences, as well
as their assessments of its validity and applicability. Ten discussions were held
with the managers, their comments were noted each time and they were used
to produce five versions of the guide in total. The comments and consequent
updates to each of the five versions of the guide are contained in appendix 17.
5 The guide was finalised with ‘version 5’, using the comments from the
discussions held with managers. The last two versions were split into the guide,
which was designed to be used by a broad set of managers on a day-to-day
basis, and a resources manual, which was designed to be used by a smaller set
of managers less frequently. Appendix numbers 1 to 7 contain the five versions
of the guide and the associated resource manuals.

Table 3: P3 Research procedure

The table above depicts the research procedure that was followed in P3. It was
important that the guide could be applied to the formulation of a wide range of different
competitive actions in practice and the competitive actions from P2 were, therefore,
drawn from different industries, territories and different types organisations. A set of
managers different from those used for the P2 interviews was used in order for the P3
process to be as objective as possible. The study population comprised managers that
either make or influence decisions that lead to competitive actions.

The themes that emerged in P1 and P2 were considered in developing P3. Relationships
that existed between the themes were identified and used to explain the dynamics of
the guide, as well as the factors that lead to those relationships. The figure below depicts
the process that was followed.

Page 32

Project 1

Competitive actions
Project 3
guide for managers

Project 2

Test guide with managers

Competitive actions

guide for managers

Figure 2: P3 inputs and development process

Several iterations of the guide were produced and managers were interviewed between
each iteration until they were no longer able to make novel contributions in the
interviews. Five iterations of the guide are included in this DBA thesis as appendices.


The guide to formulating competitive actions is the corollary of the research that
preceded it, including both the knowledge acquired through the systematic literature
review, the data gathered through the interviews and the 26 competitive actions that
were recorded and analysed. The guide seeks to share this data and knowledge with
managers in an intuitive and practical way through the use of diagrams, tables and
summaries. These have been laid out in accordance with the competitive action
formulation process that was observed in the research and which has been summarised
as SOLAR, namely:

• S - Managers become aware of the stimulus to the action.
• O - They envisage a desired outcome and a set of objectives.
• L - They identify levers of mechanisms that can be used to achieve the objectives.
• A - Using the data, experiences, tools and knowledge available to them, they set
about developing the specific action, or actions, by, for example, gathering more
data, having discussions with colleagues, customers and business partners and
using tools that assist them in this regard.
• R - Once the action has been executed, managers refine it by comparing the
outcome to their objectives and feeding that back into the competitive action
cycle, either for the formulation and execution of an iterative action, as a
stimulus to a new competitive action or as part of their frame of reference in
formulating parallel or future actions.

Page 33

In discussing the guide with managers, the ideas and recommendations offered were
usually reinforced by their own experiences and anecdotal evidence was often provided.
Through the development of the guide and the interviews in P3, it was confirmed that
managers formulating and executing competitive actions in their home markets have an
advantage over those operating in foreign markets insofar as they have a better
understanding of the local culture and national peculiarities. Managers formulating and
executing competitive actions in foreign markets have an advantage insofar as they
bring learned experiences from competitive actions successfully executed in their home
markets with them. Based on the interviews, it is impossible to determine which position
is more advantageous.

Managers also highlighted some of the situations and some of the decisions they are
often faced with. For example, one of the Chief Executive Officers interviewed
mentioned that they often asked themselves “which businesses, or products and
services, they should continue with and which they should discard, which they should
re-hash and which they should try to improve upon”. Practical examples were also
offered, that either reinforced or questioned the ideas and recommendations provided
in the guide. These included an approach that involved looking for new markets that
could substitute for the loss of sales or market share in markets where sales were
waning.

The qualitative research confirmed that manager’s frames of reference are influenced
by their national and cultural backgrounds, as well as by their experiences and their
training and it became evident in P3 that this can act as both a hindrance and an
advantage in the formulation of competitive actions. Managers with more experience
but less formal education in business or marketing disciplines tend to rely more on their
experience, their intuition and on dialogues with colleagues, customer and partners to
inform the competitive actions they formulate, while managers with less experience and
higher levels of education in business or marketing disciplines place more emphasis on
what they have learnt. Based on the research, the best approach to dealing with
managers’ disparate backgrounds, experiences and training is to map them to the
requirements envisaged for each specific competitive action and, where necessary and
appropriate, to assemble teams with the requisite set of skills, experiences and
backgrounds.

A proposition emanating from P1 was that ‘competitive actions are carried out in an
iterative manner’. This was explored in P2 and it appeared that competitive actions are
indeed carried out in an iterative manner. A particular action is taken, it’s success or
failure is evaluated and it is then used as an input to a further action or actions. P3
confirmed that, because industries and markets are dynamic, companies would benefit
from competitive actions being formulated and executed as an iterative process,
informed by changes in market conditions and the competitive environment, as well as
the use of competitive intelligence. Tight integration between the gathering and
application of competitive intelligence within organisations could lead to more effective
Page 34

competitive actions being formulated, as well as actions that are more responsive to
environmental changes.

Limitations of study and areas for further research

The study was qualitative and exploratory in nature. Rich data concerning the
formulation and execution of competitive actions was produced. The most evident
limitation of this study is that it is based on only 26 competitive actions. If the size of the
sample was vastly expanded and surveys were included too, the findings could be
generalised and it would be possible to make definitive recommendations to managers
about cause and effect. For example, it would be possible to posit outcomes to decisions
or actions based on large sets of previous, comparable competitive actions. Further
research could be carried out on very specific competitive actions using large sample
sets and specific questions that would illicit simple responses in order to produce
generalisable results that could then be used to provide managers with likely outcomes
to their actions based on situational factors.

The use of generalisable data would also present a limitation insofar as it would have to
be quantitative data and, therefore, would not be rich in the insights it provides but,
rather, would have to be limited to sets of specific actions and responses. In other
words, it may be possible to use it to infer outcomes based on specific decisions or
actions but these decisions or actions would have to be very specific. Depending on the
breadth of data, the range of outcomes would also probably need to be confined to a
few possibilities.

Further research could be carried out in a number of areas using new data, including:

1. How the connection between the theories, tools and techniques offered in the
extant literature and those used in practice could be improved upon. There is a
lot that academics could learn from what practitioners do that would improve
their theoretical work. Likewise, the deployment and use of their theories, tools
and techniques in practice could be increased and deepened. In this regard, the
guide offered in P3 could be further developed.
2. The sample used in P2 and P3 was deliberately diverse and included competitive
actions from a wide variety of different industries and territories, formulated by
managers of varying ages and levels of education and experience, and for
companies of varying sizes and levels of maturity. This was done so that the data
collected would be as general as possible. The scope exists, and it would be
useful, to carry out further research to corroborate the findings of P2 and P3; to
learn more about what mangers do in practice and to further explore particular
areas of interest, such as differences in approach between disparate industries
and organisations, using new data that focuses on a particular industry or
compares approaches between different industries, categories of managers or
territories.
Page 35

3. There appears to be a gap in the literature reviewed regarding how managers

respond to mental maps of their competitive environments. In other words, how
these mental maps inform managers’ decisions and the processes they follow in
formulating competitive actions as a result of them. It would be interesting to
establish links between how managers construe their competitive environments
and how they apply this in formulating competitive actions. This was one of the
aims of P2 and some interesting findings were made, insofar as managers, for
example, envisage desired outcomes and set objectives for their actions before
the actions are actually developed. Future research could delve deeper into the
relationship between managers’ mental maps of their competitive environments
and the formulation of competitive actions.
4. While a great deal of research has been undertaken into the link between shared
inter-organisational mental maps of competitors and strategic groups, it would
be interesting to know if the link is causal. We know that managers across
organisations within strategic groups share mental maps of their competitive
environments, but we don’t yet know whether the emergence of these strategic
groups are the result of shared mental maps or if the development of strategic
groups has a causal relationship with managers’ mental maps. Further research
could also be carried out to test and validate these theories across greater and
more diverse sets of respondents and to establish differences in shared mental
maps across different environments, such as stable versus dynamic ones.
5. While this study confirmed that experience, in a wide variety of different areas,
has an influence on managers’ frames of reference and, therefore, on how they
formulate competitive actions, further research could be carried out in this
regard. Specifically, it would be interesting to know more about how managers’
experiences influence their frames of reference and how experience can be used
to improve their efficacy in formulating competitive actions.
6. As pointed out by Bowman and Daniels (1995), it would be interesting to know
whether functional bias in the context of perceived strategic priorities is a
problem or a source of competitive advantage. Furthermore, it is likely that it is
a source of competitive advantage in certain circumstances but is undesirable in
others. It would be interesting to know when it is a source of competitive
advantage and in what instances it is undesirable.
7. It was established in the research that larger organisations tend to use more
sophisticated methods for formulating competitive actions than their smaller
rivals. However, it isn’t clear whether larger organisations use more
sophisticated methods because they tend to place greater emphasis on
qualifications when employing managers or, because their size, their corporate
culture and the processes they employ provoke them to do so. The methods
employed by different types of organisations could be compared and contrasted
to determine this.

Page 36

Project 1: Systematic literature review

Page 37

Page 38

Introduction

The aim of this DBA study was to establish how managers formulate the competitive
actions they execute. This encompassed a study of both their cognitions and the
material processes they employ in deciding on particular competitive actions. The scope
of the research was limited to the actions managers take to position their brands,
products and services in relation to those of their competitors in order to optimise their
profits. These were limited to marketing actions involving price, brand and product or
service attributes. This was a practical study involving a number of senior managers who
are responsible for the formulation and execution of competitive actions at companies
across a number of different industries. The overarching research question for the study
was;

How do managers formulate the competitive actions they take?

In the context of the research question, the concept “formulate” includes all the
antecedents to competitive actions. Specifically, it has the following meanings:

• How managers view their competitive environments and categories their
competitors
• How they formulate strategies to compete more effectively with their
competitors
• The decisions they take to execute competitive actions and the information that
informs their competitive actions

This Systematic Literature Review (‘SLR’) sought to review and catalogue the literature
that is available and relevant to management cognitions and sense-making in the
context of competitive positioning and competitive strategy. This encompasses the
mental maps that managers use to construe their competitive environments, the
subsequent decisions they take to compete more effectively, and what informs these
decisions. The SLR was used both to understand what has already been found in the field
and as a foundation for research that that was carried out subsequently as part of this
study. The term foundation means a basis from which to start the research and to build
on what has already been learnt. The research question was:

strategy?

In the context of this study, competitive positioning refers to the way in which managers
map rival brands, products and services to those of their own, as well as the actions they
take to improve their competitive positions. Competitive strategy refers to the plans
managers formulate and the decisions they take to compete as effectively as possible.
This includes actions to change the price or the benefits associated with their brands,
products or services, as well as corporate actions, including mergers and acquisitions
Page 39

that are taken to compete more effectively. The research was not concerned with
actions that managers take to streamline their operations, nor to procure inputs more
economically nor any other actions they may take to become more profitable and that
are related to the operations of the business rather than to the price and benefits
associated with their products and brands and corporate actions.

The research is broken into three separate projects, namely Project 1 (P1), which is this
SLR, Project 2 (P2), in which field research to understand what happens in practice was
undertaken, and Project 3 (P3), in which a guide was developed to assist managers in
formulating competitive actions. Management cognition is a nascent field and little is
known about the constructs that managers use or where and how they think about
competitive positioning and competitive strategy in practice. Subsequent to P1, a series
of interviews were carried out as part of P2 to understand how managers think about
their competitive environments, how they formulate competitive actions and how they
make decisions with regard to competitive actions. The figure below depicts a high-level
process flow chart for the research.



cognitions in respect of competitive positioning and competitive
strategy. Predefined search strings were used, 91 relevant articles were
identified and analysed, of which 10 core articles were used as the basis
for the research carried out in P2.


Interviews were carried out with senior managers at 21 different

companies. Their cognitions and the material processes they followed
were identified in order to establish what informed their decisions and
how they construe and react to their competitive positions.

P3 – Framework & technique development

P3 focused on the development of a guide for improving the formulation

of competitive actions in practice.


Page 40

Relevant appendices

The table below lists the appendices to this study that are relevant to P1.

No. Title Description Pages
8 Previous consulting A list of previous consulting assignment and 185
assignments & businesses that I’ve been involved in and that
businesses are relevant to this DBA study
9 Quality appraisal Form that lists the Likert scale and the binary 186
criteria applied to criteria used decide on whether or not to
articles include the use of each article identified in the
study
10 Data extraction Specimen of the form used to systematically 187
form extract and record data from the articles
identified.
11 Summary of key A table containing the key findings from the 36 188 -
findings from most important articles. 200
literature

Table 1: Relevant appendices

Methodology

Literature was reviewed to understand what has already been established regarding the
constructs and processes employed by managers in practice in the context of
competitive positioning and competitive strategy. Appropriate search strings were
identified and used to locate the relevant literature. A process was employed to extract
the relevant data from the literature by funnelling through a process that started with a
systematic evaluation of the title, followed by a systematic evaluation of the abstract
and then an evaluation of the article itself. A sample data extraction form is provided in
Appendix 10.

Articles that passed the full text screening successfully were subjected to a quality
appraisal and only articles that made it through to this final stage of the process were
used. The quality appraisal criteria are provided in Appendix 9. The selected articles
were systematically reviewed and themes, key findings, their limitations and the
contributions they make to the review question were identified and recorded for
inclusion in the SLR.

Page 41

The systematic literature review process

The SLR covered both the cognitions employed by managers in understanding their
competitive environments and their relative positions; and their cognitions in
formulating competitive strategies. The starting point was how they construe and, as a
result, define their competitors and how they make decisions to respond to competitive
forces and, therefore, compete more effectively.

The review panel

Panel member Title/organisation Role
Professor Cliff Professor of Strategic Management at the Panel Chair and
Bowman School of Management, Cranfield University domain expert
Professor Mark Professor of Business Strategy at the School of Supervisor
Jenkins Management, Cranfield University
Dr Palie Smart PhD Programme Director and Reader in Panel member
Innovation Management and Corporate
Sustainability at the School of Management,
Cranfield University
Dr Emma Parry Director of the International Executive Systematic
Doctorate (DBA) programme at the School of review specialist
Management, Cranfield University. Her research
focuses on the impact of context on human
resource management.

Table 2: Review panel

The review panel comprised Professors Mark Jenkins, Professor Cliff Bowman and Dr
Palie Smart. Dr Emma Parry was the Systematic Review specialist. The table above sets
out their respective roles.

Search strategy

Figure 3 below depicts the search strategy that was followed.

Page 42

Identify key words and search strings

Identify databases

Recommendations,

cross-referencing

Run search strings in selected databases

Eliminate duplicates & title/abstract screening

Full text screening

Quality appraisal

Final papers for systematic review

Figure 2: Search strategy

Keywords

To facilitate the creation of appropriate search strings for the review question ‘What are
managers’ cognitions in respect of competitive positioning and competitive strategy?’,
the key words in the table below were identified:

Page 43

Keywords/terms Synonyms
Management Manager
Executive
Cognition Perception
Comprehension
Cognitive
Cognitive mapping
Mental models
Sense making
Competitive positioning Competitive position
Competitive positioning
Competitive environment
Competitive strategy Competitive strategy
Competitive advantage
Competition

Table 3: Keywords/terms and their respective synonyms

Search strings

The following search strings were used:

String Full search strings Search string to be used
no.
1 Management cognition AND competitive manag* cog* AND
position competitive position*
Management cognition AND competitive
positioning
Management cognitive processes AND
competitive position
competitive positioning
Manager cognition AND competitive
position
positioning
Manager cognitive processes AND
2 Management cognition AND competition manag* cog* AND
Management cognitive processes AND competition
competition
Manager cognition AND competition
Page 44


competition
3 Management cognition AND competitive manag*cog* AND
advantage competitive advantage
competitive advantage
advantage
4 Management cognition AND competitive manag* cog* and
strategy competitive strategy
competitive strategy
5 Management comprehension AND manag* comprehension
competitive position AND competitive
Management comprehension AND position*
Manager comprehension AND competitive
position
positioning
competition AND competition
7 Manager comprehension AND competition manag* comprehension
Management comprehension AND AND competitive
competitive advantage advantage
advantage
competitive strategy AND competitive strategy
strategy
9 Management perception AND competitive manag* perception AND
Management perception AND competitive
positioning
Manager perception AND competitive
position
positioning
10 Management perception AND competition manag* perception AND
Manager perception AND competition competition
Page 45


advantage
strategy
13 Management sense making AND manag* sense making
competitive position AND competitive
Management sense making AND position*
Manager sense making AND competitive
position
positioning
competition AND competition
15 Manager sense making AND competition manag* sense making
Management sense making AND AND competitive
competitive advantage advantage
advantage
competitive strategy AND competitive strategy
strategy
17 Executive cognition AND competitive Executive cog* AND
Executive cognition AND competitive
positioning
Executive cognitive processes AND
18 Executive cognition AND competition Executive cog* AND
Executive cognitive processes AND competition
competition
19 Executive cognition AND competitive Executive cog* AND
20 Executive cognition AND competitive Executive cog* and

Page 46

21 Executive comprehension AND competitive Executive comprehension

position AND competitive
Executive comprehension AND competitive position*
positioning
22 Executive comprehension AND competition Executive comprehension
AND competition
advantage AND competitive
advantage
strategy AND competitive strategy
25 Executive perception AND competitive Executive perception AND
Executive perception AND competitive
positioning
26 Executive perception AND competition Executive perception AND
competition
29 Executive sense making AND competitive Executive sense making
position AND competitive
Executive sense making AND competitive position*
positioning
30 Executive sense making AND competition Executive sense making
AND competition
advantage AND competitive
advantage
strategy AND competitive strategy
33 Management AND cognitive AND Management AND
competitive positioning cognitive AND comp*
Management AND cognitive AND
competition
Management AND cognitive map AND

Page 47


competition
34 Management mental model AND Manag* AND mental
competitive positioning model AND comp*
Management mental model AND
competition
Managers mental model AND competitive
positioning
strategy
advantage
Managers mental model AND competition

Table 4: search strings

Databases

The following databases were used, which jointly indexed a large amount of business
literature and resulted in a very comprehensive search.

• EBSCO – EBSCO covers more than 375 full-text and secondary research
databases providing a very comprehensive platform from which to search for
relevant literature. There is also a strong emphasis on academic journals, which
translates into better search results and fewer article disqualifications.
• ProQuest (ABI/Inform) – The ProQuest, ABI/Inform database coverage is very
broad and, apart from academic journals, includes many trade journals,
periodicals and news wires. While its coverage is comprehensive, the search
results yield many articles that are not useable because they are either irrelevant
or lack robustness and quality of research that this study demands.
• Science Direct – Science Direct is a leading full-text scientific database offering
journal articles and book chapters from nearly 2,200 active journals and close to
26,000 books.

Using additional databases beyond those mentioned above would have resulted in a lot
of duplication and would have sharply diminished the efficiency of the search process.
The Psych Info database was also tested but yielded very limited results.

Page 48

Cross-referencing

In addition to evaluating the results produced by the databases; reference lists from the
documents selected for the review were also examined in order to identify additional
relevant literature that might have been missed in the search. The cross-referenced
literature was subjected to the same selection criteria and quality assessment as the
literature initially identified through the use of databases.

Panel recommendations

Panel recommendations have proved to be a very good source of literature to review.
They were considered and subjected to the same selection criteria and quality
assessment as the literature identified through database searches.

Selection criteria for articles

In order to determine the relevance of each article identified using the search strings, a
four-stage process has been used. Specifically:

1. The titles were scrutinised for relevance
2. The abstract was read and the article’s themes identified
3. The full text of the article was screened to determine its relevance
4. The article and the quality of the article was evaluated using the criteria listed
below

Title and abstract screening was subjected to the following criteria:

Page 49

Criteria Inclusion Exclusion Rationale

Relevance The title should The title does not The title and the abstract
for review contain one of the include a single key should provide an
question key words and the word or the abstract indication that the article
abstract should make does not refer to will deal with how
reference to management, executives or managers
management, manager or executive map their competitive
manager or cognition, cognitive positions and develop and
executive cognition, processes , implement competitive
cognitive processes , comprehension or strategy in practice
comprehension or perception in the
perception in the context of
context of competitive
competitive positioning,
positioning, competition,
competition, competitive
competitive advantage or
advantage or competitive strategy
Date of All None Competitive positioning
publication and competitive strategy
studies are not necessarily
time-specific and work as
old as Schumpeter’s is still
relevant in this field
Language All languages, as long All articles that are Most high-quality
as an English either not written in academic articles are
translation is English or where and either published in
available English translation English or, if not,
isn’t provided translated into English
Journal All None Because my research
ranking question is a very practical
one, I expect lower ranked
articles may be important
information sources too
Type of Journal articles, Conference papers Good conference and
publication extracts from books and proceedings, working papers will most
and working papers press articles, likely be developed into
less than a year old reports, theses, journal articles. Press
working papers older articles lack the rigour of
than a year academic auricle. Reports
or theses are not always
identifiable or obtainable

Table 5: selection criteria for titles and abstracts of articles

Page 50

The full articles that make it through the tile and abstract screening were subjected to
the screening criteria:

Criteria Inclusion Exclusion Rationale
Relevance Article discusses Article does not Provides insight into
for review management, discuss management, how executives or
question manager or executive manager or executive managers map their
cognition, cognitive cognition, cognitive competitive positions
processes, processes , and develop and
comprehension or comprehension or implement
perception in the perception in the competitive strategy
context of competitive context of competitive in practice
positioning, positioning,
competition, competition,
competitive advantage competitive advantage
or competitive or competitive strategy
strategy and provides or does not provide a
a conclusion/s conclusion/s
Type of Journal articles, Conference papers and Good conference
publication extracts from books proceedings, press and working papers
and working papers articles, reports, will most likely be
less than a year old theses, working papers developed into
older than a year journal articles. Press
articles lack the
rigour of academic
articles. Reports or
theses are not
always identifiable or
obtainable

Table 6: selection criteria for full articles

Selected articles

Following the process described above, the search produced the results set out in the
table overleaf. The numbers in the ‘Search string no.’ column relate to the search string
numbers indicated in table 3 above. Relevant data from all 91 articles were extracted to
a standardised data extraction form designed to capture themes, methods and key
findings in the literature. Data extraction facilitated the rendering of a descriptive
account and a synthesis of the literature.

Page 51

Search EBSCO ProQuest Science After After After full After

string Direct title and removal article quality
no. abstract of screening appraisal
screening duplicates
1 63 118 6 47 43 26 23
2 93 87 64 19 15 14 12
3 86 105 19 45 42 29 18
4 72 74 19 22 14 12 11
5 5 7 0 0 0 0 0
6 7 12 1 0 0 0 0
7 7 14 3 0 0 0 0
8 9 6 0 0 0 0 0
9 68 74 19 8 3 3 3
10 226 278 80 17 5 5 5
11 205 269 46 6 2 2 2
12 163 121 45 10 2 2 2
13 1 7 0 1 1 0 0
14 13 15 6 2 1 1 1
15 12 18 5 5 3 3 2
16 7 20 4 7 4 4 2
17 2 2 0 1 1 1 1
18 17 15 14 1 0 0 0
19 3 3 2 0 0 0 0
20 9 11 4 1 0 0 0
21 0 0 0 0 0 0 0
22 3 1 1 0 0 0 0
23 2 1 1 1 1 1 1
24 0 0 0 0 0 0 0
25 0 1 2 1 0 0 0
26 10 8 2 0 0 0 0
27 27 22 9 0 0 0 0
28 22 23 7 0 0 0 0
29 0 8 0 1 0 0 0
30 1 13 0 4 1 0 0
31 0 8 0 0 0 0 0
32 2 6 0 1 1 1 1
33 25 19 3 1 0 0 0
34 87 128 29 12 4 4 4
35 17 26 12 9 4 3 3

Table 7: Search results

Page 52

Quality appraisal

After selecting the papers using the search strings referred to above based on their titles,
abstracts and their full texts, these were appraised for quality. Tables 7 and 8 depict the
criteria used to appraise each article. Table 7 depicts the scores where a Likert scale was
used, while table 8 relates to criteria with a binary score. Appendix 9 lists the quality
appraisal criteria. For every article, each criterion was either scored from 1 (not at all)
to 5 (completely) or on a ‘yes’ or ‘no’ basis if they elicited binary scores. Articles scored
between 1 and 5 had to meet a minimum score of 3 for each criterion in order not to be
excluded. For binary criteria, only those articles that met the criteria were included. To
negate the assumption that papers in top rated journals are all necessarily of good
quality, journal rankings were not considered as part of the quality appraisal criteria.
However, the source of each article was borne in mind when reviewing it.

Data synthesis

The objective of the synthesis was to describe, analyse and draw conclusions on the
research evidence gathered in the review and to summarise this so that it could
effectively be used to inform the qualitative research carried out as part of P2. To
achieve this, the synthesis process started by mapping manager cognitions related to
competitive positioning and competitive strategy. These were then organised in a
structure that makes it easy to relate them to competitive strategy in practice. The
synthesis sought to expand the understanding of competitive strategy in practice.
Evidence from primary qualitative studies has been synthesised.

Findings

The field of management cognition in the context of competitive positioning and
competitive strategy is broad. The literature reviewed researched a wide variety of
different topics and made many and diverse suggestions and assertions. Whilst
reviewing the literature, notes were taken regarding themes, key findings and the
limitation and suggestions for further research. A total of 31 themes were identified and
were then collated and distilled into a number of key themes. Specifically, these key
themes included:

1. Managers’ cognitive categorisations of competitors
2. Influences on managers’ frames of reference
3. Shared intra-industry management cognitions
4. Automatic versus controlled processing
5. Functional biases in the perception of competitive strategy
6. Does deviating from industry norms result in lower profits?
7. Competitive intelligence
Page 53

8. The alignment of strategy and performance management

9. Strategy as an iterative process

Each of these themes is dealt with in a separate section and a summary of the results of
each key study, as well as limitations associated with the study and scope for further
research are provided at the end of the section. This approach sought to organise the
research in the field into a manageable and logical parts that relate to each other; yet
deal with discreet topics. In instances where a study covers more than one of the key
themes identified, the same study appears in more than one section. The key findings
of the SLR are summarised in Appendix 11.

Managers’ cognitive categorisations of competitors

In the process of developing competitive strategies, understanding the competitive
landscape is the first step. This is because knowledge of where a brand or product is
positioned relative to its competitors is antecedent to understanding what its ideal or
desired position should be and the formulation of a plan with actions to attain that
position. Most environments are very complex, with numerous forms of organisations
seeking many different types of resources. Monitoring, adapting to and pre-empting
rivals require managers to first assess inter-organisational similarities and then
distinguish between organisational friends and foes (Porac and Thomas, 1994).

Porac and Thomas (1994) suggest that subjective rivalry is an interesting phenomenon
in its own right and postulate that the narrowness of subjective rivalry may be an
explanation for how and why organisations fail to adapt to changes in competitive
conditions. They suggest that this lack of categorisation of competitors led to the
American automobile manufacturers losing substantial market share to their Japanese
rivals in the 1970s. Therefore, it is appropriate to ask whether relying on mental models
of companies’ competitive environments is adequate and if a material approach, in
which the analysis of the competitive environment is mechanised to overcome the
limitations of manager’s cognitive processes, should be used.

Hedberg, Nystrom and Starbuck and (1976) suggest that Facit AB’s calculator business
declined because managers continued to define their firm as a ‘mechanical calculator
company’ despite the impending revolution in microelectronics. Porac and Thomas
(1994) proposed a tentative cognitive approach to explaining competitor classification
that centres on the concept of business definition. Abell (1980) posited that an
underlying definition of the business acts as a cognitive reference point around which
managers conceptualise an organisation’s competitive position. A business definition
creates a perceived psychological space for managers that delineates an organisation’s
technological and product position in relation to its potential rivals. Organisations are
competitors to the extent that they draw from the same resource pools (Porac and
Thomas, 1994). For example, the breakfast cereal market would be defined as all firms
selling cereal products to people who desire to purchase them.

Page 54

Strategic groups are invoked by strategists to organise and make sense of their
competitive environments (Reger & Huff, 1993). Specifically, managers simplify their
competitive environments by focusing upon a subset of firms competing within an
industry (Daniels, Johnson and de Chernatony, 2002; Easton et al. 1993; Gripsrud and
Gronhaug 1985; Hodgkinson and Johnson 1994; Lant and Baum 1995). They simplify
their competitive environments further by categorising their competitors (Porac,
Thomas and Baden-Fuller. 1989; Porac and Thomas 1990, 1994; Reger and Huff 1993).
They define their own business in terms of the label they use to define the cognitive
category in which their business is placed (Porac, Thomas and Baden-Fuller, 1989) and
hence consider their firm to be competing most closely with other firms in that category
(Porac and Thomas 1994), especially if those firms are larger or more typical of that
category (Porac et al, 1995). Porac, Thomas and Baden-Fuller (1989) use the term
‘cognitive oligopolies’ to refer to the tendency of managers, even in fragmented
environments, to select a few, very similar organisations as competitive referents.
Porac, Thomas and Baden-Fuller (1989) propose two criteria to distinguish competitors
from non-competitors:

1. The industry criteria suggest that this distinction should be made on the basis of
technology – firms are competitors when they share similar technological
attributes.
2. The market criterion suggests that this distinction should be made on the basis of
product substitutability – firms are competitors when they produce products that
can be substitutes for one another in the satisfaction of a customer need.

In their research, Porac and Thomas (1994) ask whether subjective rivalry, being the
managers cognitive view of their competitors, is similar to or different from material
competition that is defined by the more standard technological of market criteria and
argue that there is no reason to expect that employee definitions of competitors would
be isomorphic with the more analytical definitions of researchers. This research
comprised two studies that suggested two sources of divergence. Firstly, respondents
did not see market and technological factors as mutually exclusive. For example,
supermarkets were subjectively defined as much by their technology (e.g. having delis)
as by the customer markets (e.g. upscale shoppers). Secondly, respondents tended to
make fine-grained distinctions among organisations and thus defined rivals somewhat
narrowly. For example, supermarkets, rather than grocery stores, were the level of
abstraction at which rivals were perceived, even though material criteria would, in all
likelihood, define rivalry at a more general level.

Researchers of competitive strategy adopting a cognitive stance have employed a
variety of methods for revealing managerial mental models, ranging from the simple
process of having participants list competitors by name (Hodgkinson, 1994), to more
sophisticated procedures such as the development and multivariate analysis of
questionnaire items derived through a thorough analysis of relevant literature
combined with expert opinion. Repertory grid and related procedures such as
Page 55

multidimensional scaling have also been employed to reveal the basis upon which
managers distinguish competitors (Reger, 1990).

Gripsund and Gronhaug (1985) asked grocery managers in a small Norwegian city to list
all the local firms that they considered to be competitors and, although Gripsund and
Gronhaug did not directly assess business definitions, their data suggested that
respondents perceived very narrow competitive boundaries. Despite the fact that over
50 groceries existed in the local community, 90% of the managers cited five or fewer
rivals. Porac and Thomas (1990) argued that the focusing effect of business definition is
a result of managers matching the characteristics of known organisations of cognitive
taxonomies of organisational types.

In their study in 1989, Porac, Thomas and Baden-Fuller adopted a ‘within-subjects’
assessment procedure. Managers were asked to discuss the nature of their business, to
categorise their business, what related classes of business there are and what sub-
classes of each there might be. The process was continued upwards until the managers
are unable to generalise usefully any further, laterally, until all related classes of
business they can recall have been recorded, and downwards, until they can make no
further useful distinctions.

Figure 3: Elicited ‘cognitive taxonomy’ of one of the managing directors of a Scottish knitwear firm
(Porac, Thomas and Baden-Fuller 1989)

Hodgkinson and Johnson (1994) carried out a very similar study to Porac, Thomas and
Baden-Fuller (1989) and argued that researchers adopting a cognitive approach to
competitive analysis tended to focus their data collection and analyses at an aggregate
level, particularly at the level of the industry. Whilst of value, the aggregate level
approach has a number of drawbacks and limitations. In particular, it implies a level of
consensus within and between organisations, which is questionable (Wooldridge and
Floyd, 1989) and it fails to take into account individual differences in mangers'
perceptions that may exist (Reger, 1990).
Page 56

In their study, Hodgkinson and Johnson (1994) explored the nature of individual
differences and similarities in managers' mental models of competitive structures, how
they might be explained, how such differences in perception are resolved, and the
consequent implications for future research within the field of strategic management.
Their study was undertaken in the United Kingdom (‘UK’) grocery retailing industry and
revealed considerable diversity amongst the research participants' organisations in
terms of the overall structure and contents of their mental models of competitive
environments. The study also revealed considerable intra-organisational agreement
regarding the categories that describe the self-identity of the research participants'
organisations and their major competitors.

The result of Hodgkinson and Johnson’s (1994) study demonstrates that there is
considerable variation in the contents and structural complexity of the cognitive
taxonomies of individual managers, both within and between organisations, in the same
industry sector. The study, as with other studies carried out around the same time,
focuses on how managers construe the market positions of their brands or products
relative to competitors, rather than the decision-making processes they follow in
developing competitive strategies.

Reger and Huff (1993) sought to compare individual-level mental models of competitive
structures. Using a repertory grid procedure (Kelly, 1955), Reger (1990) found
considerable variation in terms of the personal constructs elicited from managers from
different banks within the Chicago area. However, Reger and Huff (1993) re-analysing
the same dataset noted considerable agreement in terms of the research participants'
categories of competitors. Thus, it would appear that individuals might hold somewhat
different construct systems, yet share common category structures at the level of the
industry. In contrast to the Reger and Huff study that compared managers' mental
models across rival firms, the later study focused primarily on the nature and extent of
cognitive consensus and diversity within particular organisations. Nevertheless, their
focus on individual managers allows comparisons with the findings of the Reger (1990)
and Reger and Huff (1993) studies. The use of the taxonomic interview approach also
allowed comparisons with the findings of the industry-level aggregate studies of Porac
et al. (1987, 1989).

Daniels, Johnson and de Chernatony (2002) argue that the competitive, or task
environment, may encourage divergence of management cognition between
organisations, management functions and amongst senior managers, and that the
institutional environment may encourage cognitive convergence at the level of the
industry, the strategic group and within institutionalised practices linked to
management functions and level. They suggest that the institutional environment is
influenced by the convergence of middle managers’ mental models across specific
industries and that there is also some influence of the task environment through
cognitive differences across organisations. It has been found that greater differentiation
Page 57

exists amongst senior managers' mental models than amongst those of middle-
managers.

Study Results of study Limitations/scope for further research
Gripsund Managers view and focus on The research is based on a very peculiar
and only a sub-set of all their industry and territory and fails to ask
Gronhaug competitors – the most why managers focus on the sub-set of
(1985) direct competitors competitors that they do.
Porac, Managers actions are based The study included research on the
Thomas on their interpretations of interpretation of competitors and
and environmental cues, resulting suggested ways in which mental
Baden- in firms within competitive models of competitors are linked to
Fuller groups enacting their tactics competitive actions. Further research is
(1989) in similar ways needed regarding this link.
Reger The study found significant The study uses the Chicago financial
(1990) differences in managers’ services industry, which was going
personal constructs through change. Further research could
be carried out to contrast stable and
dynamic industries
Reger and The Reger study carried out The article focuses on a manager’s
Huff in 1990 was re-analysed and comprehensions of competitors in
(1993) considerable agreement in strategic groups. The dataset is drawn
the categorisation of from a very specific set of respondents
competitors between (managers of financial institutions in
respondents was found Chicago during a period of
deregulation) and is, therefore, biased
Porac and The article comprises two The focus of the two studies is on the
Thomas studies and they suggest respondents as a collective rather than
(1994) managers’ select few, very on individuals, which may limit the
similar organisations as results. While these, and other studies
competitive referents and too, shed light on how managers’
that these selections are construe their competitors, there is
structured not only by little research on how these mental
cognitive taxonomies but models are applied in practice and how
also by geographic proximity. they influence the decisions managers
Respondents didn’t view make with regard to competing within
market and technological their industries or strategic groups.
factors as mutually exclusive
in categorising competitors

Page 58

Study Results of study Limitations/scope for further research

Hodgkinson The study revealed that The article uses the individual
and there is considerable manager as its unit of analysis, as
Johnson variation in the contents opposed focusing at the aggregate
(1994) and structural complexity of level, particularly at the industry level,
the cognitive taxonomies of as prior research had done. The study,
individual managers, both as with other studies carried out
within and between around the same time, focuses on
organisations in the same how managers construe the market
industry sector, as well as positions of their brands or products
considerable intra- relative to competitors, rather than
organisational agreement their decision making processes they
regarding the categorisation follow in developing competitive
of competitors strategies.
Daniels, The article suggests that the This study highlights the complexity of
Johnson task environment management cognition in the context
and de encourages divergence in of competitive strategy insofar as it
Chernatony the cognitions of senior addresses cognitive divergence and
(2002) managers between convergence, across different
organisations and that the management levels and in the
institutional environment institutional and the task
encourages cognitive environments. Further research could
convergence at the level of be carried out exploring other useful
the industry and the metrics, such geographic locations,
strategic group at functional different industries and the
management level developmental stages of the
industries or strategic groups in which
firms’ operate.

Table 8: Managers’ cognitive categorisations of competitors

In the case of subjective rivalry, Porac and Thomas (1994) argue that the relevant
cognitive taxonomies consist of categories of perceived organisations varying from the
abstract to the specific. Each category is cognitively represented by a category label and
a set of attributes that describes the essential features of members’ firms. Defining a
business essentially entails matching a firm’s characteristics to a category feature list
and then using this match as a reference point around which competitive boundaries
are cognitively constructed. The table above provides a summary of the various studies
conducted regarding managers’ mental models in the context of competitors.

Summarising the results of the literature that has been reviewed, it is clear that
managers focus on a comparatively narrow set of competitors, comprised of those they
perceive to be most similar to their own companies. It would also appear that individuals
might hold somewhat different construct systems, yet share common category
structures at the level of the industry. Furthermore, it appears that there is divergence
Page 59

between the mental models of senior managers, which results from the task
environment and their objectives of differentiating their products and brands through
competitive strategy, yet cognitive convergence exists at the functional management
level, where managers are influenced by the institutional environment and motivated
by conformity with industry standards and processes.

Every study reviewed was based on a narrow and very specific dataset. The studies
either took the managers surveyed at an aggregate level as the unit of analysis or took
managers as individuals as the unit of analysis. While all studies pointed to managers
construing their competitors within the parameters of strategic groups, carrying out
research on a wider and more diverse group of respondents could further shape our
knowledge in terms of the divergence or convergence of managers’ construct systems,
category structures, as well as the influence of the task and institutional environments
on managers’ mental models and how they make decisions in the context of competitive
strategy. Further analysis on a wider and more diverse group would be particularly
interesting in terms of the following dichotomies:

1. Stable versus dynamic environments
2. Nascent versus mature industries
3. Senior managers versus middle managers

The literature reviewed, apart from the Daniels, Johnson and de Chernatony (2002)
study to some extent, is silent on how the mental models are used. In other words, how
they inform managers’ decisions and decision-making processes in the context of
competitive strategy. It would be interesting to establish links between how managers
construe their competitive environments and how they use this to make decisions
regarding competitive actions.

Influences on managers’ frames of reference

Subjective judgments are a major component in the process of strategic planning (Porac
and Thomas, 1994). According to Wissema et al (1980), managerial characteristics such
as creativity and intuitive-irrational thinking are important, and are being increasingly
recognised in the literature of strategic management. Jankowitz (2001) concurs and
adds that many occupations require people to draw on their experience to make
decisions based on subjective judgment, as opposed to the rational deductive chain of
logic, due to either gaps and/or an overload of information as well as time and cost
constraints. Therefore, the ways in which managers analyse and make sense of their
environments (Weick, 1995), perceive and categorise their competitors (Porac and
Thomas, 1990) and take decisions about competitive strategies (Simons and Thompson,
1998) have real implications when attempting to understand, contextualise and explain
competitive landscapes.

Theory and empirical research suggest that managerial interpretation is linked to
experience (Reger and Huff 1993, Fiske and Taylor 1984, Prahalad and Bettis 1986,
Page 60

Simon 1957). Hodgkinson and Johnson (1994) argue that the diversity of managers’
frames of reference influences their perceptions of competition and how their brands
or products are positioned in the market. It also suggests that the diversity of frames of
reference goes still wider than the organisation or industry level and that there is
increasing evidence that national culture affects managers' interpretations and
responses to strategic issues (Hodgkinson and Johnson, 1994; Calori et al., 1992;
Schneider and de Meyer, 1991). Hofstede (1980) suggests that managers’ frames of
reference influence their perceived control of the environment and strategic behaviour.
There are, of course, and inevitably, also factors within the organisation that influence
managers’ mental models. At the level of functional groups, for example, there are
functionally specific belief systems and perceptions of issues (Dearborn and Simon,
1958; Handy, 1985). Whitley (1987) argued that managers' views of the world are
shaped, at least in part, by their career backgrounds.

Study Influences on managers’ Scope for further research
frames of reference
Dearborn Functions within How do different functional
and Simon organisations influence backgrounds impact on competitive
(1958) managers’ frames of mental models and the formulation
reference of competitive strategy?
Hofstede Managers’ frames of What impact does greater perceived
(1980) reference influence their control of the strategic environment
perceived control of the have on the efficacy of managers’
environment and strategic strategic decision making processes
behaviour and the decisions they make?
Whitley Career backgrounds Further research into the effects
(1987) influence managers’ frames that different career backgrounds
of reference have on the decisions managers
make and their implications for the
formulation of competitive actions.
Hodgkinson Managers frames of Are managers more adept at making
and Johnson reference are influenced by strategic decisions in their home
(1994) their experiences, national markets, where they have strong
culture is a strong frames of reference, or can exposure
influencer, and their frames to different national cultures act as
of reference are, as a result, an advantage? How do managers’
broader than organisational frames of reference at the individual
or industry level ones level compare with organisation-
wide or industry-level frames of
reference at the aggregate level?

Table 9: Influences on managers’ frames of reference

Page 61

Any manager or group of managers draws on a series of frames of reference to make

sense of their world. There is a continual interplay between the individual, the context
in which he or she operates, the frames of reference related to these contexts, and the
political and social processes at work (Hodgkinson and Johnson, 1994).

While it cannot be disputed that experience, in a wide variety of different areas, has an
influence on managers’ frames of reference in the context of how they construe
competitors and make strategic decisions, further research is needed to establish
exactly how experiences influence frames of reference and how experience can be used
to improve the strategic decisions made and the competitive actions take.

Shared intra-industry management cognitions

Though essentially an individual-level concept, cognitive frameworks are influenced by
the interactions individuals have with others (Bogner and Barr, 2000). As interactions
occur among a number of different individuals within a given social grouping, the
commonly shared ideas begin to take on an existence of their own, independent of the
individuals that created them, and frameworks that exists at supra-individual levels
begin to emerge (Wiley 1988). These "shared belief systems" make coordinated activity
possible by providing a common framework for observing and interpreting new stimuli
and for coordinating appropriate action (Kelly 1955).

Individuals in a specific industry interact with each other. They go to the same
conferences and exhibitions, they read the same industry literature and they recruit
staff from the same labour pool (Reger and Huff, 1993). They share the same suppliers
in their value chain activities and observe what competitors do through benchmarking
(Porac et al., 1989). As a result, shared beliefs about competitive challenges and
opportunities are created through the cross-fertilisation of such interaction. Potentially,
this may lead to the adoption of similar ideas and practices and thus may hinder
differentiation.

Over time, individuals within the firm share experiences and knowledge with one
another, and a base of common knowledge and ‘views of the world’ begin to form
(Bogner and Barr, 2000). In organisation literature, these firm-level frameworks have
been referred to as organisational myths (Hedberg and Jonsson, 1977). These
arguments have found empirical support in the works of Spender (1989), Porac, Thomas
and Baden-Fuller (1989), Reger and Huff (1993).

Cheng and Chang (2010) examine the performance implications of cognitive complexity
in cognitive strategic groups. The concept of cognitive strategic groups, utilising
managerial cognition of competition, gains prominence to explain performance
differences among competing firms at the group level analysis, since managerial
cognition of competition influences organisational strategic actions and subsequent
performance (Cheng & Chang, 2010; Andrews, 1971; Hodgkinson, 1997; Osborne et al.,
2001). Given the cognitive limitation of individual's information processing capability,
Page 62

top managers need to focus their attention on some selective dimensions since they are
unable to comprehensively evaluate all variables relevant to a decision (Cheng & Chang,
2010; Hambrick and Abrahamson, 1995; Calori, Johnson, and Sarnin, 1994; Garg et al.,
2003). Managers construct simplified mental models to make decisions (Cheng & Chang,
2010; March and Simon, 1958).

In their article, ‘Intra-industry shared cognitions and organizational competitiveness’,
Bloodgood, Turnley and Bauerschmidt (2007) explore the concept of shared mental
models within cognitive groups and the influence that shared cognitions have on
individual decision-making. Firstly, the article examines how being a part of a specific
cognitive group in an industry influences general managers’ perceptions of the
importance of certain organisational activities.

Although general managers are often responsible for determining their organisation’s
strategy, the structure of the industry also plays an important role because it influences
perceptions regarding which activities are most likely to influence organisational success
(Porac, Thomas and Baden-Fuller 1989). Specifically, the study examines how
membership in a specific sub-group of an industry influences individual general
managers’ perceptions of two critical organisational activities, namely; innovation and
customer service. Secondly, and most importantly, the article examines the impact that
deviating from a shared mental model can have on an organisation’s competitiveness
within its industry.

Especially in relatively stable environments, it is expected that conforming to widely
shared beliefs will have a positive impact on an organisation’s competitiveness. In
contrast, deviating from the shared mental model that has developed over time is likely
to negatively impact organisational performance. This research examines whether
having a general manager who holds discrepant beliefs (either higher or lower)
regarding the importance of innovation and customer service, negatively impacts their
plant’s competitiveness. This paper attempts to highlight the important role that shared
mental models have on organisational performance.

Porac, Thomas and Baden-Fuller (1989) state that managerial actions are based upon an
information processing sequence in which individuals attend to cues in the
environment, interpret the meaning of such cues and then externalise these
interpretations via concrete activities. Porac, Thomas and Baden-Fuller (1989) suggest
that consensual recognition is a defining feature of such primary competitive groups and
that firms which define each other as rivals enact their competitive tactics in similar
ways.

Bogner and Barr (2000) provide a hierarchical cognitive framework in which mental
models of individuals within the firm contribute to firm level frameworks that, in turn,
create industry-level competitive frameworks or recipes. It is these interactions at the
industry and firm levels that perpetuate competitive behaviour patterns in times of
perceived industry stability (Porac, Thomas and Baden-Fuller 1989). These cognitive
Page 63

frameworks represent portfolio ‘maps’ that managers use to understand the

environment in which their organisations operate. These interactions, coupled with
prolonged and significant disruption in cognitive frameworks that result from significant
environmental upheaval, that Bogner & Barr (2000) argue leads to changes in sense-
making behaviour that, in turn, perpetuates hypercompetition.

Bogner’s & Barr’s central argument is that the distinctive market conditions that persist
in hypercompetitive environments are directly tied to the demands that such markets
place on managerial sense-making. They argue that a strong, though certainly not
conclusive, tie exists between managerial thinking, company actions, and competition
(Walsh 1995). Managers in non-hypercompetitive environments are able to base both
their own actions and their interpretations of others' actions on a cognitive framework
that includes beliefs shared within the companies, as well as beliefs shared among firms.

Environmental conditions New sense making responses

Significant Use of ‘adaptive’
change/s in Organisational
Destruction sense making
the action based on
of cognitive processes to
idiosyncratic
competitive frameworks manage
firm-level
environment effectiveness hypercompetitive
(in scope, frameworks
on all levels environments
speed and
duration)
New industry recipe
based on process of
hypercompetition
not historic content

Figure 4: Sense-making in Hypercompetitive Environments

Bogner & Barr (2000) suggest that while cognitive frameworks are likely to remain
rooted in some generalised understanding of product, technology and firm identity,
many of the traditional constructs managers use to anchor beliefs about the industry
(input factors, buyer preferences, identity of rivals, substitutes, potential entrants and
relevant resource accumulation) are no longer helpful markers on the cognitive maps
used by managers to guide firms through the competitive environment.

The construction of cognitive groups allows managers to estimate the effects of
environmental changes on sets of organisations within an industry, instead of having to
estimate the effects on all companies individually (Porac, Thomas and Baden-Fuller
1989). Firms that produce similar products or provide similar services are often similarly
affected by the conditions to which they are exposed (Tallman et al., 2004). Prevailing
wage rates, raw material availability and shifting customer demands are examples of
Page 64

environmental conditions that similarly impact organisations within a cognitive group.

These conditions can possess both limiting and enabling characteristics that can affect
the direction of change for the organisation (Bloodgood and Morrow, 2003). Managers
are attuned to how companies within their cognitive group compete with one another
and are likely to use competitive analysis to help them better understand and predict
these organisations’ actions (Porter, 1980). This is because the actions of these firms are
likely to strongly influence the competitiveness of the focal organisation.

All the studies reviewed confirm the existence of shared mental models. The table below
summarises the findings of each study and their views with regard to shared mental
models.

Study Results of study Limitations/further research

Kelly Shared belief systems enable The focus of this study was to
(1955) coordinated activity by providing analyse the industrial inspection
a common framework by the method of paired
comparisons. In the context of
competitive strategy, the study
could be built on by asking what
the implications of common
cognitive frameworks are in
understanding competitive
environments and in formulating
competitive strategies
Wiley Supra-individual level The study provides a good
(1988) frameworks emerge as foundation for the study of supra-
interactions take place among individual level frameworks but is
different individuals within a silent on how they are applied
given social grouping and the and how they affect strategy
commonly shared ideas begin to setting or performance at the
take on an existence of their organisational- or strategic-group
own, independent of the levels
individuals that created them

Page 65


Porac et Shared mental models are the The dataset used is limited and the
al. (1989). result of firms within strategic conclusions of such a study would
groups sharing the same be well served through validation
suppliers in their value chain with other similar studies using
activities and observing what disparate datasets. Further
their direct competitors do research could include the effects
through benchmarking on firm performance of being part
exercises. They postulate that of a strategic group and sharing
managers sequence the mental models with other firms in
decision-making that precedes the strategic group. The process of
their actions by firstly scanning sequencing decision-making before
the external environment and acting that is offered is interesting
then taking their cues from but requires further research and
competitors before acting. confirmation and more detail.
Porac, Managers simplify their The theory of cognitive oligopolies
Thomas competitive environments by found in this study could be
and categorising their competitors explored and validated using a
Baden- and defining their own business border and more diverse dataset
Fuller in terms of the label they use to and questions concerning the
(1989) define the cognitive category in impact that this theory has on
which their business is placed. firms within the industry and both
They used the term ‘cognitive inside and outside the cognitive
oligopolies’ to refer to the oligopolies, in terms of
tendency performance as well as other
measures, could be asked.
Reger & Strategists organise and make What does this mean, in terms of
Huff sense of their competitive strategy formulation, the
(1993) environments by grouping competitive actions that these
competitors into strategic firms take against other within the
groups. This is the result of strategic group and with those
attending the same conferences outside the strategic group and,
and exhibitions, reading the ultimately, how does it affect their
same industry literature and performance. I would be
they recruit employees from the particularly interested in the effect
same pool strategic groups have on the
attitudes of managers towards
other firms within the group.
Porac and Managers tend to place their Further research could be carried
Thomas firms in the same category as out regarding managers’ mental
(1994) similar firms, especially if they alignments of their firms with
are larger or more typical of those that are larger and more
that category typical of the categories in which
they place their firms.

Page 66


Bogner Individuals within organisations The article makes some interesting
and Barr share experiences and points about the factors that cause
(2000). knowledge with each other and and perpetuate hypercompetitive
this leads to firm-level cognitive
environments. These theories have
frameworks, which leads to been tested but the empirical
shared industry frameworks. evidence provided is territory and
This leads to actions that appear
industry specific. It is also not clear
to be coordinated in stable how ‘stable’ and
environments. Prolonged ‘hypercompetitive’ environments
environmental upheaval results are defined and delineated. It
in these frameworks being would be interesting to test the
disrupted and prolonged causality between the degree of
disruption results in shared cognitions in the context of
hypercompetitive competitive frameworks and the
environments. intensity of rivalry within
industries.
Bloodgood The study suggests that factors The logical question to ask and
and such as wage rates, raw material scope for further research lies in
Morrow, availability and shifting which factors are limiting and
(2003) customer demands impact which factors are enabling in terms
organisations within a cognitive of “direction of change of the
group and these conditions organisation” and, in the context of
possess both limiting and this research”, on the formulation
enabling characteristics that can of competitive strategy and on
affect the direction of change competitive actions.
for the organisation
Cheng & Managers tend to focus their The article is vague in explaining
Chang attention on selective and the influence of cognitive strategic
(2010 similar dimensions, which leads groups on the subsequent
to cognitive strategic groups, performance of the firms within
which influences organisational the group. I’d like to know how
strategic actions and being part of a cognitive strategic
subsequent performance group affect the strategic decision
making of managers and their

Table 9: Shared intra-industry management cognitions

The structure of competitive groups partly emerges from the strategies of individual
firms (Porac, Thomas & Baden-Fuller, 1989). Conversely, the strategies of individual
firms, both realised and intended, reflect the nature of the broader competitive
environment. This non-independence means that a complete understanding of
competition will be possible only when the reciprocal links between firm-level strategies
and group-level structures are uncovered. Strategic groups are part of the way
Page 67

strategists organise and make sense of their competitive environments (Reger & Huff
1993). Porter (1980) defined a strategic group as a group of firms in the same industry
making similar decisions in key areas. As managers within an industry interact with
common suppliers, customers and others, and as they face similar situations over time,
their individual cognitive structures become more similar and their shared mental
models become a part of a socially reinforced view of the environment (Berger and
Luckman, 1967).

It is clear that shared mental models exist and that cognitive oligopolies pervade
industry. Further research could be carried out to test and validate these theories across
greater and more diverse sets of respondents and to establish differences in shared
mental models in different environments, such as stable versus dynamic ones. The
overarching questions that are spawned from the review of this literature in the context
of shared intra-industry management cognitions include how shared mental models
affect organisational activities such as the formulation of strategy and the execution of
strategy and what affect they have on firm performance. It would be interesting to
understand what the correlation between the complexity of mental models and firm
performance is.

Automatic versus controlled processing

Bogner & Barr (2000) suggest that as industries move toward hypercompetition, the
cognitive frameworks that managers had used to make sense of and act within their
industry are significantly compromised. To act effectively under such circumstances, and
to build new understandings of the environment, managers must engage in "adaptive"
sense making processes. They propose that the very sense-making actions that
managers undertake to build new frameworks can result in industry-level beliefs that
perpetuate competitive turbulence and, in effect, institutionalise hypercompetition.

Schneider and Shiffrin (1977) observed two qualitatively distinct processing modes in
their study, being ‘Automatic’ and ’Controlled’. Automatic processing is described as
unintentional, involuntary, effortless, autonomous and occurring outside of awareness
(Reger and Palmer 1996, Bargh 1989, Johnson and Hasher 1987, Kahneman and
Treisman 1984, Logan and Cowan 1984, Uleman 1989). In contrast, controlled
processing is described as flexible, within an individual’s intentional control, effortful,
active, constrained by short-term attentional resources and motivated or strategic
(Reger and Palmer 1996, Atkinson & Shiffrin 1968, Bargh 1989, Logan, 1980, Neely 1977,
Uleman 1989). Uleman (1989) formulated an expanding continuum of multiple, fuzzy
and overlapping cognitive processing modes that form a progression from absolutely
automatic to unconditionally controlled.

Page 68

Figure 5: Controlled processing versus automatic processing
in the context of competitive positioning

Reger and Palmer (1996) examined the differences between automatic and controlled
processing by executives in an increasingly dynamic industry. First of all they explored
the differences in ways strategists categorise competitors in a cross-sectional field study
conducted during a period of significant environmental upheaval and found that
managers relied on cognitive maps that reflected obsolete industry boundaries rather
than configurations representative of the deregulated market. Secondly, managerial
competitive schemas of competitive positioning were compared across three research
projects conducted in the financial intermediary industry. The results indicate that
change creates diversity of thought between managers in the same environment.
Managers at competing firms therefore tend to view competition quite differently in
turbulent environments.

Figure 6: A continuum of cognitive mode processing (Reger & Palmer, 1996)

Page 69

As situational uniqueness increases, accurate interpretation becomes more difficult

and, in unfamiliar environments, automatic category assignments based on outdated
maps are likely to result in erroneous action, as automatic judgments are made without
reflection (Reger and Palmer 1996, Fiske 1989). Reger & Palmer (1996) found that
managers’ cognitive maps, on a collective basis, became less consensual as the
environment became more turbulent. However, the mean number of constructs per
individual increased only slightly and not significantly (Reger and Palmer 1996, Reger &
Huff, 1993). Many strategic decisions are made under stress and time pressure and,
despite sophisticated planning and decision support systems aimed at coercing
executives into controlled processing, automatic cognitive processing may be the
dominant mode in strategic issue diagnosis (Reger and Palmer 1996, Dutton 1993) and
strategic decision making (Reger & Palmer 1996, Louis & Sutton 1991).

Figure 7: Cognitive interpretation in stable and changing environments (Reger & Palmer, 1996)

When environments are relatively stable for long periods of time, reinforcement of well-
learned, ready-made categories occur (Reger and Palmer 1996, Dutton 1993). This
results in a strong convergence between automatic and controlled schemas. Automatic
and controlled mental models are expected to remain similar until the environment
changes substantially enough to render them obsolete (Reger and Palmer 1996).

Page 70


Schneider Two qualitatively distinct While the study provided a
and Shiffrin processing modes, being very useful dichotomy
(1977) ‘Automatic’ and ’Controlled’ were between automatic and
observed. Automatic processing is controlled processing, it fell
unintentional, autonomous and short analysing the
occurring outside of awareness. implications the two
Controlled processing is within an processing modes had on
individual’s intentional control, mental models and decision
effortful and active. making processes in practice.
Reger and In turbulent environments The study is based on a very
Palmer managers rely on cognitive maps specific dataset, executives of
(1996) that reflect obsolete industry financial intermediaries in
boundaries rather than Chicago in a time of market
configurations representative of turbulence, and it would be
the evolving market and changes in interesting to apply the same
managerial competitive schemas analysis to broader and more
create diversity of thought diverse datasets, for example
between managers in the same other territories with divergent
environment- managers at cultural norms. It would also
competing firms therefore tend to be interesting to carry out
view competition quite differently research on the implications of
in turbulent environments. The the two processing modes on
study also found that when firm and strategic group
environments are relatively stable performance.
for long periods of time,
reinforcement of well-learned,
ready-made categories occurs and
results in convergence between
automatic and controlled schemas
Bogner and As industries move toward It would be interesting to study
Barr (2000) hypercompetition, the cognitive the impact that the ‘new
frameworks that managers had frameworks’ and the resultant
used to make sense of and act hypercompetitive
within their industry are environments has on
compromised. The study suggests management decision making
that the very sense making actions and on the competitive actions
that managers undertake to build that managers take. It would
new frameworks can result in also be interesting to ascertain
industry-level beliefs that what effect they have on firm
perpetuate competitive turbulence performance and the
and hypercompetition becomes performance of strategic
ingrained as the norm. groups as a collective.

Table 10: Automatic versus controlled processing

Page 71

From the literature reviewed, it is clear that two modes of mental processing exist -
automatic and controlled, and that, in times of market turbulence, managers have a
tendency to revert to the mode of automatic processing. It would be interesting to
understand variances in this construct that occur due to environmental peculiarities,
such as those related to national cultures. It would also be interesting to gain a better
understanding of its consequences for management decision-making, company
performance and the performance of strategic groups that are exposed to turbulent
market environments and stable market environments.

Functional biases in the perception of competitive strategy

Walsh (1988) notes that there are two ways in which managers process information:

1. Bottom-up, data driven
2. Top-down, based on experience in similar circumstance

Dearborn and Simon (1958) asked managers to categories problems in a study and
found that functional experience influenced the perception of problems in the business.
Walsh’s (1988) study showed managers to have a more generalist view to problems in
their organisations but also showed there to be functional biases in the perception of
problems and the sources of information and the methods to understand the problems.

Bowman and Daniels (1995) make reference to a study carried out by Nystrom in 1991
in which respondents were asked to rate how important competitive methods derived
from Porter’s work are to their company’s overall strategy, and concluded that there is
functional bias. Bowman’s and Daniels (1995) study on the influence of functional
experience on perceptions of strategic priorities concludes that when managers are
asked to reflect on their own company’s situations, there is evidence of functional bias
in the perceptions of priorities derived from generic competitive strategies.

The results of the Walsh (1988) study and the reworking of the Dearborn and Simon
(1958) study suggest that when managers are faced with an unfamiliar case situation,
and where they are also engaged in programmes designed to develop a general
management perspective, they tend to perceive problems or issues as disconnected to
their functional backgrounds.

Page 72

Study Evidence of Concluding remarks

functional
bias
(yes/no)
Dearborn & Yes Functional experience influenced the managers’
Simon (1958) perception of problems
Walsh (1988) Yes Managers have a more generalist view of their
businesses than the Dearborn and Simon (1958)
study indicated but also showed there to be
functional bias
Nystrom Yes Based on competitive methods derived from Porter,
(1991) respondents confirmed functional bias
Bowman & Yes When managers are asked to reflect their firms’
Daniels (1995) situations, there is evidence of functional bias

Table 11: Functional biases in the perception of competitive strategy

As pointed out by Bowman and Daniels (1995), it would be interesting to know whether
functional bias in the context of perceived strategic priorities is a problem or a source of
competitive advantage. Furthermore, it is likely that it is a source of competitive
advantage in certain circumstances but is undesirable in others. It would be interesting
to know when it is a source of competitive advantage and when it is undesirable.

Does deviating from industry norms result in lower profits?

There are only limited investigations into the reasons behind performance differences
among intra-industry firms. Cool and Schendel’s (1988) research suggests that intra-
industry performance may result, at least in part, from strict conformity to shared
mental models. Specifically, the research found that a plant manager’s close conformity
to the perceptions generally held by other members of the cognitive group is likely to
result in higher plant performance. In this regard, top managers face a paradox –
conform to institutional perceptions by being similar to competitors to gain legitimacy
or seek competitive advantage by being different to competitors. Especially in stable
industries, there may be an advantage associated with conforming to industry norms.

The results of the Bloodgood, Turnley and Bauerschmidt (2007) study suggest that
cognitive groups influence managers’ perceptions of the importance of specific
organisational activities and, therefore, can influence strategic change. Facing a
common environment influences the type of shared mental model that develops among
managers within industry subgroups. Specifically, this research suggests that deviations
from shared cognitions within industry groups can negatively impact firm performance,
while conformity to shared cognitions can positively impact it.

The existence of standardised products and processes within the industry may increase
the advantage of engaging in accepted organisational behaviour (Spender, 1989).
Page 73

Moreover, managers in these industries may have well-established mental models that
provide a blueprint for organisational success. This idea is somewhat similar to the ideal
profile model proffered by Gresov and Drazin (1997). They suggested that firms that
deviate from the ideal pattern of design can suffer lower performance through
inefficient or ineffective firm behaviour. Deephouse (1999) found that high levels of
strategic similarity were associated with higher levels of performance than were low
levels of strategic similarity.

Study Conclusion regarding the effects on Does divergence
performance resulting from divergence from from strategic
the norms of the strategic group norms compromise
performance
according to this
study?
Gresov and Efficiency and efficacy has been optimised in Yes
Drazin (1997) the structures and processes adopted by the
strategic group. Deviating from them results in
compromised performance
Deephouse High levels of strategic similarity are Yes
(1999) associated with higher levels of performance
than low levels of strategic similarity
Porac (1989) The access to specific resources is more easily Yes
achieved by strategic groups than by singular
firms and, as a result, accessing the same
resources as competitors in the strategic group
improves performance
Baum and Managers can be reluctant to take actions that Not necessarily
Korn (1996) appear to be in their organisations’ best
interest because they induce retaliatory
actions from their competitors
Bloodgood, Cognitive groups influence managers’ Yes
Turnley and perceptions of the importance of specific
Bauerschmidt organisational activities and, therefore, can
(2007) influence strategic change. Deviations from
shared cognitions within industry groups can
negatively impact firm performance, while
conformity to shared cognitions can positively
impact it.

Table 12: Does deviating from industry norms result in lower profits?

Porac et al. (1989) suggest that much of a firm’s performance can be tied to its ability to
access resource niches. This access is afforded through a degree of similarity to other
firms that are accessing the same resource niches. Managers are sometimes reluctant
to take actions that appear to be in their organisation’s best interest for fear of inducing
Page 74

retaliatory actions from their competitors (Baum and Korn, 1996). All of these factors
can lead to the emergence of group-level rationality and a similarity of understanding
that is shared by members of the cognitive group (Porac et al., 1989). In such cases,
managers within cognitive groups are likely to interpret events using a common frame
of reference and to respond similarly to environmental stimuli. Within industry
subgroups, shared cognitions are likely to influence the way that plant managers
interpret and respond to environmental stimuli (Hodgkinson, 2003).

All the literature that has been reviewed indicates that the phenomenon of
compromised performance as a result of deviations from the strategic group norms is
more applicable to stable industries than it is to dynamic ones. Further research will
need to be carried out to substantiate this assertion.

Competitive Intelligence

Petriso and Strain (2013) define competitive intelligence as an instrument to improve
competitiveness that contributes to the continuous improvement of the quality of
products, services and solutions offered by the company. They state that the need for
intelligence arose due to the decision-making process, which involves the development
of different courses of action.

Systematic competitor scanning is core to gathering competitive intelligence. This
involves noticing and interpreting competitive stimuli through the monitoring of market
variables. In order to sustain a competitive advantage, companies must respond
promptly to changes in customer preferences, competitor strategies and technological
advancements (Qui 2008). Shoemaker and Day (2009) provide a framework for
gathering competitive intelligence that encompasses three steps, namely:

1. Scanning
2. Sense-making
3. Probing and acting

Constantineau (1995) suggests that those involved in gathering competitive intelligence
that provoke discussions with decision makers have more input and are more highly
valued. He also suggests that making competitive intelligence information relevant to
the company’s situation and to its strategic initiatives, going beyond simply reporting
the facts, synthesizing seemingly disparate sources of data and representing the findings
in an inviting and compelling manner will provide a mechanism for increasing action-
ability. Lastly, he suggests that developing alternative scenarios of likely outcomes also
tends to elicit reaction.

Page 75

Study Results of studies Implications for competitive

intelligence in competitive
strategy in practice
Constantineau The article suggests that the The methods of integrating
(1995) application of competitive competitive intelligence with
intelligence would be more the competitive strategy
effective if those collecting the formulation process could be
intelligence engaged in explored and the results of
discussions with decision makers, the study could be used to
made the information more improve the link between
widely available and if they competitive intelligence and
developed alternative scenarios of competitive strategy
likely outcomes to elicit reaction. formulation
Qui (2008) The article asserts that companies If the link between
can sustain a competitive competitive intelligence
advantage by responding gathering and competitive
promptly to changes in customer strategy formulation could be
preferences, competitor strategies made as dynamic as possible,
and technological advancements, according to the study, the
which are noticed through the outcomes of competitive
monitoring of market variables strategy would be improved
Shoemaker A three-step framework for The efficacy of competitive
and Day (2009) gathering competitive intelligence intelligence gathering could
is provided that encompasses be improved through the
scanning, sense-making, probing application of a formulaic
and acting process
Petriso and Competitive intelligence is defined News methods of engaging
Strain (2013) as an instrument that arose due to with organisational
the decision-making process, stakeholders can improve the
which involves the development efficacy of competitive
of different courses of action and intelligence gathering, as well
that contributes to the continuous as the type and the quality of
improvement of the quality of information that is gathered
products, services and solutions and made available to the
offered by the company organisation

Table 13: Competitive Intelligence

In Qui’s (2008), Petriso’s and Strains (2013) and Shoemaker’s and Day’s (2009) research,
the link between competitive intelligence and their use as inputs or triggers for
competitive actions is not clear. In other words, their studies are vague in explaining
how managers can transform the results of competitive intelligence into actions.
Constantineau (1995) offers some suggestions regarding the integration of competitive
intelligence with decision-making processes, although they are nothing more than
suggestions based on practical ideas, rather than concrete steps that can be taken and
Page 76

that have been validated using an empirical study. The scope for further research lies in
the application of competitive intelligence in the formulation and execution of
competitive strategy and the outcomes that different methods of competitive
intelligence may have in the context of firm performance.

The alignment of strategy and performance management

González, Calderón and González (2012) examine the alignment of managers’ mental
models with the strategy map provided by the balanced scorecard developed by Kaplan
and Norton (1992). The research focuses on how managers construe competitive
advantage. The authors use the cognitive maps technique and their unit of analysis is
managers of a printing firm. Cognitive maps are used to analyse a situation or problem,
the interviewees’ most important concepts or ideas relating to the situation are elicited
and the cause and effect relationships are then plotted, connected and established
(Eden, Ackermann, & Cropper, 1992). González, Calderón and González (2012) then use
the distance ratio method to analyse managers’ different perceptions of the firm's
resources and capabilities in the context of the balanced scorecard (‘BSC’). One of the
problems related to the use of the BSC approach is that biases might be introduced by
the active participation of the interviewer, and during the process of entering the
concepts into the computer program. To avoid any such bias, the authors used the
repertory grid technique (Kelly, 1955) to elicit concepts from the respondents.

The González, Calderón and González (2012) study shows that individual manager’s
mental models are strongly correlated with the mental models associated with the
strategy map. Thus, the balanced scorecard’s strategy map can be used as a reference
point for the convergence of mental models. González, Calderón and González (2012)
conclude that implementing the balanced scorecard strategy map can help reduce
managers’ causal ambiguity with regard to the objectives they need to pursue in order
to improve a firm's competitive position.

Causal ambiguity (King & Zeithaml, 2001) describes managers’ misunderstanding of the
competencies that are directly or indirectly associated with a firm’s improved results.
Managers’ causal ambiguity of competencies refers to their perceived ambiguity when
attempting to determine the relationships between their firm’s competencies and
competitive advantage. The better the managers’ understanding of the systems related
to the contribution and generation of organisational competencies, the lower the causal
ambiguity. In the resource-based view literature, the majority of studies of the concept
of causal ambiguity view it as a precursor to the generation and maintenance of
competitive advantage. Causal ambiguity therefore is a concept that describes the
managers’ cognitive limitations about how a given resource may generate a competence
and, in turn, improves the firm’s performance (King & Zeithaml, 2001; King, 2007;
Lippman & Rumelt, 1982).

The intermediate goal of the BSC is to shape the mental models of the firm’s managers
(Capelo & Ferreira, 2009) and it could therefore be used as a tool to avoid causal
Page 77

ambiguity. Another outcome of the BSC should be a better understanding of the internal
and external sources of competitive advantage by helping the managers’ mental models
to converge, which would facilitate and accelerate an understanding of the causal links
between the essential components of the firm’s strategy (Capelo & Ferreira, 2009).

McNamara et al. (2002) hypothesised that there is an inverse U-shape relationship
between the degrees of cognitive complexity of strategic groups and performance. They
tested the hypothesis by empirically investigating the curvilinear relationship between
cognitive complexity and performance using the data from banks in three U.S. cities.
They use three variables to measure the complexity:

1. The number of strategies identified by the managers
2. The number of competitors categorised by the managers
3. The size of groups identified by top managers

In their study, they find a positive relationship between the last two complexity variables
and a negative relationship between the first one. Furthermore, they do not find an
inverse U-shape relationship between complexity and performance with the first two
measures of complexity.

Study Results of studies Implications for performance
management in competitive
strategy
McNamara The study suggests that there is an The findings of this study
et al. inverse relationship between the support the assertion that a
(2002) cognitive complexity of strategic simpler strategy yields better
groups and performance. The tests results, particularly with regard
carried out as part of this study to the firms’ performance. It
revealed that there is a negative would be useful to test this
relationship between the number of using a broader and more
strategies identified by the managers diverse set of firms.
and the performance of the strategic
group and a positive relationship
between the number of competitors
categorised by the managers, as well
as the size of groups identified by top
managers, and performance of the
strategic group.

Page 78

Study Results of studies Implications for performance

management in competitive
strategy
King & The better the managers’ The study’s dataset is limited
Zeithaml understanding of the systems related and the assertions made about
(2001) to the contribution and generation of the effects of managers’
organisational competencies, the understanding of the systems
lower the causal ambiguity. related to the contribution and
Therefore, lower causal ambiguity in generation of organisational
managers’ cognitions can improve the competencies on performance
firm’s performance. should probably be based on a
broader and more diverse
dataset.
Capelo & The intermediate goal of the Balanced This and the other studies
Ferreira Score Card (BSC) is to shape the reviewed point to the BSC
(2009) mental models of the firm’s managers acting as a unifier of managers’
and it could be used to better mental models. Assuming the
understand the internal and external validity of this assertion, the
sources of competitive advantage by BSC could be used to accelerate
helping the managers’ mental models the unification of truisms and
to converge, which would facilitate mental models related to the
and accelerate an understanding of firm’s competitive position, its
the causal links between the essential competitive environment and
components of the firm’s strategy its competitive strategy.
The The study shows that individual The use of the BSC and its
González, manager’s mental models are strongly strategy map in particular can
Calderón correlated with the mental models play an important role in
and associated with the strategy map and helping managers properly
González suggest that the BSCs strategy map interpret unified firm-wide
(2012) can, therefore, be used as a reference strategy and can, therefore,
point for the convergence of mental reduce casual ambiguity. It
models. The study concludes that the would be interesting to what
BSC strategy map can help reduce effects the use of the BSC and,
managers’ causal ambiguity with more specifically, its strategy
regard to the objectives they need to map ultimately has on the
pursue in order to improve a firm's performance of firms.
competitive position.

Table 14: The alignment of strategy and performance management

The overarching assertion made in the literature reviewed is that the BSC reduces casual
ambiguity, integrates managers’ mental models and leads to improved performance.
While further research using a broader and more diverse set of firms and managers is
needed to substantiate these assertions, we can take note of them and they can be used
to accelerate the formulation and implementation of strategy in an integrated manner
across the firm.
Page 79

Strategy as an iterative process

Feurer and Chahrbaghi (1995) assert that traditional approaches to strategy formulation
tend to analyse the environment in order to identify an ideal position but that in a
dynamic environment such an approach will fail as the environment is constantly
evolving. They postulate that strategy formulation should therefore be regarded as a
continuous learning process. Feurer and Chahrbaghi (1995) claim that, despite the large
amount of research carried out to date, little guidance is provided on how to translate
organisational learning into the formulation of business strategies and that, therefore,
a need exists to establish that a relationship exists between strategy formulation and
the process of organisational learning and to determine how organisations can improve
their learning potential in this regard. The study provides a framework which
distinguishes operational learning, learning how to perform, and conceptual learning,
learning why to perform, from a third dimension, which relates to goal learning, learning
what wants and needs to satisfy.

Feurer’s and Chahrbaghi’s (1995) study asserts that gaps exist between organisations’
knowledge and their strategic positions and concludes that it is difficult to formulate
strategies through a process of conception using a mechanistic approach. Therefore,
strategy formulation should be regarded as a process of continuous learning which
includes learning about the organisations goals, the effect of possible actions towards
these goals and how to implement these actions. They argue that the speed and the
quality of implementation of strategies will be influenced by the organisations cognitive
and behavioural learning capabilities.

Sull (2007) proposes the use of a strategy loop in which strategy can be revised on a
regular basis. The need to revise strategy regularly is predicated on changing internal
and external circumstances and is all the more important in dynamic markets.

Make revisions Make sense

Execute Make choices

Figure 8: Sull’s (2007) strategy loop diagram

Mintzberg and Lampel (1999) contend that strategy evolves, not passively but
creatively, and so unpredictably, simply because organisations seek to be unique. The
ingenuity of those who practice strategy should, therefore, constantly surprise those
who study it. Chandler (1962) observed that there is a cycle of innovation in strategy,
comprised of spurts of innovation followed by imitation and consolidation. Mintzberg
Page 80

and Lampel (1999) make a number of observations in their study regarding the
formation of business strategy, including:

• New kinds of strategies emerge from collaborative contacts between
organisations and firms cannot avoid learning and borrowing when they trade
and work together
• The evolution of strategy is also pushed along by competition and
confrontation
• New strategies are often a recasting of the old
• Strategy is pushed along by the sheer creativity of managers, because they
explore new ways of doing things

Study Results of studies Implications for the strategy
loop in competitive strategy
Chandler There is a cycle of innovation in It would be interesting to know
(1962) strategy, comprising spurts of what effect the different phases
innovation followed by imitation of the cycle of innovation have
and consolidation. Strategy is on the formulation or
iterative and requires change or competitive strategy and on
revisions as the firm or the industry competitive actions and how
moves through the innovation cycle. strategies are updated or can be
updated to respond to moves
through the cycle of innovation.
Mintzberg Strategy evolves creatively and, This study relates to the
and therefore, unpredictably because outcomes of the studies
Lampel organisations seek to be unique. concerned with strategic groups
(1999) The study’s principal finding is that and the debate over the
the processes proposed by different benefits and the problems
schools of strategic management associated with divergence from
can all be used in the formulation of a strategic group. It would be
a single strategy and all have interesting to know more about
different and unique contributions how the evolution of strategy in
to make in the formulation of that the context of this study relates
strategy. Furthermore, it proposes to the results of the ‘strategic
that these different schools work to groups’ studies
form a complete loop in the
strategy formulation and
implementation process.

Page 81

Study Results of studies Implications for the strategy

loop in competitive strategy
Feurer and In dynamic market environments, the The competitive strategy
Chahrbaghi traditional approach to strategy formulation and
(1995) formulation of establishing an ideal implementation processes of
competitive position by analysing the firms and strategic groups
environment will fail and strategy operating in dynamic market
formulation should, therefore, be environments versus those
regarded as a continuous learning operating in stable market
process. The study asserts that a environments could be studied
need exists to establish a relationship and contrasted. The links
between strategy formulation and between the different forms of
the process of organisational learning organisational learning and the
and that strategy formulation should formulation of competitive
be regarded as a process of strategy could be studied with
continuous learning which includes the aim of developing a better
learning about the organisations understanding of how they
goals, the effect of possible actions relate to each other and what
towards these goals and how to impact these relationships
implement these actions. have on firm performance.
Sull (2007) The study suggests that strategy is Further research could be
subject to changing internal and carried out in relation to the
external circumstances, especially in efficacy of different
dynamic markets and must, approaches to strategy
therefore, be update regularly and formulation and
whenever a change in the internal or implementation between
external environment is experienced stable and dynamic markets

Table 15: Strategy as an iterative process

The formulation and execution of strategy is subject to environmental factors that
require revaluation and adjustment. To this extent, strategy and the implementation of
strategy cannot be regarded as a static set of processes but, rather, need to be updated
in response to constantly changing markets and other internal and external factors. It
would be interesting to know more about the influence that the tacit knowledge within
the organisation and within strategic groups has on the formulation and the periodic
revision of strategic plans. It would also be interesting to know how the stability or
dynamism of markets affects the efficacy of different approaches to strategy
formulation and implementation, as well as how strategy can be updated or revised to
respond to changes in the phase of the innovation cycle that the firm or industry is in.

Page 82

Discussion

Summarising the results of the literature that has been reviewed:

• Managers focus on a comparatively narrow set of competitors, which represent
a sub-set of all their competitors. This leads to the emergence of cognitive
oligopolies and shared mental models between managers
• Divergence exists in the cognitions of senior managers between organisations,
while cognitive convergence exists at the level of the industry and the strategic
group at functional management level
• Personal backgrounds and experiences shape managers’ mental models and
decision making processes
• Two modes of mental processing exist, namely automatic and controlled, and
managers tend to revert to automatic processing in turbulent markets and
controlled processing in stable markets
• Prolonged environmental upheaval results in shared industry frameworks being
disrupted and prolonged disruption results in hypercompetitive environments
• High levels of strategic similarity are associated with higher levels of
performance than low levels of strategic similarity. This is partly because
efficiency and efficacy have been optimised in the structures and processes
adopted by the strategic group and deviating from them results in compromised
performance. It is also because strategic groups than by singular firms more
easily achieve accessing specific resources and, therefore, accessing the same
resources as competitors in the strategic group improves performance.
• Managers’ often avoid deviating from the conventions set by strategic groups for
fear of rivalry from other firms in the strategic group
• Because industries and markets are dynamic, strategy development and
execution needs to be an iterative process informed by changes in market
conditions; in the competitive environment; and in the use of competitive
intelligence. The tight integration of the gathering and application of competitive
intelligence within organisations can lead to more effective competitive
strategies and improved decision making in the context of competitive actions

While the literature reviewed is split into key themes that were identified as discreet
topics in this SLR, these themes and the focus of the research undertaken in the
literature can be viewed as components of a single process, namely competitive
strategy. This process encompasses competitive intelligence, competitive strategy
formulation and competitive strategy execution. Managers’ interpretations of their
competitive positions can be regarded as a snap shot in time, rather than being part of
a process. The term competitive positioning can mean a process or a set of actions, as
the term ‘positioning’ is, after all, a verb.

Articles, including Sanchez and Heene (1997) and Mintzberg and Lampel (1999), sought
to integrate different approaches to strategy formulation, different phases in the
Page 83

strategy formulation and execution process, as well as cognitive and material processes
related to strategy. These articles take the approach of integrating existing theories,
tools and techniques, rather than taking a ‘clean slate’ approach by researching how
strategy is actually formulated and executed in practice. Many of the gaps identified in
this SLR could be addressed through such a study.

Gap in knowledge and scope for further research

A great deal of research has been carried out in the fields of competitive strategy and
competitive positioning and managers’ cognitions in this regard, but very little research
has been undertaken in relation to individual competitive actions. Furthermore, the
extant literature deals extensively with managers’ interpretations of their competitive
environments but little work has been carried out in relation to how managers respond
to these interpretations and, specifically, the competitive actions they formulate and
execute as a result.

The various studies on managers’ mental maps of their competitive environments
reviewed are limited to specific industries and territories. For example, the study carried
out by Daniels, Johnson, de Chernatony (2002) is limited the personal financial services
industry and a relatively stable one, as well as being limited to the United Kingdom.
Future research could be undertaken across a broader set of industries, territories and
markets to provide a more holistic view. Furthermore, future research could be
undertaken into competitive strategy in stable industries versus dynamic industries and
nascent industries versus mature industries, as well as fragmented industries versus
oligopolies or industries with just a few dominant players.

While much research has been undertaken into the link between shared inter-
organisational mental maps of competitors and strategic groups, it would be interesting
to know if the link is causal. In other words, we do know that managers across
organisations within strategic groups share mental maps of their competitive
environments, but we don’t yet know whether the emergence of these strategic groups
is the result of shared mental models amongst managers or if the development of
strategic groups has a causal relationship with managers’ mental maps of their
competitive environments.

Based on this SLR, it is also apparent that further research could be undertaken into how
the cognitive and the material categorisations of competitive positions, both current
and desired, intersect. Sanchez and Heene (1997) sought to integrate several strategic
management theories provided by researchers with the logic employed by managers
and attempted to develop all the theories used with other researchers. Further research
that is based on what actually happens in practice, in other words how managers
integrate mental maps and processes with material processes and tools, would be
useful.

Page 84

The literature reviewed often focused on one aspect of the complete strategy
formulation and implementation process, while very few studies sought to integrate
competitive intelligence, managers’ mental maps of their competitive landscapes, the
formulation of competitive strategy and the execution of competitive actions. It would
be interesting to know more about the links between competitive intelligence,
competitive strategy, the trigger of competitive actions and the execution of
competitive actions and to how the complete strategy process, or loop, functions in
practice on a holistic basis.

Managers’ take

decisions about 5. Implementation 1. Competitive
Managers’ develop a view
actions that of competitive intelligence of how their brands or
need to be actions products are positioned
taken in order relative to competitors
to attain the

ideal or desired
positioning of

their brands or Managers’
develop
products
views on the
relative to 2. Strategy 3. Setting ideal or
competitors
formulation performance desired
targets positioning of
their brands
4. Identification or products
of desired relative to
competitive competitors
position

Figure 9: Competitive strategy cycle

For the purpose of projects P2 and P3, and in order to apply a structure to them, the
starting point of the competitive strategy cycle will be assumed to be an overall view of
the competitive landscape. This is followed by the development of views of where
brands or products should be positioned relative to those of competitors. The end point
will be the decisions that managers make about actions that need to be taken to attain
their ideal or desired competitive positions and what informs these decisions and how
they are arrived at.

It would be very interesting to understand what outcomes the theories offered in the
literature reviewed have on firm performance. For example, is firm performance
compromised by automatic mental processing and, if so, how and to what extent. Also,
if different aspects of the entire strategy process, or the strategy loop, were more tightly
integrated and the process was made to be more responsive to changing internal and
external environmental factors, what effect would this have on firm performance? As
asked by Bowman and Daniels (1995), could functional bias, in the context of perceived
Page 85

strategic priorities, be a problem or a source of competitive advantage and under what

circumstances.

Most of the research carried out in the fields of management cognition in the context
of competitive strategy is limited to the perception of competitors and it would be useful
to use the same research approach to address the process models of strategy
development and strategic decision-making. Cognitive-based studies of management
should be able to increase our understanding of strategic decision-making processes by
showing how managers’ mental models influence organisational and group action.

Project 2 Proposal

The objective of the proposed research for P2 was to better understand how managers
construe the competitive actions they take. The research sought to identify and explore
how managers interpret their competitive environments and how they formulate and
execute competitive actions, as well as the links and the chain of causality between their
interpretations of their competitive environments and the formulation of competitive
actions. Therefore, the research question for P2 is:


In response to the findings of P1, the gaps in the extant literature, as well as the four
propositions set out on page 24. Specifically, 26 competitive actions were recorded and
through a series of semi-structured interviews with managers, in which questions were
asked and discussions were stimulated in relation to the gaps identified, and the
propositions developed in P1.

The proposed approach for P2 involved using the CIMO framework to understand the
cognitions and the processes that led managers to take certain competitive actions. The
interviews were used to understand the following elements related to a wide variety of
different competitive actions:

• Context
• Intervention
• Mechanism
• Objective

Based on this approach, the unit of analysis of Project 2 was the competitive action. Each
action was analysed through a process of constructing CIMO maps for each interview
and considering supporting material, such as business plans, research, internal
memorandums and notes taken by managers.

Page 86

Data related to 26 different competitive actions were collected, analysed and mapped.
Before starting P2 in earnest with all participants, the approach was validated using a
single participant to verify its efficacy and to verify that it can be successfully deployed
in practice. A participant that I have a good relationship with and that I’ve known for
some time was used.

Limitations and reflections

A systematic approach that involved using key words was used to identify the relevant
extant literature in P1. The literature that was identified was then subjected to several
filtering processes that reduced the search results to 91 relevant articles, of which 10
core articles became the focused of this study. The key limitation to this approach is that
it doesn’t include ‘branching’ or ‘snowball’ sampling but, rather, focuses on the search
string results. Consequently, literature that might have been relevant to the study but
that didn’t contain any of the words included in the search strings would have been
missed.

Another limitation to the approach that was used to identify relevant literature is based
on a snapshot of the literature extant at the time of conducting the search. Therefore,
the literature published during the remainder of the DBA study would have been
ignored.

As a partial counter-balance to the two limitations identified above, some branching was
used. Specifically, some of the literature not included in the search results but that was
referenced in literature identified through the search was also included.
Recommendations by the panel members and other members of my cohort were also
considered and, where applicable, included.

In reflection, the literature that was used in the DBA study belongs to wide array of
different fields and disciplines, sometimes with limited applicability to the study. With
hindsight, the selection of literature, and the process employed to identify possible
literature to use, would have included branching and would have focused more on the
propositions that were researched in P2 and the guide that was developed in P3. The
body of literature used would have also been updated before P2 and before P3 were
embarked upon to include articles that were published subsequent to the SLR.

Page 87

Project 2: Qualitative research

Page 88

Page 89

Introduction

The research aim of this DBA study was to establish what managers actually think and
do in formulating and executing competitive actions and the inputs they use in this
regard. This encompasses a study of both their cognitions and the material processes
they employ in formulating and executing competitive actions. The scope of the
research is limited to senior managers’ cognitions in relation to the competitive actions
they take to position their firms relative to their competitors in the context of marketing
actions involving price, brand and product attributes in order to optimise their profits.
This is a practical study involving a number of senior managers who are responsible for
the formulation and execution of competitive actions at companies across a number of
different industries. The overarching research question for the research is:


In the context of the research question, construe includes the antecedents to
competitive actions. Specifically, it has the following meanings:

• How managers view their competitive environments and categorise their
competitors
• How they formulate actions to compete more effectively
• Their cognitions in relation to competitive actions and the inputs that inform
these actions

In relation to this study, competitive positioning refers to the way in which managers
map their rivals’ competitive positions and their own brands’ or products’ relative prices
and benefits. Competitive action refers to specific actions that managers’ plan and take
with the objective of competing more effectively. This includes, inter-alia, actions to
change the price or the benefits associated with their brands or products. The research
is not concerned with actions that managers take to streamline their operations, to
procure inputs more economically or any other actions they take to become more
profitable, and that are related to the operations of the business rather than the prices
and benefits associated with their products and brands. Specifically, the actions have
been classified into a number of broad categories, namely:

• Product re-pricing
• The development or launch of a new product
• The update or repackaging of an existing product or service offering
• The development and execution of a marketing campaign
• The development and execution of a market segmentation campaign in which
different prices or benefits are targeted at different segments of the market
• Corporate actions in which a business is acquired for competitive purposes

Page 90

The CIMO3 framework (Denyer et al., 2008) were used to structure the interviews,
insofar as the framework guided the data being sought and, therefore, the questions
that were asked. The framework was also used to map the data gathered in a logical and
easily understandable format. An example of the CIMO-based coding system is provided
in Appendix 15 (see page 237).

The research is broken into three projects, namely Project 1 (‘P1’), which was a
Systematic Literature Review, Project 2 (‘P2’), which is comprised of field research to
understand what happens in practice and is the subject of this protocol, and Project 3
(P3), which will be undertaken subsequent to this research and will include the
development of a framework to improve the formulation and execution of competitive
strategy in practice. The end goal is to understand what the implications are for practice
based on the overarching review question. The figure below depicts a high-level process
flow chart for the research.



cognitions in respect of competitive positioning and competitive
strategy. Predefined search strings were used, 91 relevant articles were
identified and analysed, of which 10 core articles were used as the basis
for the P2 research.


• Semi-structured interviews will be used to identify a number of

competitive actions (‘actions’) carried out at different companies

• In interviewing senior managers at the participating companies, the

identified actions were mapped using the CIMO framework. The

context, interventions, mechanisms and objectives will be mapped

using simple process flow charts to establish how managers’

construe their competitive actions

P3 – Framework & technique development

P3 will focus on the development of a framework for improving the

formulation and execution of competitive strategy in practice


3
Context, Intervention, Mechanism, Objective
Page 91

The review panel

The review panel comprises Professors Mark Jenkins and Cliff Bowman and Dr Palie
Smart. Dr Emma Parry is the Systematic Review specialist. The table below includes an
overview of the panel and their respective roles.

Panel member Title/organisation Role
Professor Cliff Professor of Strategic Management at the School of Panel Chair
Bowman Management, Cranfield University and domain
expert
Professor Professor of Business Strategy at the School of Supervisor
Mark Jenkins Management, Cranfield University
Dr Palie Smart PhD Programme Director and Reader in Innovation Panel
Management and Corporate Sustainability at the member
School of Management, Cranfield University
Dr Emma Parry Director of the International Executive Doctorate Systematic

(DBA) programme at the School of Management, review
Cranfield University. Her research focuses on the specialist
impact of context on human resource
management.

Table 1: Review panel

Relevant appendices


assignments & businesses that I’ve been involved in and that
businesses are relevant to this DBA study
12 CIMO Maps A unique CIMO map for each of the 26 201 -
competitive actions that were recorded and 227
analysed.
13 Internal & external A table that lists the external and internal 228 -
factors relevant to environmental factors associated with the 239
competitive actions manager/s and company of each competitive
actions.
14 Points to be covered A checklist of factors that were captured and 240 -
in the semi- questions that were asked when carrying out 242
structured interviews interviews with each of the managers

Page 92


15 Example of CIMO- An example of how a single interview and 243 -
based coding system CIMO map was coded. The forth competitive 247
action was used for the example.
16 Example of a The complete transcript of a single interview 248 -
manager interview carried out with a manager. The forth 254
competitive action was used for the example.


Background

This study was preceded by a Systematic Literature Review (SLR), in which gaps in the
existing literature were identified. While many academics have offered theories on how
managers can effectively formulate and execute competitive actions, little has been
done to understand what actually happens in practice or to understand the gap between
theory and practice. The SLR also served to better understand the field and to develop
a foundation for this project. The focus of the SLR was on the role of decision-makers
when evaluating competitive dynamics and their cognitions. Cognitive scientists suggest
that how individuals make sense of, and act, within their environments is tied to their
cognitive frameworks or mental models (Fiske and Taylor, 1991). Cognitions are
developed over time and through experience, vicarious learning, and direct
communication from others (i.e. teaching) (Fiske and Taylor 1991). The development of
these frameworks is path-dependent; as individuals interact with their environments
and build cognitive frameworks, they use those frameworks to make sense of future
interactions. The SLR’s research question was:

actions?

The field of management cognition in the context of competitive positioning and
competitive actions is broad. The literature reviewed covered a wide variety of different
topics and made a broad and diverse set of assertions. Whilst reviewing the literature,
notes were taken regarding themes, key findings, limitations and suggestions for further
research. A total of 31 themes were identified, which were then collated and distilled
into a number of key themes. These key themes were:

1. Managers’ cognitive categorisations of competitors
2. Influences on managers’ frames of reference
3. Shared intra-industry management cognitions
4. Automatic versus controlled processing
5. Functional biases in the perception of competitive strategy
6. Does deviating from industry norms result in lower profits?
7. Competitive intelligence
Page 93

8. The alignment of strategy and performance management

9. Strategy as an iterative process

Summarising the results of the literature that has been reviewed:

• Managers focus on a comparatively narrow set of competitors, which represent
a sub-set of all their competitors. This leads to the emergence of cognitive
oligopolies and shared mental models between managers
• Divergence exists in the cognitions of senior managers between organisations,
while cognitive convergence exists at the level of the industry and the strategic
group at functional management level
• Personal backgrounds and experiences shape managers’ mental models and
cognitive processes
• Two modes of cognitive processing exist, namely automatic and controlled, and
managers tend to revert to automatic processing in turbulent markets and
controlled processing in stable markets
• Prolonged environmental upheaval results in shared industry frameworks being
disrupted and prolonged disruption results in hypercompetitive environments
• In the context of strategic groups (Porter, 1980), high levels of strategic similarity
are associated with higher levels of performance, than do low levels of strategic
similarity. This is partly because efficiency and efficacy have been optimised in
the structures and processes adopted by the strategic group and deviating from
them results in compromised performance. This is attributable to strategic
groups being able to access specific resources more easily than singular firms
and, therefore, accessing the same resources as competitors in the strategic
group improves performance.
• Managers’ often avoid deviating from the conventions set by strategic groups for
fear of rivalry from other firms in the strategic group
• Because industries and markets are dynamic, the formulation and execution of
competitive actions needs to be an iterative process informed by changes in
market conditions and the competitive environment
• The use of competitive intelligence and the tight integration between
intelligence-gathering and the application of the intelligence within
organisations can lead to more effective competitive actions

Although the literature reviewed was split into key themes that were identified as
discreet topics, these themes can be viewed as components of a single process, namely
the competitive action process. This process encompasses competitive intelligence,
competitive action formulation and competitive action execution. Managers’
interpretations of their competitive positions can be regarded as a snapshot in time,
rather than being part of a process. However, the term ‘competitive positioning’ can
mean a process or a set of actions, as the term ‘positioning’ is, after all, descriptive.

Articles, including Sanchez and Heene (1997) and Mintzberg and Lampel (1999), sought
to integrate different approaches to the formulation of competitive actions, different
Page 94

phases in the formulation and execution process, as well as cognitive and material
processes related to competitive actions. These articles have taken the approach of
integrating existing theories, tools and techniques, rather than taking a ‘clean slate’
approach by researching how competitive actions are actually formulated and executed
in practice.

The various studies reviewed concerning managers’ mental maps of their competitive
environments are limited to specific industries and territories. For example, the study
carried out by Daniels, Johnson, de Chernatony (2002) is limited to the personal financial
services industry, which is a relatively stable one, as well as being limited to the United
Kingdom. A gap exists in the knowledge of competitive actions across all or various
industries, territories and markets and across different sizes and types of companies, as
well as differences in the formulation and execution of competitive actions between
them. Further research could also be undertaken into competitive actions in stable
industries versus dynamic industries, and into nascent industries versus mature
industries. Lastly, further research could be taken into competitive actions in
fragmented industries versus oligopolies or industries with just a few dominant players.

Based on this SLR, it is apparent that further research could be undertaken into how the
cognitive and the material categorisations of competitive positions, both current and
desired, intersect. Sanchez and Heene (1997) sought to integrate several strategic
management theories provided by researchers with the logic employed by managers.
However, the theories used in the study were limited to those developed by Sanchez in
collaboration with other researchers. Further research that is based on what actually
happens in practice, in other words how managers integrate their mental maps and
cognitive processes with material processes and tools, would be useful.

The literature reviewed often focused on one aspect of the complete action formulation
and implementation process, but very few studies sought to integrate competitive
intelligence, managers’ mental maps of their competitive landscapes and the
formulation and execution of competitive actions.

Aim of the research

The aim of P2 is to address the gaps identified in the SLR. Firstly, the links between
competitive intelligence, competitive actions, the trigger and the execution of
competitive actions and to how the complete process, or loop, functions in practice
will be investigated.

Page 95

5. Implementation of
competitive actions 1. Competitive
intelligence
Managers’ take
decisions about Managers’ develop a view
actions that of how their brands or
need to be
taken in order products are positioned
to attain the relative to competitors
ideal or desired
positioning of 2. Identification Managers’
their brands or 4. Setting of desired develop
products
relative to
performance competitive
views on the
competitors targets ideal or
position desired
positioning of
3. Strategy
their brands
formulation
or products
relative to
competitors

Figure 2: Competitive action cycle

Most of the prior research carried out in the field of management cognition and in the
context of competitive actions is limited to the perception of competitors and one of
the aims of this study has been to understand the process models of the formulation
and execution of competitive actions. This was a cognitive-based study that also
considered material inputs and tools that are used to support the competitive action
process. The aim of the study was to increase our understanding of the cognitive and
material processes associated with competitive actions that managers take.

In order to obtain a broad understanding of the competitive action process that is as
generalisable as possible, the P2 research covered a number of different industries,
territories, company sizes and industry maturity levels.

Research objective

The objective of the P2 research was to understand managers’ cognitions in the context
of competitive actions. The research sought to identify and explore the links and the
chain of causality between managers’ interpretations of their competitive environments
and the formulation and execution of actions they took as a result. For example, how
well integrated are managers’ mental maps of their competitors with the actions they
formulate and execute and how consistent are managers’ plans with the competitive
actions they take? The research question for P2 is:

Page 96

How do managers formulate and execute the competitive actions they take and what
inputs are used?

The focus of the research was on understanding what happens in practice, as there is a
lot of literature that prescribes processes for formulating and executing competitive
actions but there is little or no real evidence that these processes are used in practice
or, indeed, of what practitioners actually do in this regard. The objective was to get a
broad understanding of what practitioners do across different industry sectors,
territories and different types of competitive actions in order for the results of the
research to be as generalisable as possible and to enable comparisons to be made
between the various managers that were interviewed. With this in mind, competitive
actions from a variety of industries and territories, taken by companies of varying sizes
and for different reasons, were sought.

Four propositions were developed based on the outcome of Project 1 (P1), the SLR,
which were explored as part of P2. The findings in this regard are included in the
‘Analysis & Discourse’ section of this document and are summarised in the ‘Conclusions’
section.

Research design

An interpretive epistemology was applied to understand the phenomena being
researched. The epistemological stance on interpretive approaches is that knowledge of
reality is gained only through social construction such as language, shared meanings,
tools, documents etc. (Walsham, 1993). This epistemological approach is well suited to
the research because there are no predefined dependent or independent variables.
Instead, the research focused on the complexity of human sense making as the research
participants’ competitive environments emerge. The interpretive approach is inductive
and concerned with discovering and interpreting social patterns (Chen and Hirschheim,
2004).

The approach to carrying out research for this project started with the identification of
specific actions. Working backwards to understand their cognitions and the processes
they followed to take these actions, managers were interviewed using semi-structured
interviews. Based on this premise, the unit of analysis of the project was the competitive
action and each action was analysed through a process of interviews with the relevant
managers, as well as by considering supporting material, such as business plans,
research, and notes taken by them. The information gathered was pieced together and
maps based on the CIMO framework describing the context, interventions, mechanisms
and objectives were produced. These maps are provided in appendix 12.

The aim of the study was to produce between 20 and 30 maps for different actions. A
copy of the questions covered in the semi-structured interviews is included in appendix
14.
Page 97

Research population

Because the research compared the approaches managers take in formulating and
executing competitive actions, and to produce a study that is as generalisable as
possible, it was important that the respondents were not concentrated around
particular industry sectors, territories, company sizes, industry structures or the
maturity of the industries they operated in. To achieve this, participants were drawn
from different industries, territories and different types and sized of organisations. The
study sought to cover between 20 and 30 different competitive actions and involve
between 10 and 15 managers.

The study population comprised managers that either make or influence decisions that
lead to competitive actions. To this end, managers that were interviewed were involved
in either collecting market intelligence, or formulating or executing of competitive
actions. Preference was given to managers that were either involved in all three of these
aspects in order to obtain a holistic perspective regarding how competitive actions are
formulated and executed in practice.

Recruitment of participants

A two-pronged approach was followed in order to identify and recruit appropriate
research participants:

1. Through the consulting assignments I’ve worked on in the past I’ve built up a
long list of senior executives that are involved in the formulation and execution
of the competitive actions that their respective organisations take. I approached
a number of them and some of them agreed to participate in my research. One
of them participated in the pilot project
2. Cranfield University has been used as a resource for the recruitment of suitable
research participants. Specifically, the Centre for Customised Executive
Development (’CCED’) and the current DBA cohorts were approached and
several past and present CCED and DBA students were interviewed.

Eligibility criteria

While the study focused on the senior and the top management teams of companies,
the practical consideration was whether of not they were involved in the formulation
and the execution of competitive actions. In order words, for the purpose of this study,
I was only interested in interviewing managers involved in aspects of the cognitions and
processes that lead to a competitive action or competitive actions.

Page 98

Inclusion criteria

Any manager that is involved in any aspect of the cognitions and the processes that lead
to a competitive action or competitive actions at his or her organisation was eligible for
inclusion in the research.

Exclusion criteria

1. Any manager who was not directly involved in any aspect of the cognitions and
the processes that lead to competitive actions
2. Any manager who was not aware of who his or her direct competitors are or was
not aware of competitive actions that their organisation has taken
3. A manager at an organisation that does not actively formulate competitive
actions
4. Should the research population have become too concentrated around
managers who operate in a particular industry sector, territory, type of industry
structure or industry maturity profile or from company of a certain size range,
then managers who would have further concentrated the population would have
been excluded.

Research Outcomes

The primary outcome of the research was an understanding of how competitive actions
are formulated and executed in practice. It was confirmed that perceptions of
environmental uncertainty and organisational control influence managers’ behaviour.
As national culture influences these perceptions we expect to find cultural differences
in interpretation and response to strategic issues (Schneider and De Meyer, 1991).
Secondary outcomes include understanding the influences that managers’
environments and backgrounds have on their formulation and execution of competitive
actions. An example of an interview with a manager is provided in appendix 16.

Another secondary outcome is an understanding of how managers’ use tools and
techniques to support the formulation and execution of competitive actions. Consistent
with Rigby’s (2001) ‘Management Tools and Techniques’ study, a log was kept of the
tools and techniques used by the research participants. P2 was succeeded by P3, in
which the results of P2 were used to produce a guide to assist managers in the

Page 99

Research procedure

The table below depicts the research procedure that was followed.
Step Description
1 Identify and recruit suitable participants
Managers were located using both my personal network of contacts and
through the contact networks of the Cranfield CCED and the current Cranfield
DBA cohorts. The participants were all managers involved in the formulation
and execution of competitive actions within their respective organisations.
2 Identify specific competitive actions
Each participant was asked to identify at least one specific competitive action
(‘action’) to be included in the research. A review of participants’
organisation’s websites and documentation related to the action allowed for
the triangulation of the interview findings.
3 Establish environmental factors and factors concerning participating
managers’ backgrounds
Specific factors regarding the company and the environment related to the
action, as well as specific factors related to the participating managers
backgrounds, were gathered before their cognitions and the processes that
led to the action were established.
4 Interview participating managers
In most cases, the interviews were voice-recorded and extensive notes were
always taken. Additionally, respondents were asked for documentation that
supported the formulation and the execution of the competitive action.
5 Transcribe, code and analyse interviews and the associated material
The interviews were transcribed and then coded. To add more depth to the
information gathered in the interviews, the associated material, such as
business plans, advertising briefs and advertising material was collated and
analysed.
6 Produce ‘CIMO’ maps
The coded interviews, as well as other information, were used to produce
‘CIMO’ maps
7 Analyse ‘CIMO’ maps in response to the two propositions
The maps were analysed in response to the two propositions, namely that:
1. The formulation and execution of competitive actions is environment-
dependent
2. The formulation and execution of competitive actions is influenced by
the relevant managers’ backgrounds
8 Compare and contrast ‘CIMO’ maps
The maps were compared and contrasted in order to identify anomalies and
differences in managers’ approaches to the formulation and execution of
competitive actions and to draw conclusions in this regard.

Table 3: Research procedure
Page 100

The type of company and the environment it operates in was noted at the start of each
interview, as were the managers’ backgrounds. Specifically, the following attributes
were noted and used to categorise each competitive action in relation to the first
proposition.

• Industry sector
• Territory (region or sub-continent) where the competitive action was formulated
and where it was executed
• Size of company, defined in terms of the number of employees
• The structure of the managers’ organisations
• The structure of the industry in which the manager’s organisations operates
• The maturity of the industry in which each manager’s organisations operates
• The rate of change and the rate of innovation in the industry in which the
managers’ organisation operates

Regarding the background of the manager being interviewed, the following factors were
ascertained in order to deal with the second proposition:

• Nationality and cultural background
• Education
• Age
• Current and previous function/s within the company
• Exposure to, and training in the use of, specific tools and techniques for
formulating and executing competitive strategy

Pilot study

Before starting P2 in earnest with all participants, the approach was validated using a
single participant to verify its efficacy and to verify that it can be successfully deployed
across all participants and their respective organisations. Specifically, a participant that
I have a good relationship with and that I’ve known for some time was used and the
following points were addressed:

1. The method of identifying actions
2. The process of starting with an action and working backwards to determine
management cognitions and the processes that informed particular competitive
actions
3. The interviewing process, with particular attention to questioning techniques,
the way in which the manager responds to specific questions and their general
mood when using a recording device, as opposed to not using one
4. The types of supporting material that should be sought, such as business plans,
e-mail communications and managers’ notes, and how they could be used
Page 101

Analysis

The focus of P3 was to analyse and make sense of the insights and the information
gathered in the SLR (P1) and from the interviews (P2) with the objective of developing a
framework for improving the formulation and execution of competitive actions in
practice. Therefore, the analysis carried out as part of P2 has been relatively limited. The
CIMO maps of 26 actions from a wide variety of different environments produced as
part of P2 were used for analytical purposes.

The CIMO framework (Denyer et al., 2008) was used to synthesise and organise the data
collected from the interviews. They were synthesised using a combination of:

• Quotations from the interviewees
• Information obtained from supporting documentation and sources such as
company websites, advertising briefs and advertising material
• The interviewers own interpretations and analysis of the interviews

The CIMO model was developed with the objective of providing a framework for
formulating review questions in management and organisation studies, taking into
account why and how relationships occur and under which circumstances. The CIMO
model comprises four inter-related questions, namely:

• C – Context. Which individuals, relationships, institutional settings or wider
systems are being studied?
• I – Intervention. The effects of what event, action or activity are being studied?
• M – Mechanisms. What are the mechanisms that explain the relationship
between interventions and outcomes? Under what circumstances are these
mechanisms activated or not activated?
• O – Outcomes. What are the effects of the intervention? How will the outcomes
be measured? What are the intended and unintended effects?

In the context of P2, the CIMO framework has been applied in the following manner:

1. C – The stimulus relates to the context of the competitive action. Of course,
environmental factors also define the context in which the competitive action is
formulated and these are covered in the ‘Context’ section of this guide.
2. I - Intervention describes what managers think and do to formulate mechanisms
that will yield the desired outcomes, or objectives, to the action. As stated above,
the interventions analysed as part of P2 were usually initiated with a clear set of
outcomes, or an outcome, in mind.
3. M - Mechanisms relate to the action that was taken to produce the outcome, or
set of outcomes. Consistent with the CIMO model, the mechanism explains the
relationship between the interaction and the outcomes.
Page 102

4. O - Outcomes relate to either the objective or objectives that the manager had
before embarking on the intervention and the actual outcome or outcomes that
were realised as a result of the competitive action.
Page 103

Competitive Consumer Threat Change in Shareholder Top

New Poor sales Customer
action mis- from new market pressure to
technology performance request
management
perception market conditions improve pressure to
stimuli (3) (6) (1)
(3) entrant (5) performance diversify
(1) (6)
business (1)

Competitive
Maintain Expand Generate or
action Increase share business
market increase sales
desired of existing through new
market
position and in a new
outcomes profit levels
unit, product market (4)
(15) or service (5)
(2)

Communication Updating, re-
to change packaging, Acquisition of a
Competitive Development or Discontinuation
complimentary
Establish
consumer extending or re- launch of a new of a product or presence in a
action perception or pricing an product or
product (7) service (2) new market (2)
mechanisms create existing product
service (2)

awareness (4) (9)

Figure 3: Competitive action processes from interviews
Page 104

In the figure in the previous page, which is based on the findings of P2, the order of the
components of the CIMO model have been laid out to reflect the process that the
managers interviewed in P2 generally followed, which includes:

C – Context and the stimuli of the competitive action. The ‘context’ section has been
clustered around eight different categories of stimuli, including:

1. Consumer misperceptions
2. Threats from new market entrants
3. Changes in market conditions, including regulatory, economic or consumer
behavioural changes
4. Shareholder pressure to improve performance
5. The emergence of new technologies
6. Poor sales performance
7. Customer requests
8. Top management pressure to diversify businesses

O – The desired outcomes or objectives that managers envisaged as a result of the
context and the stimuli have been clustered into the following four groups:

1. Increase share of existing market
2. Maintain market position and profit levels
3. Expand business through new unit, product or service
4. Generate or increase sales in a new market

I – The intervention that led to a particular mechanism being executed with the objective
of achieving the desired outcome or outcomes.

A total of 26 CIMO maps were produced and are included in appendix 12. Each map
relates to a singular competitive action. In some cases, actions comprise more than one
intervention and, far as possible, and so long as the intervention could be regarded as a
discrete event for synthesis and analysis purposes, each intervention relates to only one
competitive action. The maps vary in length and density depending on the complexity
of the particular competitive action and the factors surrounding it. In the context of this
research, the CIMO maps method is an integral part of the data synthesis and analysis
process. Antecedent to developing the CIMO maps, the data was coded and each
quotation was analysed to understand the subtext. In parallel to producing the CIMO
maps, the environmental factors related to each interview were documented for
analysis purposes, including:

• Size of the company and the industry sector and territory it operates in
• Industry structure, including the presence of strategic groups and the intensity
of rivalry and the maturity of the industry
• Rate of change and innovation in the industry

• The manager’s background, including nationality, education, current and

previous functions within the company and age
• Methods used to develop the competitive action
• Whether the action was carried out in a developed market, an emerging market
or a developing market

These, in turn, were used to analyse the interviews and to test the propositions.
Anomalies and similarities were also sought between the various competitive actions.
The triadic sort method was used to compare and contrast the content of the interviews
and the results were analysed. Tables containing the environmental factors related to
the interviews are included in the appendices to this document.

Before the CIMO maps were produced, the interviews were analysed using a coding
process. This process included:

1. Capturing the major themes related to the research question
2. Recording verbatim quotations from the interviews that were categorised under
specific themes
3. Drawing conclusions from the quotations once they had all be assigned to major
themes

Once the CIMO maps had been produced, conclusions were drawn where possible
regarding the differences in approaches to formulating and executing competitive
actions based on environmental factors, managers’ backgrounds and other variables.
The internal and external factors that were found to be relevant to competitive actions
are listed in appendix 13.

As part of P3, theoretical processes prescribed in literature such as ‘Competitive
Strategy: Techniques for Analysing Industries and Competitors’ (Porter, 1980) will serve
as juxtaposition against the findings of P2 and, where possible, conclusions will be drawn
regarding their application in practice. The results of the SLR (P1) will also be contrasted
with the findings of P2. For example, the taxonomic models offered by Porac and
Thomas (1989, 1990, 1994) could be compared to the results of P2 in order to assimilate
extant anomalies in the research.

In the CIMO maps contained in Appendix 1:

• ‘Company’ always refers to the interviewee’s organisation and, therefore, the
organisation that perpetuated the competitive action
• The capital letter ‘C’ is used to mask the identity of competitors (i.e. ‘C1’ =
competitor 1)
• The capital letter ‘P’ is used to mask the identity of business partners (i.e. ‘P1’ =
business partner 1)
• Other capital letters (e.g. ‘A’) have been used to mask the identity of any other
companies (excluding competitors and business partners.
Page 106

Summary of sample demographics

The table below summarises the demographics of the sample data.

Category Demographics
Number of 20
respondents
Number of 26
competitive actions
(cases)
Industries covered Automotive (luxury), Financial services (incl. retail banking and
underwriting financial derivative products), Information
Technology, Retail, FMCG (Fast Moving Consumer Goods),
Mobile Telephony, Media, Fashion and Alcoholic Beverages
Countries covered South Africa, the United Kingdom, Mauritius, Kenya, the
United States of America, the Peoples Republic of China,
Nigeria, Kazakhstan
Types of competitive Product re-pricing, Development/launch of a new product,
actions (cases) Update or repackaging of an existing product or service
offering, Marketing campaign, Market segmentation,
Corporate action, Geographical expansion
Respondents’ The respondents’ backgrounds varied greatly, from those with
backgrounds no formal training that worked their ways up in their
respective organisations to those with undergraduate and
postgraduate degrees in business disciplines and extensive
practical experience in developing and executing competitive
actions for large companies.

Table 4: Summary of sample data

Page 107

Summary of sample population

Respondents were drawn from a number of different industries, countries and with different functional and education backgrounds in
order to produce data that was as rich and varied as possible. The table below summarises the population of respondents.

No. Actions Function/ Industry Age Sex Education/training Home
position country
1 1 to 3 General Automotive (luxury car 40 Male National diploma in hotel South
Manager importer/dealer) management Africa
2 4 Founder & CEO Information Technology 47 Female No formal business qualification but United
(Smart card applications) completed the Business Growth Kingdom
programme at CCED
3 5 Marketing & Information Technology 45 Male 5-year Master’s degree from United
Client Strategy (asset management Strathclyde University that combined Kingdom
Director systems) business studies with general
engineering
4 6 Head of Commercial bank 41 Male BSc and MSc in Finance and Economic Mauritius
Strategy, from the LSE
research &
innovation
5 7 CEO of a family Importer and retailer with 34 Male BSc in Accounting & Finance from the Kenya
business multiple homeware stores LSE, MBA from Warwick University
6 8-10 Managing Information Technology & 46 Male Bachelor’s degree in Electrical Kazakhstan
Director Telecommunications Engineering from St Petersburg
University, MBA from Ohio State
University.
Page 108


position country
7 11 Sales & Information Technology 41 Male Bachelor’s degree in Accounting and South
Marketing (financial trading & professional accounting certification Africa
Director settlement systems)
8 12 Founder & CEO Financial services (financial 46 Male MBA from the Stern School of United
markets trading) Management, International business States of
certificate from HEC America
9 13 Managing Automotive (luxury car 41 Male National diploma in hotel South
Director importer/dealer) management Africa
10 14-15 General Media (large, listed group 56 Male No formal tertiary training. South
Manager: that own several Africa
Group Sales & newspaper and magazine
marketing tiles, TV and radio stations)
11 16 Division FMCG (drinks 37 Male Bachelor in Marketing, MBA from South
Category manufacturer) Henley Business School Africa
Manager
(Marketing)
12 17 Marketing FMCG (confectionary 39 Male Bachelor in Marketing, MBA from the South
Manager manufacturer) University of Cape Town Africa
13 18 Brand Manager FMCG (personal care 36 Male Bachelor of Commerce in Marketing South
products manufacturer) and Business Economics Africa
14 19 Division FMCG (drinks 35 Male Bachelor of Commerce in Marketing South
Category manufacturer) Africa
Manager
15 20 Strategic FMCG (household 41 Male Bachelor of Commerce in Marketing, South
Innovations detergents and cleaning MBA from Henley Business School Africa
Manager products manufacturer)
Page 109


position country
16 21 Founder & CEO Automotive (specialist 44 Male No formal tertiary education South
brake pad manufacturer) Africa
17 22 President, Financial services (retail 30 Male MBA from the Stern School of United
Leasing Division bank) Management States of
America
18 23 Commercial Fashion (manufacture and 47 Male No formal tertiary education United
Director retail) Kingdom
19 24 Regional Alcoholic beverages 46 Male BBA and MBA in Marketing Kenya
Business
Development
Director
20 25 Sales & Fashion (manufacture and 52 Male No formal tertiary education United
Marketing retail) Kingdom
Director
21 26 Strategic FMCG (drinks 44 Male Bachelor in Marketing, MBA from South
Marketing manufacturer) Henley Business School Africa
Manager

Table 5: Summary of sample population

Page 110

Summary of competitive actions

No Description of Industry Territory Maturity of Size of Manager’s Type of Type of trigger to
action sector industry immediate function competitive the action
organisation action
(employees)
1 Luxury car 'It's Automotive South Africa Mature 22 General Marketing Desired change in
closer than you Manager campaign customer
think' campaign perceptions
2 'It's closer than Automotive South Africa Mature 22 General Marketing Desired change in
you think' media Manager campaign customer
selection and perceptions
placement
3 Used car Automotive South Africa Mature 22 General Marketing Desired change in
warranty Manager campaign customer
programme perceptions
4 Product Loyalty United Emerging 40 Chief Development/ Growth through
development by scheme Kingdom Executive launch of a new product
a UK IT services using smart Officer product development or
company cards reconfiguration
5 Action to fend Information United Growth 35 Director of Development/ Response to rivalry
off threat from Technology Kingdom Sales & launch of a new
smaller Client product
competitor Strategy

Page 111

No Description of Industry Territory Maturity of Size of Manager’s Type of competitive Type of trigger to the
action sector industry immediate function action action
organisation
(employees)
6 New mortgage Financial Mauritius Mature 85 Head of Update or Growth through
product services Strategy, repackaging of an product development
developed by a Research existing product or or reconfiguration
bank and service offering
Innovation
7 Market Retail East Africa Mature 27 Managing Market Growth through
segmentation by Director segmentation product development
flooring business or reconfiguration
8 4G service with Mobile Kazakhstan Mature 93 Managing Update or Response to rivalry
voice & data in an telephony Director repackaging of an
emerging market existing product or
service offering
9 Sales to fellow Information Kazakhstan Growth 67 Managing Marketing Poor sales
state institutions Technology Director campaign performance
in the last fiscal
quarter
10 Bundling of Mobile Kazakhstan Mature 93 Managing Development/launc Poor sales
mobile and fixed- telephony Director h of a new product performance
line services
11 Bundling of Information South Africa Growth 65 Sales & Update or Growth through
services by large technology Marketing repackaging of an product development
financial software Director existing product or or reconfiguration
vendor service offering

Page 112

No Description of action Industry Territory Maturity of Size of Manager’s Type of Type of trigger to
sector industry immediate function competitive the action
organisation action
(employees)
12 Product re-pricing by Financial United Decline 27 Chief Product re-pricing Economic crisis
a credit default trading4 States of Executive
swaps underwriter America Officer
13 Re-launch of a Automotive South Mature 12 Managing Update or New ownership
luxury motorcar Africa Director repackaging of an with new business
brand existing product goals and objectives
or service offering
14 Strategic acquisition Media South Decline 56 General Corporate action New ownership
by media group (traditional) Africa Manager: with new business
Revenue goals and objectives
15 Bundling of value Media (new South Emerging 56 General Update or New ownership
added services by a mediums) Africa Manager: repackaging of an with new business
media group Revenue existing product goals and objectives
or service offering
16 Product FMCG South Mature 100 Marketing Update or Poor sales
discontinuation by Africa Director: repackaging of an performance
drinks manufacturer Fruit existing product
Juices or service offering
17 Product line FMCG South Mature 88 Marketing Development/lau Growth through
expansion by a Africa Manager nch of a new product
confectionary product development or
manufacturer reconfiguration

4
Underwriting credit default swaps
Page 113


organisation action
(employees)
18 Product FMCG South Mature 100 Product Development/ Change in consumer
development by Africa Manager launch of a new demands or trends
FMCG manufacturer product
19 Product FMCG South Mature 91 Marketing Development/lau Growth through
development by Africa Manager nch of a new product
drinks manufacturer product development or
reconfiguration
20 Product line FMCG South Mature 100 Product Update or Change in consumer
extension by a Africa Manager repackaging of an demands or trends
FMCG manufacturer existing product
or service offering
21 Product Automotive South Mature 7 Managing Development/ Change in consumer
development by Africa Director launch of a new demands or trends
niche brake pad product
manufacturer
22 Geographical Financial United Mature 43 Business Geographical Growth through
expansion of an services States of Dev. expansion geographic
auto-financing (retail America Manager expansion
company banking &
auto
leasing)
23 Re-positioning in the Fashion China Mature 29 Wholesale Product re-pricing Poor sales
Chinese market by (PRC) Director performance
fashion brand
Page 114


organisation action
(employees)
24 Geographical Alcoholic Kenya Growth 45 Global Geographical Growth through
expansion Beverages Product expansion geographic
Manager expansion
25 Product Fashion United Mature 23 Commerci Update or Poor sales
customisation for States of al Director
repackaging of an performance
USA market America existing product
or service offering
26 Launching a new FMCG South Mature 100 Marketing Development/lau Poor sales
fruit juice brand in Africa Director: nch of a new performance
an emerging market Fruit product
Juices

Table 6: Summary of competitive actions
Page 115

Discussion

This section explores the major themes that emerged in analysing the interviews and
seeks to offer possible explanations for the anomalies and the similarities found
between the different competitive actions. It also addresses four propositions that
emanate from the findings of Project 1 (P1), the SLR, namely:

1. In the context of this research, managers’ approaches to the formulation and
execution of competitive actions are environment dependent.
2. The way in which managers’ approach the formulation and execution of
competitive actions are influenced by their backgrounds.
3. Managers focus on narrow subsets of their competitors due to their limited
capacities to rigorously comprehend and analyse their comprehensive
competitive sets.
4. Managers’ mental maps and the processes related to the formulation and
execution of competitive actions are integrated and carried out on an iterative
basis.

These four propositions are dealt with in the following sections:

Proposition 1 – Environmental dependency of managers’ approaches

In the context of this research, managers’ approaches to the formulation and
execution of competitive actions are environment-dependent. Specifically, managers
operating in different environments have mental maps of their competitive structures
that differ and follow disparate processes in the formulation and execution of their
competitive actions. This disparity can be attributed to environmental factors that
include, inter alia:

• State of development of the economies in which the competitive actions are
formulated and executed, specifically whether they are developed, emerging
or developing economies.
• Maturity and the structure of the industry, particularly whether it is
monopolistic, oligopolistic or if all companies are price-takers and how intense
rivalry is between them.
• Rate of change and innovation in the industry.
• Size and structure of the participating companies.

The sophistication of methods used to formulate and execute the competitive action
is defined as the methods used to perform the functions listed below, as well as the
tools used and the breadth and depth of the managers’ cognitions in this regard:

1. Gathering intelligence about competitors

2. Research market requirements and possible market reactions to the proposed

competitive action
3. Formulate the action and develop a plan for its execution

It also applies to the mental maps managers’ have of their competitive environments
and how detailed these maps are.

State of development of the economy

Each of the competitive actions was categorised into one of three categories, namely
a developed, an emerging or a developing market, based on the country or countries
in which they were executed. The ratings given to the level of sophistication of the
methods used to develop competitive actions were then averaged for each of the
categories and the results in the table below were derived.

Category Sophistication of
methods used (avg.
rating)
Developed markets 5.80
Emerging markets 5.94
Developing markets 7.67

Table 7: Sophistication of methods used in different economic groups

Interestingly, in this study the less sophisticated the economy, the more sophisticated
the methods used to develop competitive actions. It must be noted that the sample
size is incredibly small (26 in total) and the results are, therefore, not statistically
generalisable. The results are also skewed by the backgrounds of the managers and
the size and types of companies they represent and it is, therefore, not possible to
make any categorical deduction from the table above. For example, a large retail bank
in a developing market employed a highly skilled manager and a rigorous process of
developing competitive actions. A successful entrepreneur in the United Kingdom
used interviews and surveys to gather data and a tool to position her business relative
to competitors but not with the same level of rigour that the retail bank had
employed. Both competitive actions were successfully executed and resulted in great
successes for both organisations.

In conclusion, this particular sample may possibly show that the development and
execution of competitive actions is influenced by the managers’ backgrounds and the
size of their companies but that the economies in which they are executed has little
bearing on the sophistication of methods employed. That is not to say that a
correlation between the development of an economy and the sophistication of
methods used for formulating and executing competitive actions does not exist but it
isn’t evident in the sample of this study.
Page 117

Maturity and structure of industry

For the purpose of this analysis, ‘Industry maturity’ is defined as the growth phase the
industry is in, as well as the level of stability of earnings. The industries covered in this
study have been broken into four groups, including:

1. Emerging (erratic earnings resulting from abnormal profits but also relatively
large investments)
2. Growth (abnormal profits with new entrants attracted to the market)
3. Mature (normal profits with little or no movement in terms of market entry
and exit)
4. Decline (declining profits and market consolidation)

The various sectors in which the actions were carried out have been categorised
according to the four groups in the table below.

Industry sector Industry
maturity
Automotive Mature
Financial services (retail banking & auto Mature
leasing)
Financial trading5 Decline
Information Technology Growth
Loyalty scheme using smart cards Emerging
Retail Mature
FMCG6 Mature

Mobile Telephony Mature

Media (traditional) Decline

Media (new mediums) Emerging

Fashion Mature

Alcoholic Beverages7 Growth

Table 8: Relative maturity of different industries

Based on our sample, the structure of the industry in any specific market is normally
related to its maturity. In mature industries, such as the automotive or the FMCG (soft
drinks, fabric softener, confectionaries and under-arm deodorants) industries,
managers were very aware of whom their competitors were and their relative
positions in the market. As a result, they acted in very deliberate ways when gathering
market intelligence and when formulating and executing competitive actions.

5
Underwriting credit default swaps
6
Fast Moving Consumer Goods
7
This score relates specifically to the alcoholic beverages industry on the African continent and not
the global alcoholic beverages industry
Page 118

The managers that were interviewed at IT companies, whose industrial structures

were still evolving and, therefore, their competitive sets were not as clearly defined
as those of the automotive or FMCG industries, were less deliberate in their
approaches to gathering market intelligence and formulating and executing
competitive actions. Their views of their competitive environments were also less
clear than those of managers in the automotive and FMCG industries and they were
less aware of how competitors might react to their competitive actions. They were
also less formulaic in how they gathered data and made decisions related to

A fruit juice manufacturer had very precise sales data for his brands and those of his
competitors and was able to estimate the income and expenses associated with
producing and marketing his brands, as well as his competitors’. The approach to
formulating competitive actions was also very precise, surveys were used to gauge
market acceptance and a tool was used to estimate sales volumes related to new
products being considered and how much would need to be spent on marketing to
achieve these volumes.

One of the managers interviewed at a company that produces smart cards, was aware
that if all they did were to produce and market smart cards, their competition would
be intense and their margins would be low. The manager also took a resource-based
view of the business and, taking into account their size and the relatively high skills
sets and the corresponding cost of their human resources, used the smart cards they
produced as a mechanism to deliver services that fulfilled very specific needs. In doing
so they were able to achieve much higher margins than they could otherwise have
achieved. The manager wasn’t aware of what the alternatives to the solutions they
provided were, or who their competitors were. As the business was highly innovative
and the markets they entered or created were nascent, the industry was unstructured
and the players in the industry were highly fragmented. Therefore, there wasn’t really
a need to be all that aware of their rivals or to use sophisticated methods for gathering
market intelligence and for formulating competitive actions.

Another anomaly found with the smart card producer is that they seek to develop and
launch products that fill specific market needs, which is a function of the maturity of
the industry they operate in and its relatively unorganised structure. In contrast, the
automotive and the large IT companies in our sample formulated and executed
competitive actions in order to respond to competitive pressures and to fend off new
market entrants. For example, the Director of Sales & Client Strategy at an investment
management software company commented “A new, small competitor with slightly
disruptive compliance technology appeared and I didn’t see them as a threat at first
but began to when they introduced a new product to the market. They introduced
‘Shareholder disclosure notifications’, which was not being catered for by any of the
incumbent providers”. The quotation indicates that the manager was particularly
concerned about the product being offered by a new entrant from outside the
established strategic group. In the context of competitive actions, it is clear that
Page 119

common cognitive frameworks are used in understanding competitive environments

and in formulating competitive actions.

Rate of change and innovation of the industry

The rate of change and innovation of the industry is often, but not necessarily, related
to its maturity. For example, the research includes an action taken by a prominent
British fashion brand to reposition its business in China and, ultimately, to improve its
profitability. While the fashion industry can be regarded as an established one with
little innovation, except perhaps for recent brand extension actions8, the industry
underwent an upheaval in Mainland China as a result of the Chinese government’s
anti-corruption measures9 and the lifting of restrictions on travel to Hong Kong, which
has always been more price competitive than the Mainland. This led to innovation by
the respondent in China, including the introduction of a label exclusively for the
Mainland Chinese market and a focus on British manufactured merchandise, which is
considered to be more exclusive than merchandise manufactured elsewhere.

Based on an interview with a manager in the mobile telephony industry, it appears
that the industry only started experiencing accelerated change through innovation
related to both technology and competitive actions when its profits came under
pressure. It can be deduced that while the industry was nascent it enjoyed abnormal
profits and, therefore, there wasn’t much of a motivation to commit time and budget
to innovation. As the industry tended towards market equilibrium, abnormal profits
diminished and the industry participants were compelled to take competitive actions
as a means of maintaining higher profit levels.

Type of trigger for each competitive action No. of
occurrences
Desired change in customer perceptions 3
Response to rivalry 2
Poor sales performance 6
Economic crises 1
New ownership with new business goals and objectives 3
Growth through product development or reconfiguration 7
Growth through geographic expansion 2
Change in consumer demands or trends 2

Table 9: Occurrences of different triggers for competitive actions

8
The fashion industry has recently experienced innovation through brand extension actions, which
include the extension of brands into other product categories, such as fragrances, watches and
mobile phone accessories through licensing agreements and other arrangements.
9
Restrictions were placed on giving gifts to civil servants, a practice that had been going on in
Mainland China on a large scale in return for favours from the civil servants.
Page 120

As with the British fashion brand example, most competitive actions can be regarded
as market innovations and are associated with industries that are in a state of flux
and, therefore, undergoing change and this is often confined to a specific set of
competitors, a specific part of their businesses or a specific territory. Of the 26
competitive actions covered in the research, only four can be considered standard
market or product extension actions with little or no innovation.

Of the 10 industries covered in the research, none could be considered to be stable
without change or innovation taking place. The corollary is that competitive action,
and specifically the number of competitive actions that take place, the reason for such
actions and the ways in which they are formulated and executed, is not a function of
the rate of change or the level of innovation of a particular industry. Rather, they are
situation-specific and such situations relate to specific changes in the competitive
landscape, corporate actions, economic crises, desired changes in customer
perceptions or poor sales performance. The table above lists the different types of
triggers to the competitive actions analysed in this study and the number of
occurrences of each one.

10
Rate of change & innovation in the
9
8
7
6
industry
5
4 Innovation & dynamism
3
2
1
0
0 5 10 15
Sophistication of competive action methods

Figure 4: Rate of change & innovation of the industry and the sophistication of methods used

The chart above depicts the relationship between a score of 1-10 for the perceived
state of the innovation and dynamism of the industry sector and the sophistication of
the methods used by firms in that particular industry to formulate and execute
competitive actions. The scores given to each industry for their rates of innovation
and dynamism were based on general perceptions of the industry. For example, the
IT industry is perceived to be more innovative than the automotive industry. The chart
shows that, based on the sample, there is not a relationship between the perceived
rates of change and levels of innovation of industries and the sophistication of the
methods used in them to formulate and execute competitive actions. However, based
on the interviews, it is apparent that innovation and dynamism ebbs and flows in all
Page 121

industries. This concludes that, based on the results of the study, it is not possible to
draw conclusions about the sophistication of the methods used by managers to
formulate and execute competitive actions based on the perceived rates of change or
the levels of innovation of industries.

Size and structure of the participating companies

The results of the interviews showed that larger companies tended to develop and
execute competitive actions in order to fend off competitive threats from smaller
competitors or as a reaction to shrinking sales figures or market share, when
compared to smaller companies that tended to develop and execute competitive
actions with the objective of growing their businesses. This is also applicable to the
maturity of the industry, which isn’t surprising as the size of the companies within an
industry is often a function of the maturity of that industry. For example, a small,
entrepreneurial, United Kingdom based IT company initiated a competitive action in
order to use their existing resources to extend their product range while a large and
established United Kingdom based IT company initiated their competitive action to
fend off a competitive threat from a new, small competitor.

It was also observed that managers at large companies make a mental assumption
that their companies should be able to compete more effectively than their smaller
competitors because of their more comprehensive and more developed resource
bases. For example, the manager at a large IT company stated that by combining their
resources, including both internal resources and those made available to them by
partners at preferential rates because of their size, they would have a competitive
advantage over smaller competitors in price and in the functional breadth of their
solution offerings. A manager at another large IT company was surprised that a small
competitor could enter their competitive set because he thought they would not be
able to fulfil their customers’ rigorous procurement requirements.

There was often a prosaic assumption made by managers at larger companies that
their organisations had a right to remain entrenched as market leaders in their sectors
and that being challenged by smaller competitors was anomalous. This is
accompanied by a view, whether cognitive or not, held by managers of small
businesses that competing with large companies in their industry would be difficult
and result in lower profits. The manager of the smart card company (Competitive
action no. 4) interviewed said, “part of the business produces smart cards, which is a
highly commoditised market to be in. If that was all the business did, and if we
operated solely in the smart card producing environment, it would be challenging, as
we would be under pressure to act responsively to changes in market conditions”.

To support the notion that large companies should be able to compete more
effectively than smaller ones, the processes employed in formulating competitive
actions amongst the large companies interviewed were more rigorous than the small
companies interviewed. In one of the two dominant universal banks in a developing
market, very structured processes are followed to formulate competitive actions. For
Page 122

example, customer surveys and mystery shoppers are used, input is obtained from the
bank's Asset/Liability committee and annual planning meetings are held in which the
banks strategic initiatives are agreed and prioritised.

12
Sophistication of methods used
10
6
Level of sophistication of
4 methods used
0
0 50 100 150
Size of immediate organisation

Figure 5: Size of immediate organisation and the sophistication of methods used

In the chart above the level of sophistication of the methods used to develop the
competitive actions were rated between 1 and 10 for each of the 26 competitive
actions and were plotted with the size of immediate and relevant organisation within
each company (the particular organisation within the company for which the
competitive action was being formulated and executed). While there are some
outliers, a clear relationship can be seen between the size of the organisation and the
level of sophistication of the methods used and we could conclude that, based on the
26 competitive actions sampled, the size of the organisation has an influence on the
sophistication of the methods used to formulate and execute competitive actions.

Proposition 2 – Managers’ approaches are influenced by their
backgrounds

This section responds to the proposition that the way in which managers’ approach
the formulation and execution of competitive actions is influenced by their
backgrounds. The following three factors have been considered in relation to the
influence managers’ backgrounds can have on their approaches:

1. The nationality, culture and age of managers.
2. The educations of managers and, specifically, whether they received formal
marketing or business education at a graduate or post-graduate level that
Page 123

would have influenced the ways in which they formulate and execute
3. The current and previous organisational functions of the managers
interviewed.

12
10
6
4 methods used
0
30 40 50 60
Managers' ages

Figure 6: Managers' ages and the sophistication of methods used

Regarding the sophistication of the methods used, amongst the managers
interviewed, there didn’t appear to be any significant anomalies based on nationality,
culture or age. The chart above plots age against the sophistication of methods used
and no relationship can be seen between them. It is noteworthy that two of the
youngest managers interviewed were very sophisticated in their approaches to
formulating and executing competitive actions and they accounted for two of only
four managers that used a tool or technique to assist them. These two managers also
possessed high levels of relevant formal training. The explanation that could be
offered for this phenomenon is that, with less practical experience and more formal
training, managers would be inclined to be more methodical in formulating and
executing competitive actions and would do so in a formulaic fashion, compared to
managers with more experience and less formal training. This is confirmed by
competitive actions formulated and executed in the automotive and fashion
industries by managers with no relevant formal training but many years of experience.
They relied on their tacit knowledge that they had accumulated over many years, as
well as dialogues with other managers, sales staff and customers.

Another observation from the study is that more emphasis was placed on publicly
available information in developed markets for market intelligence gathering than in
developing or emerging markets. The Chief Executive Officer of a software company
in the United Kingdom mentioned reading government white papers and studying
research on the reasons businesses fail to develop new business ideas. The causality
could possibly be explained by the availability of such information in developed
Page 124

markets, rather than by influences of nationality and culture, because such

information isn’t as readily available in developing or emerging markets. More
research would be needed to establish the causes for choices in sources of information
in respect of competitive actions.

An interesting question to ask is whether managers are more adept at formulating
and executing competitive actions in their home markets where they have strong
frames of reference, or if exposure to different national cultures can act as an
advantage? National culture is an institutionalising force creating general norms that
will either facilitate or thwart adoption of adaptive processes. It is clear that in many
of the competitive actions analysed as part of this study, the tacit knowledge that
managers held relating to their home environments gave them an advantage but that
managers operating in foreign environments had advantages too that resulted from
their learning’s and the tacit knowledge they brought from their home markets.
However, the research doesn’t provide enough data to draw conclusions about which
group had a greater advantage over the other.

In the automotive industry, for example, the managers interviewed had very good
views on who their competitors were, where their dealerships were located, the
marketing campaigns they had used over the previous few years and how successful
these campaigns had been and for what reasons. He also had a very good idea of the
sort of marketing messages, the creative material and the media that would work in
his home territory based on national and cultural norms. The Sales & Marketing
Director of a large software company had a very good knowledge of his industry’s
customers’ requirements and how they were likely to respond to the introduction of
new products or pricing models or the reconfiguration of existing ones. In fact, in every
action where customer interactions were relied on extensively, it is clear that
managers operating in their home markets had an advantage, as these organisations
were less methodical about the formulation and execution of competitive actions and
relied more heavily on the tacit knowledge held by their managers.

With certain competitive actions covered in this study, managers operating away from
their home environments had a competitive advantage insofar as their approaches to
formulating and executing competitive actions were distinguished from those of local
managers. They also brought a degree of objectivity with them, as can be seen in the
case of the Commercial Director of a prominent British fashion brand operating in the
U.S.A., who realised that their garments were cut for the British population and that
they would, therefore, never be able to compete effectively in the U.S.A. until they
had designed a range specifically for that market with cuts to suit the American figure.
It’s noteworthy that every single successful competitive action in our sample that was
orchestrated by a manager in a foreign market was carried out with the assistance of
managers in the local market. We see this in the case of the manager at an alcoholic
beverages producer (competitive action no. 25), who consulted managers in every
possible new jurisdiction before deciding on which one to expand into. We witness
the same phenomenon in the case of the auto-financing company manager
Page 125

(competitive action no. 22), who always appointed a local ‘second in command’
manager to assist in the rollout and development of the business in the new territory.

Education

Based on the research, the dichotomy between competitive actions carried out by
managers with relevant and formal graduate and post-graduate business or marketing
qualifications and those without, primarily entrepreneurs, is clear. This applies mainly
to the methods used to formulate the competitive actions. In the case of several
competitive actions taken in the automotive industry by a General Manager who
worked in the luxury car industry ever since leaving school and who had no relevant
graduate or post-graduate marketing or business qualification, the methods
employed in developing the actions were based on intuition and direct feedback from
customers. No formal research was used because the manager and the companies
that he was employed by did not see the value in using them. A CRM system was used
and relied on quite heavily to provide market intelligence and the manager stated that
his was a ‘customer-centric’ organisation. This contrasts with the founder and CEO of
an IT company that doesn’t have a relevant and formal graduate and post-graduate
business or marketing qualification but attended the Cranfield Centre for Executive
Development’s Business Growth Programme. Her company used interviews and
surveys quite extensively to gain market intelligence and made use of a software tool
to establish their position in the market.

While the methods used by managers without relevant graduate and post-graduate
business or marketing qualifications are somewhat divergent, what is clear is that that
there is a relationship between the level of training of the manager and the
sophistication of the methods they used in developing their competitive actions.
Particularly, it is clear that managers with more extensive relevant graduate and post-
graduate training used more sophisticated methods. For example, the manager at the
retail bank, who has a BSc in accounting and finance and an MBA with marketing and
service management modules, used macro-economic analysis, customer surveys,
market analysis and discussed the competitive action in their Asset and Liability
committee before finalising and executing it.

In the chart below the level of the relevant manager’s training and the level of
sophistication of the methods used to develop the competitive action were rated
between 1 and 10 for each of the 26 competitive actions and plotted. The chart
supports the second proposition in this study’s protocol, namely ‘the way in which
managers’ approach the formulation and execution of competitive actions are
influenced by their backgrounds’. Furthermore, two distinct clusters can be seen in
the chart. The one in the bottom left-hand corner represents the managers with little
or no formal business or marketing training while the other, in the top right hand
corner, represents those managers who had undergone formal business or marketing
training.

Page 126

12

10
6
4 methods used
0
0 2 4 6 8 10
Level of managers' formal training

Figure 7: Managers’ training and the sophistication of methods used

On the issue of causality, it could be argued that larger companies tend to use more
sophisticated methods and also place greater emphasis on formal qualifications when
employing managers and, therefore, the sophistication of methods employed is a
function of the size of the company and their recruitment policies, rather than directly
a result of the level of training of the manager. To support the proposition, the flooring
business in a developing market (competitive action no. 7) is a family-owned business
with a turnover of US$9 million/annum after the competitive action, yet Porter's 5-
forces, ethnography10 (observing consumer behaviour), interviewing consumers and
employees who used to work for competitors were methods used to gather
intelligence and develop the competitive action. The manager has a BSc in accounting
and finance and an MBA that he took with marketing and service management
modules, which indicates that, in this instance, it is the manager who determined the
sophistication of methods employed and is not the result of the size of the company.

Functional biases

As part of this study, one of the propositions is that the way in which managers
approach the formulation and execution of competitive actions is influenced by their
backgrounds and, while it isn’t possible to draw any statistical conclusions regarding
the impact that functional biases have on the formulation and execution of
competitive actions, it is apparent that a relationship does exist. For example, the
Commercial Director of a prominent British fashion brand has a sales background and,
when the CEO of the business decided to address the issue of waning sales in China
the manager said “I decided to go to China for a week and walk around looking at
competitors stores, their product mixes and the pricing of their products”.

10
Ethnography is a research method based on observing consumer behaviour
Page 127

Meanwhile, a manager at a niche brake pad manufacturer with a research &

development background, places very little importance on marketing the company’s
products or thinking about marketing campaigns, pricing policy etc. but, rather,
focuses on responding to customer requirements by producing the best products they
can from a technical perspective. He commented “we looked at aircraft brakes that
are subjected to very intense use and, therefore, very high heat, to see how they are
constructed and the materials they use”. A manager with a marketing background at
a FMCG manufacturer approached the formulation and execution of competitive
actions with a marketing frame of reference. For example, he noted, “we thought
about how we could grow the business by responding to consumer needs and
attitudes” and “research carried out by a marketing agency showed that our
consumers were very price sensitive”.

Proposition 3 – Manager’s focus on a narrow subset of their
competitors

The third proposition derived from the SLR is that managers focus on narrow subsets
of their competitors due to their limited capacities to rigorously comprehend and
analyse their comprehensive competitive sets. These assertions are confirmed by the
interviews that were conducted. A manager at a mobile telephony company, for
example, was only really aware of his two closest competitors, their business models
and their competitive advantages. He noted, “of our two closest competitors, one also
has a Long-Term Evolution license and the other telecommunications company have
much better voice coverage than we do”. He admitted to following and copying their
“closest competitor’s strategy” and dropped their own rates below their closest
competitors as a competitive action.

Based on the study, it is routine for manager’s to be cognitively aware of the strategic
group, or industrial sub-sector, they operate in, even if this wasn’t clearly
communicated in the interviews. For example, one of the interviewees defines his
competitive set as any organisation that could “provide an alternative luxury
purchase” but is very clear about who his competitors are when selecting advertising
media. In most interviews, the managers were able to name their closest three to five
competitors and their competitive actions were developed with these competitors in
mind. For example, the manager who defines his competitive set as any organisation
that could provide an alternative luxury purchase, implemented a marketing
campaign where “A-1 sized billboards advertising our products were placed along dual
carriageway islands on posts in close proximity to our two closest competitors”.

In the case of a luxury motor car distributor in an emerging market re-launching the
brand subsequent to the business being acquired by a new owner, the manager was
very aware of his existing set of competitors and made reference to four competitors,
sales of between 300-350 vehicles per annum between them and spoke about what
these competitors had done or intended doing in the coming months and how they
would respond in significant detail. For example, he mentioned, “We will also be
Page 128

launching a Sports Utility Vehicle that will compete with C1’s and C2’s very popular
SUVs and we’ll be pricing ours along the same lines as these two. C3 will also be
launching an SUV at around the same time”. Unrelated to the launch of the SUV, the
manager also commented, “We decided to emulate what C4, one of our closest
competitors, has done in this market but on a smaller scale”.

Proposition 4 - Competitive actions are formulated in an iterative
manner

In this section we deal with the proposition that managers’ mental maps and the
processes related to the formulation and execution of competitive actions are carried
out in an iterative manner. The interviews not only suggest that these actions are
carried out in an intuitive manner, but that tools and techniques are seldom used. 15
of the 26 competitive actions covered in this study relied on customer interactions to
inform and guide their formulation and execution and 10 of them relied on iterative
customer interactions. Examples include the re-pricing of credit default swaps by a
financial trading house that underwrites these products. The manager interviewed
noted, “During this period we monitored what our competitors were doing and we
found they were re-pricing their products. We did this by hiring from competitors,
being friendly with competitors to the point we could talk with them about their
pricing strategies, as well as talking to the banks, which were our common clients,
about how our competitors were pricing their products.

In the case of a software company based in London, after hearing about a new
competitor providing a system to automate ‘Shareholder disclosure notifications’,
they spoke with a few of their existing clients about the functionality the new market
entrant was offering and were told “We are currently performing these functions
manually and would like to automate them but it wouldn’t be worth the trouble of
doing so on our own”. Given this feedback from clients, they started discussions with
a law firm that advised clients on compliance regarding shareholder notification rules
and, the manager interviewed noted, “which led to us forming a partnership with and
we started specifying the functionality for a new product to compete with the new
market entrants”. They then, “mocked up a few web pages to show what the new
functionality would look like and our clients were enthusiastic”, which led them to
develop the new product and piloted it with two clients before launching it. This is a
good example of how competitive actions are developed in a stepped and iterative
process based on dialogues with partners and customers. This example also shows
how competitive intelligence can be integrated with the competitive action
formulation and execution process. This type of iterative process based on dialogue
and competitive intelligence was pervasive across the competitive actions that were
analysed. One of the luxury car distributors relied heavily on the feedback they
received from customers and employees while formulating their competitive actions
and the manager interviewed at the flooring retailer in a developing market spent
over a month in the store observing customer interactions and customer comments
while formulating his set of competitive actions.
Page 129

Emergent themes

Deviating from industry norms in search of abnormal profits

While the study found there to be mimicking between competitors in the same
strategic groups, in relation to marketing campaigns, product developments and
product or pricing policy updates, there were many instances where the managers
interviewed deviated from industry norms with the objective of increasing their
profits beyond the standard levels for their industries. An FMCG company launched
refill pouches in response to the market becoming more and more commoditised and
consumers becoming more and more price sensitive. A telecommunications company
bundled fixed-line and mobile-line products together to offer a service that none of
its competitors could offer. A bank broke with the market norm by offering a mortgage
loan product with an incredibly low interest rate for the first two years of the
mortgage term.

In the case of the smart card producer (competitive action no. 4), the manager was of
the view that the only way to achieve improved profit levels was to deviate from
industry norms and based this on her experience in the industry. The manager noted,
“If we operated solely in the smart card producing environment, it would be
challenging, as we would be under pressure to act responsively to changes in market
conditions”. Despite competing in the smart card industry, the manager looked
outside her industry for new applications for smart cards and said, “I read white
papers regarding developments in the transport sector and developments in
government, as well as looking at businesses and why they’re going out of business”.

Differences in competitive actions in different industry sectors

The peculiarities of and the similarities between competitive actions formulated and
executed in industry sectors covered in the study have been analysed and are
summarised in the table below.

Page 130

Industry Similarities and peculiarities

sector
Automotive The relationship between customer perceptions and competitive
actions is very direct in the luxury segment of this market, on which
four of the competitive actions in this study are based. A great deal
of emphasis is placed on developing and managing brand equity in
this segment of the industry and this is often the genesis of their
competitive actions. This is probably partly symptomatic of a
mature industry in which there are established strategic groups and
it is hard to use product innovation to distinguish a company’s
products from those of their competitors.
Information The theme that emerged from this sector in the study has to do
Technology with the development of new product and service offerings by
bundling different products together and including value-added
services to products that aren’t differentiated between
competitors. There is also an imperative to deliver products and
services in new and innovative ways.
Financial The oligopolistic structure of the industry makes it hard to
services distinguish one competitor’s products from another’s. However,
there are several examples of how the managers that were
interviewed found ways to do so. This included product innovation,
limiting the particular credit risk categories that they expose
themselves to, and offering fast turnaround times in granting
consumers credit facilities.
Retail Compared to financial services, it is easy to distinguish a product
line in this sector. The competitive action undertaken by the
flooring retailer in a developing country involved repositioning the
company and updating its pricing structure, which would not have
been possible in the other industries the study dealt with, including
financial services, IT or telecoms.
Telecoms Competitors are very aware of each other and the competitive
actions included in the study in this industry were all focused on
fending off threats from close competitors or to gain market share
from them.
Media Symptomatic of this being a mature industry and, therefore, one
that is experiencing consolidation. The competitive actions in this
study are focused on bundling different forms of media together to
offer integrated marketing solutions to customers in an attempt to
compete more effectively with competitors that don’t have the
same set of complimentary services. These competitive actions are
also symptomatic of the media group that was interviewed being
very large and partly owned by a private equity group that was able
to fund corporate actions. Had smaller media groups been
interviewed, it might have been found that they employed very
different competitive actions.
Page 131

Industry Similarities and peculiarities

sector
FMCG This is a stable industry with well-defined processes for gathering
market and competitor intelligence and for developing and
executing competitive actions, as well as measuring their
performances. All the competitive actions analysed in this study
support this proposition.
Fashion The competitive actions were carried out in a very ‘hands-on’
fashion and little research and no tools were used. While sales data
triggered these competitive actions, the actions themselves were
developed on a very informal basis.
Alcoholic Despite this industry being closely aligned to the FMCG industry,
beverages the competitive action in the study that relates to this sector
employed very little structure or any formal process. Instead, the
competitive action was developed through discussions with
managers at other subsidiaries of the company.

Table 10: Similarities and peculiarities of competitive actions in different industries

Clustering of different types of competitive actions

Each of the competitive actions were categorised as per the table below and
similarities between them were sought.

Types of Similarities and peculiarities
competitive
actions
Product re- The antecedents to re-pricing a product tend to be informal and
pricing based extensively on management cognitions, which are sourced by
informal inputs. In the case of a credit default swaps underwriter,
discussions with employees that used to work for competitors and
with common customers were used as inputs to establish pricing
parameters. In the case of a British fashion brand operating in
mainland China, the manager went into competitors’ stores in the
territory to establish their product mix and pricing structures.
Update or The antecedents of this type of action are normally well structured
repackaging and, depending on the importance to the company, the amount of
of an existing management time, focus and other resources committed to the
product or action vary greatly and can be vast. For example, surveys and
service interviews are used extensively and, in the case of a large telecoms
offering company in an emerging market, consultants were used to develop
the action. In three of the nine actions analysed, managers used
other companies as points of reference in developing their
competitive actions. These companies included direct competitors,
as well as their international counterparts.
Page 132


competitive
actions
Development/ Surveys are used extensively, with one of the companies using a
launch of a marketing agency to establish consumer needs and attitudes.
new product Manager’s cognitions and the processes followed are very similar
to those identified in the ‘update or repackaging of an existing
product or service offering’ action type. The management time,
effort and other resources committed to the action vary greatly
depending on the importance it has to the company and can be
extensive, with one company surveying a million consumers to
establish how they could make an impact in changing their
personal hygiene products. The trigger for these actions, as well as
the methods employed in developing and executing them, vary
greatly depending on the type of organisation. For example, a
niche brake pad manufacturer replied heavily on a single
customer’s requirements and interactions with that customer,
whereas large FMCG companies tended to initiate competitive
actions when their sales started waning or they started losing
market share to competitors. The large FMCG companies used
sophisticated methods, including surveys to establish market
requirements and tools to predict sales volumes and marketing
budget requirements.
Update or The antecedents of this type of action are normally well structured
repackaging of and, depending on the importance to the company, the amount of
an existing management time, focus and other resources committed to the
product or action vary greatly and can be vast. For example, surveys and
service interviews are used extensively and, in the case of a large telecoms
offering company in an emerging market, consultants were used to develop
the action. In three of the nine actions analysed, managers used
other companies as points of reference in developing their
competitive actions. These companies included direct competitors,
as well as their international counterparts.
Marketing The development and execution of marketing campaigns tends to
campaign be based far more on tacit knowledge held by managers and
intuition when compared to other types of competitive actions.
Formal and structured processes are used relatively less in
developing marketing campaigns, which can probably be attributed
to the creative nature of the process and the employees involved
in it, but further research would be required to clarify this.
Market The study shows that market segmentation requires extensive
segmentation technical analysis and can result in substantial changes to the
market positioning and the structure of the company. In one case,
interviews with consumers and employees who used to work for
competitors were used to gather competitive data and Porter's 5-
forces was used to analyse the competitive environment.
Page 133


competitive
actions
Corporate Only one corporate action was identified and it was led by the
action objective of bundling products and services to create solutions that
would be hard for competitors to mimic.
Geographical The study only has two relevant examples and they were triggered
expansion by increased competitive pressure and waning economic
performance in the home market. The process followed in
developing the action was based primarily on conversations the
manager had with the management of the company’s subsidiaries
in other countries and no structured processes or tools were used.

Table 11: Differences in types of competitive actions

Following are seven CIMO maps that relate to each of the seven types of competitive
actions listed above. The CIMO maps describe the context, intervention, mechanism
and objectives generally typically associated with the types of competitive actions
covered.
Page 134

Competitive action - product re-pricing

Context

Applicable across all and every industry sector and stimulated by a change in the external environment, such as a change in regulation,
a crisis that precipitates a change in the value of the product or service or a competitive action by an existing competitor or a new
entrant to the market.
Intervention

• Intelligence is gathered through informal

channels, including interactions with
Mechanism
former customers, business partners, Outcomes
sales staff and former employees of The re-pricing of the product
Successful outcomes of these

competitors and about how competitors’ or service is usually
actions include arresting waning
price their products. accompanied by other
sales, effectively responding to
• Alternatives to re-pricing are considered actions, such as updating or
emerging competitive rivalry or
and investigations into why the current changing the product or
successfully adjusting to
price levels cannot be maintained are service offering in order to
changes in the external
carried out. distinguish it from those of
environment such as regulatory
competitors in an attempt to
• Possible changes or updates to the changes.
avoid competing solely on
product or service offering are
investigated and considered. price.
Page 135

Competitive action - development/launch of a new product

Context

The stimuli for these actions, as well as the methods employed in developing and executing them, vary greatly depending on the type of
organisation. For example, a niche brake pad manufacturer relied heavily on a single customer’s requirements and interactions with
that customer, whereas large FMCG companies tended to initiate competitive actions when their sales started waning or they started
losing market share to competitors.

Intervention

Outcomes
• Surveys are used extensively, with one of the
companies using a marketing agency to Mechanism • The first outcome of this action is
establish consumer needs and attitudes regaining lost market share.

Research & development

• The management time, effort and other • The second successful outcome
resources are committed
resources committed to the action vary is developing and launching a
to developing and
greatly depending on the importance it has to new product that responds to a
launching the new
the company and can be extensive, with one new market requirement that’s
product and groups
company surveying a million consumers to been created or to grow
across the organisation
establish how they could make an impact in revenues.
are mobilised to
changing their personal hygiene products. formulate and execute • The desired outcomes are clearly
• The large FMCG companies used sophisticated the action, as well as to articulated and defined with
methods, including surveys to establish monitor and measure its yardsticks against which to
market requirements and tools to predict success. measure them.
sales volumes and marketing budget
requirements.

Page 136

Competitive action – Updating, repackaging or extending an existing product or service offering
Context

The stimuli to these actions is usually changing or evolving customer requirements and can involve customers placing pressure on
suppliers to reduce costs in markets that are consolidating or are in decline
Intervention

Outcomes
• The formulation of these actions are generally well
structured and, depending on the importance to the • A common outcome to such

company, the amount of management time, focus and an intervention taken by a
Mechanism
other resources committed to the action vary greatly and company is that it competes
can be vast. Product and/or in new markets with
• In three of the nine actions analysed, managers used service attributes are fundamentally existing
other companies as points of reference in developing either updated, products or services
their competitive actions. These companies included products or services • Companies are often also
direct competitors, as well as their international are repackaged or able to target a broader
counterparts. Sometimes parallel industries are emulated presented to the audience without
to package and/or present products or services in new market in different cannibalising their existing
ways. ways, which often sources of revenue. This
• Surveys and structured interviews are used extensively to involves bundling often results in the bundling
assimilate customer perceptions and requirements. products and/or or products or services as a
services together way of segmenting the
• Product presentations and sales calls in which the
planned product or service offering updates are discussed market.
are often used to test the market.
• Consultants are sometimes used to develop these
actions.
Page 137

Competitive action – Marketing communication to change a consumer perception
Context

• There is a particular consumer perception that needs to be addressed through communication with customers or prospective customers
• Managers are often not aware of, or thinking about, who their competitors are when formulating and executing marketing
communications to change consumer perceptions

Intervention

• Frameworks or techniques are
Outcomes
not used to formulate these Mechanism

• When executed successfully,
A message that the
• Manager’s respond directly to the target market’s perception
manager would like to
interactions with customers and of the product or service would
communicate to
prospective customers, so the have changed in accordance
customers and
relationship between their with the message behind the
prospective customers is
knowledge of the market and the marketing campaign
defined and a
competitive actions they take are • The outcome may not be direct
programme is then
very direct. One manager was or immediate (e.g. executing a
developed to
quoted “the feedback from marketing campaign may not
communicate the
customers led me to embark on a result in an immediate
message.
campaign to change that price improvement in sales
perception.” performance)

Page 138

Competitive action – Creating multiple sets of price & product attributes to target multiple market segments
Context

The managers who were interviewed operated in environments characterised by a relatively large number of competitors and large and
fragmented markets. They attempted to, firstly, understand their markets better and, secondly, to tailor specific product or service
offerings to different segments within their markets and, thereby, compete more effectively within them. Market segmentation required
extensive technical analysis and usually resulted in substantial changes to the market positioning and the structure of the company.

Intervention Outcomes

• Information on competitors is

Mechanism The outcomes

obtained from customers who
include
speak about them, as well as from • Specific products or services are identified for thesuccessfully
employees who used to work for different consumer segments and the competitors in capturing of
them and who provide managers’ each segment are identified, along with their marginal revenue
with their competitors’ prices and respective product/service attributes and pricing from existing but
sales volumes. policies. newly identified
• Data on competitors’ price lists is • Based on the findings, certain products/services for segments and/or
used to determine the pricing certain segments are often re-priced the expansion of
policies for the different segments. • Different marketing approaches and different media the breadth of
• The process of segmenting the are identified to target the different segments. the prospective
market is a technical one relative to • Periodically, the companies update their pricelists market (customer
developing and launching new and the product/service attributes and packaging base) by
products, for example, and tools across the various segments independently, based targeting new
are often used to support the on their competitors' pricing policies and changes in segments, which
process. their competitor’s product/service offerings. implies widening
the range of
competitors.

Page 139

Competitive action – Acquire complimentary product or service offering
Context

The managers that were interviewed made strategic acquisitions to increase and improve product or service offerings in order to be able
to compete more effectively. Adding complimentary products or services to existing offerings allowed the managers to deepen
relationships with their existing client base and distinguish themselves from their competitors.

Intervention

• Companies with complimentary products

Mechanism Outcomes
and/or services that can be acquired are

identified The company is acquired Acquisitions allow existing

• Management evaluate the financial and its product or products and services to be
impact that the acquisition would have to service offerings are bundled with those from the
make sure it will be value accreting and integrated with those of acquired business to create
compare different acquisition targets, in the acquirer to create bundled solutions that
terms of the impact they will have on opportunities to improve would give them a
profitability, as well as the impact they revenues and profits, as competitive advantage and
will have in relation to exposing them to a well as customer allow them to compete
wider prospective customer base. relationships and more effectively and,
• Acquisition targets are motivated by the customer stickiness. therefore, become more
benefit the acquisition will bring them competitive.
and this influences the consideration paid
by the acquirer.
Page 140

Competitive action – Establish a presence in a new market

Context

• The interviewees of this action included managers with products, services and brands that had experienced success in their home markets
but had reached saturation and were, therefore, motivated to emulate the success in other markets
• These actions were also stimulated by increased competitive pressure and/or waning performance in the home market

Intervention

Mechanism Outcomes
• Intelligence is primarily gathered through

Where no presence exists Outcomes include

dialogues with managers, business partners
yet, a subsidiary is normally increasing revenue, as
and prospective customers in the markets
created that starts off by well as diversifying
that are being considered. Surveys are also
importing products until the revenue across
used.
market is proven. Where different markets,
• The action and the process to be followed in
the company already has a particularly when the
rolling it out are often formulated in
presence the new product home market is
consultation with local employees.
or service is added to the vulnerable or
• Managers tend to choose markets where
local entities product line competitors are
they feel comfortable (i.e. where there is
and the existing starting to erode
cultural similarity).
infrastructure is used. market share and

profits.
Page 141

Conclusions

Based on the research, tools and techniques, such as those discussed by Rigby (2001)
are seldom used. In fact, of the 26 competitive actions included in the research only four
used a tool or technique and they included:

• Competitive Compass
• Michael Porter ‘s Five Forces framework (1980)
• A tool developed internally by an FMCG company to estimate sales volumes and
value, as well as the requisite marketing investment. This tool was used in two
of the competitive actions covered.

However, in 13 of the 26 competitive actions, structured interviews or surveys were
used. The interviews suggest that the formulation and execution of competitive actions
is an intuitive and iterative process and indicates that managers rely very heavily on
direct interactions with other managers, business partners and their customers when
formulating and executing competitive actions. Feurer and Chahrbaghi (1995) noted “In
dynamic market environments, the traditional approach to strategy formulation of
establishing an ideal competitive position by analysing the environment will fail and
strategy formulation should, therefore, be regarded as a continuous learning process”.
Shoemaker and Day (2009) proposed a three-step framework for gathering competitive
intelligence that encompasses scanning, sense making, probing and acting. The study
also shows that managers place great importance and act on information received
directly form sales employees, former employees of competitor organisations and
through Client Relationship Management systems. For example, the development of a
set of actions to reposition a prominent British fashion brand in the U.S.A. were based
on interviews with the management and staff of Nieman Marcus11 to establish why sell-
through rates for their collections were very low.

The interviews affirm the existence of strategic groups (Porter, 1980) and cognitive
oligopolies as described by Porac, Thomas and Baden-Fuller, 1989), who used the term
to refer to the tendency of manager’s to limit their competitive subsets. They postulated
“Managers simplify their competitive environments by categorising their competitors
and defining their own businesses in terms of the labels they use to define the cognitive
categories in which their businesses are placed” The interviews further affirm that a
correlation exists between the maturity of an industry and its structure, in terms of the
competitive environment. The interviews also infer that the more mature the industry
is, the more deliberate and methodical managers are in formulating and executing
competitive actions and that these actions are more sophisticated than those of firms
in emerging or growing industries. Gripsund and Gronhaug (1985) noted, “Managers
view and focus on only a sub-set of all their competitors – the most direct competitors”.
The General Manager of a luxury vehicle distributor defined his competitive set as any

11
Nieman Marcus operates large, luxury shopping malls in the U.S.A.

organisation that could provide an alternative luxury purchase yet his cognitions were
based on a small sub-set of his competitors. For example, he used “A-1 sized billboards
advertising our product placed along dual carriageway islands on posts in close
proximity to our two closest competitors” for a marketing campaign. Reger & Huff
(1993) suggested, “Strategists organise and make sense of their competitive
environments by grouping competitors into strategic groups. This is the result of
attending the same conferences and exhibitions, reading the same industry literature
and recruiting employees from the same pool”. Cheng & Chang (2010) concluded that,
“Managers tend to focus their attention on selective and similar dimensions, which
leads to cognitive strategic groups, which influences organisational strategic actions and
subsequent performance”.

It is also evident form the interviews that oligopolies act in a coordinated fashion in the
context of competitive actions. Kelly (1995) noted “Shared belief systems enable
coordinated activity by providing a common framework”. Managers also appear to take
comfort in operating within their established industrial structures and become
protective of these structures once they are cognitively embedded. This could be
explained through the notion that managers conduct industrial inspection by the
method of paired comparisons. These structures are associated with industry maturity.
In other words, as an industry matures so the structures become more and more
engrained. This study confirms this insofar as managers in the mature industries,
including the automotive, financial services, FMCG and fashion industries, were far more
aware of their competitors and, therefore, the structures of their industries, than the
managers operating in nascent (emerging and growth) industries, including the
information technology, smart cards and new media industries. Wiley (1988) asserts
that supra-individual level frameworks emerge as interactions take place among
different individuals within a given social grouping and the commonly shared ideas begin
to take on an existence of their own, independent of the individuals that created them.

While most literature deals with competitive intelligence gathering, managers’ mental
maps of their competitive environments, the formulation of competitive actions and the
subsequent execution of these actions as discreet processes, the study shows that these
are integrated and iterative processes. Constantineau (1995) suggests, “The application
of competitive intelligence would be more effective if those collecting the intelligence
engaged in discussions with decision-makers, made the information more widely
available and if they developed alternative scenarios of likely outcomes to elicit
reaction.”

Dearborn and Simon (1958) observed, “Functions within organisations influence
managers’ frames of reference”. Bowman & Daniels (1995) found that “When managers
are asked to reflect their firms’ situations, there is evidence of functional bias”. The
interviews confirmed that functional biases exist in the formulation and execution of
competitive actions and this was pervasive across the study. For example, marketing
managers used surveys to gather information while those with sales backgrounds
Page 143

replied more on personal dialogues. Managers with engineering backgrounds placed

more emphasis on the technical differentiators of their product or service offerings.

The interviews infer that the more mature the industry is, the more deliberate and
methodical managers are in formulating and executing competitive actions and that
their competitive actions are more sophisticated than those of firms in emerging or
growing industries. This is particularly evident when comparing the FMCG or the mobile
telephony industries with nascent industries, such as information technology or, most
strikingly, the smart card producer.

No differences in the types of competitive actions or the methods used to formulate and
execute them could be found between those carried out in developed markets,
developing markets and emerging markets. The conclusion is that the sophistication of
methods used in the formulation and execution of competitive actions is the same
across developed, developing and emerging markets.

Regarding managers’ training and the size of their organisations relative to the
sophistication of the methods used in formulating and executing competitive actions,
there are some outliers but very distinct correlations can be seen between the level of
managers’ training and the sophistication of methods used for the formulation and
execution of competitive actions, as well as between the sizes of their organisation the
sophistication of methods used. We can conclude that, based on the 26 competitive
actions sampled, both the level of the managers’ training and the size of their respective
organisations has an influence on the sophistication of the methods used to develop
competitive actions. This could be explained by the profiles that large companies seek
when recruiting managers (i.e. large companies look for managers with extensive formal
training while smaller organisations are less concerned about formal qualifications).
Further research would, however, be needed to verify this explanation.

One of the observations in interviewing managers at large companies, in comparison to
those at small companies, is that those at the large companies tended to focus their
competitive actions on defending their market positions while the managers at smaller
companies tended to focus their competitive actions on growing their market share and
their businesses in general. Examples of this include a large software company
formulating and executing a competitive action to fend off rivalry from a small, new
market entrant and a small smart card producer developing a new product to fill a
specific market need.

Younger managers with extensive formal training in business and marketing disciplines
but with, due to their age, less experience, were relatively methodical in their
approaches to formulating and executing competitive actions while older managers who
had accumulated substantial tacit knowledge over many years, but had no relevant
formal training, relied more on dialogues with other managers, employees and
customers, as well as their own knowledge, to formulate and execute competitive
actions.
Page 144

The study found that managers operating in their home markets had an advantage
insofar as they had an affinity with local cultural and national norms. Likewise, managers
operating in foreign markets had an advantage insofar as they were able to apply
learned and tacit knowledge gained in their home markets to the new ones. However,
in every instance of managers from foreign markets successfully formulating and
executing competitive actions, they did so with the support of local managers.
Hodgkinson and Johnson (1994) noted, “Managers frames of reference are influenced
by their experiences, national culture is a strong influencer, and their frames of
reference are, as a result, broader than organisational or industry level ones”. Based on
the findings of the study it isn’t possible to determine whether it’s more advantageous
for managers to operate in their home markets or to operate in foreign markets once
they had gained significant knowledge in the formulation and execution of competitive
actions in their home markets.

The study concludes that the competitive actions, and specifically the number of
competitive actions that take place, the reason for such actions and the ways in which
they are formulated and executed, is not a function of the rate of change or the level of
innovation in a particular industry. Rather, they are situation-specific and such situations
relate to specific changes in the competitive landscape, corporate actions, economic
crises, desired changes in customer perceptions or poor sales performance. D'Aveni
(1994) postulates “hypercompetition is a relatively permanent situation, though it may
be punctuated by brief periods of stability”. Furthermore, the study found that the
intensity of competition is also a function of cultural and national norms, as well as
regulation. For example, the anti-corruption laws introduced in Mainland China caused
considerable competitive upheaval in the fashion industry and the procurement
regulations imposed on state-owned entities in Kazakhstan guided the way in which
other state-owned entities marketed and sold their products and services. D'Aveni
(1994) noted that the airline, banking, and telecom industries in the United States had
been hypercompetitive for some time; yet in Japan, and to a lesser extent continental
Europe, social and cultural norms imposed constraints on adapting such rapid and
discontinuous change frameworks.

The smart card producing company that was interviewed developed a programme called
‘you can do it’ that provides a novel solution to incentivising the use of public services
through reward points into a successful business that their Chief Executive Officer aims
to sell as a stand-alone business one day (competitive action no. 4). Her cognitions and
her approach are consistent with Kim & Mauborgne (2015), who suggested companies
could succeed not by battling competitors, but rather by creating ʺblue oceansʺ of
uncontested market space.

Gresov and Drazin (1997) assert that efficiency and efficacy are optimised in the
structures and processes adopted by the strategic group and that deviating from them
results in compromised performance. This may be true when considering the cost
structures and the collective relationships that strategic groups have with suppliers and
Page 145

is consistent with Porac (1989) who noted, “The access to specific resources is more
easily achieved by strategic groups than by singular firms and, as a result, accessing the
same resources as competitors in the strategic group improves performance”. However,
the findings of this study do not necessarily support this assertion in respect of market
performance and the company’s ability to generate revenue when deviating from
industry norms and there were a number of examples of managers deviating from
industry norms through marketing campaigns, new product developments or the
updating of products or pricing policies with the objective of achieving or sustaining
profit levels above the industry norms. Another explanation for managers being
reluctant to deviate from industry norms could be because taking actions that appear
to be in their organisation’s best interests may induce retaliatory actions from their
competitors (Baum and Korn, 1996). In the 26 interviews that make up this study, not a
single example of this behaviour was identified.

Summary of findings

The following list summarises the findings of this P2 study.

1. Tools and techniques are seldom used in the formulation and execution of
competitive actions. Structured interviews and surveys were used in 50% of the
actions covered in this survey but tools, such as Michael Porter’s (1980) Five
Forces, were only use for four of the 26 actions.
2. Managers rely heavily on interactions with other managers, customers and
employees, as well as their own intuitions in the formulating and executing
3. The study affirms the existence of strategic groups and cognitive oligopolies and
shows that managers focus on narrow subsets of all their competitors, limited to
their most direct ones, when formulating and executing competitive actions.
4. The more mature the industry, the more deliberate and methodical managers are
in formulating and executing competitive actions.
5. No difference could be found in the way in which competitive actions are
formulated and executed between developed, developing and emerging
economies. In other words, the methods used in formulating and executing
competitive actions are not dependent on the relative developmental state of the
economies in which they are executed.
6. There is a very clear correlation between the level of a manager’s training and the
sophistication of the methods used in formulating and executing competitive
actions.
7. The competitive actions of large companies tend to focus on defending their
market positions while small companies tend to focus on growth in the
8. Young managers tend to rely on frames of reference developed through training
in the formulation and execution of competitive actions while older managers
Page 146

tend to rely more on intuition, as well as on dialogues with colleagues, business

partners and customers.
9. Managers formulating and executing competitive actions in their home markets
have an advantage over those operating in foreign markets insofar as they have
a better understanding of the local culture and national peculiarities. Managers
formulating and executing competitive actions in foreign markets have an
advantage insofar as they bring experience and knowledge of competitive actions
successfully executed in their home markets with them. Based on the interviews,
it is impossible to determine which position is more advantageous. However, it is
noteworthy that a local manager was also involved in the formulation and
execution of competitive actions led by foreign managers in the study.
10. Functional-level managers often deviate from industry norms, in the context of
product development, marketing campaigns and the reconfiguration of product
or service offerings or the way in which they are packaged, in an attempt to
increase their profit levels above their industry norms. This does, to some extent,
contrasts with the literature that suggests functional-level managers tend not to
deviate from industry norms for fear of compromising their profits.


While the data collected in P2 is rich and insightful, the sample is too small to be
generalisable. The findings would be generalisable if a much larger sample were used
and the questions and, therefore, the responses elicited from respondents were simple,
concise and direct. For example, had a few hundred managers been surveyed and asked
whether envisaging outcomes to competitive actions before they are formulated
resulted in more successful actions, it would have been possible to make a
generalisation with a low sampling error based on the responses received. Instead, a
small number of semi-structured interviews were carried out in an exploratory manner
with the aim of collecting qualitative data.

In P2 little attempt was made to answer any research questions directly or, for that
matter, to find categorical answers or conclusions to the four propositions developed in
P1. Instead, the research question and the propositions developed in P1 were explored
and the discourse associated with the research questions and the propositions was
expended upon. For example, Bowman and Daniels (1995) suggested that functional
biases exist in the context of perceived strategic priorities and that this could either be
a problem or an advantage to organisations. While managers’ functions were noted in
P2 and it was found that they have a bearing on managers’ strategic priorities in the
formulation of competitive actions, it was not conclusively ascertained whether this was
an advantage or a hindrance in each case.

Page 147

Page 148

Project 3: Development of a guide for the formulation of

competitive actions

Page 149

Page 150

Introduction

The focus of Project 3 (‘P3’) was the development of a guide to assist managers in
formulating competitive actions based on the findings of Projects 1 and 2. The guide is
accompanied by a Resources Manual that acts as a tool kit to support the guide. The
Resources Manual includes a number of categories, namely:

• Data, including data sources and methods for gathering data.
• Tools, including, inter alia, the Customer Matrix developed by Bowman and
Faulkner (1994) and the 5-Fources model developed by Michael Porter (1980).
• Competitors, including points to consider and methods to use in analysing
competitors and competitive environments.
• Benchmarks, including ideas regarding benchmarks that can be used when
formulating competitive actions.
• Team, including points to consider when assembling teams to formulate
• Industry, including points to consider and methods to use in analysing industries
and industrial dynamics.

Both the guide and the Resources Manual were designed to act as reference documents,
provoking thought and providing ideas to managers in the formulation of their
competitive actions. The guide and the resources manual were validated in the field
through discussions with managers, who also reviewed them. A total of 10 discussions
were held with managers and five iterations of the guide and the Resources Manual
were produced. These discussions focused on the practical applicability of the guide and
the Resources Manual. The guides and Resources Manuals that were produced are
included in appendices 1 to 7. Notes were taken after each discussion, which were used
to update the guide, and have been summarised in appendix 17.

The guide and the resources manual evolved through this process of iteration until the
interviewees were no longer able to make meaningful contributions. To start with, the
two documents were merged but were separated into two in order to distinguish
between material that could be used by all managers on a day-to-day basis, and material
that would typically only be used occasionally and not by all managers. P3 also explains
the progressions between each of the iterations and the outcomes of the discussions
with the managers.

The research protocol and the methods used in this study are covered in the
introduction to the P1 section. The DBA research is broken into three projects, namely
Project 1 (‘P1’), which was a Systematic Literature Review, Project 2 (‘P2’), which
comprised field research to understand what happens in practice and Project 3 (P3),
which is the subject of this protocol and which focused on the development of a
framework to improve the formulation of competitive actions.

Page 151

The unit of analysis is the competitive action. The guide developed as part of P3 was
validated in practice through discussions with a number of senior managers who are
responsible for the formulation of competitive actions, by asking them to apply it to
specific actions their organisations’ had formulated and executed in the past.

Relevant appendices


Nos. Title Description Pages
1-7 Competitive actions Five subsequent versions of the guide and 171-
guides & resources the resources manual to support the 184
manuals formulation of competitive actions that were
produced as part of P3 are contained in
these appendices. In the first three versions
the guide and the resources manual are
integrated and presented in single
appendices, while they are separated into
two separate documents, presented in
separate appendices, in the last two
versions.
assignments & businesses that I’ve been involved in and
businesses that are relevant to this DBA study
17 Summary of Summary of the changes made between the 255-
iterations of the five iterations and an account of the 262
guides & resources progression made between iterations in
manuals developing the guide and the resources
manual.

Research objective

The ultimate aim of the P3 research was to use the findings of P1 and P2 to provide a
guide that managers can use in practice to improve the formulation of their competitive
actions. To achieve this, P3 makes use of the processual framework discerned in P2,
offers recommendations and proposes approaches. This includes the use of tools and
external inputs, such as data, for the formulation of competitive actions depending on
the type of action, as well as its stimuli and the objectives of the action. This guide was
developed as the corollary of P1 and P2 and was discussed with managers in the field in
order to ensure its validity and applicability. The research question for P3 was:

Page 152

How could managers improve their approaches to the formulation of competitive

actions?

The extant literature offers a range of tools and techniques for developing competitive
strategy but there is little real evidence that these tools and techniques are used in
practice or, indeed, of what practitioners actually do in this regard. The objective of P2
was to understand what practitioners actually do. Rather than limiting the study to a
particular industry sector, size of company or territory a diverse group of managers were
interviewed so that the results of the research could be applied to a diverse set of
environments and competitive situations.

Research design & methods

The process in carrying out research for this project (P3) started with the identification
and documentation of patterns and approaches to different types of competitive actions
based on P1 and P2, and was followed by the development of the guide, which was then
discussed with managers and updated accordingly. The objective of these discussions
was to validate the guide, as well as to capture divergent views and emergent issues and
to test the guide’s applicability to practice. Before these discussions were held with the
managers, the guide was sent to them to review.

Research Procedure

The table below depicts the research procedure that was followed.
Step Description
1 Patterns and approaches relevant to the formulation of competitive actions
were identified and documented based on the findings of P1 and P2.
2 A guide for formulating competitive actions based on the patterns and
approaches identified and documented in step 1 was developed. Process flow
charts and tables were used as far as possible to describe the guide in a succinct
manner.
3 Four suitable managers involved in the formulation of competitive actions
within their respective organisations were identified and recruited to review
and comment on the guide. The criteria used to recruit these managers and a
summary of the those selected is provided in the ‘Research population’ section
below.
4 The guide was discussed with the participating managers and updated
accordingly after every discussion to reflect their particular experiences, as well
as their assessments of its validity and applicability. 10 discussions were held
with the managers, their comments were noted each time and they were used
to produce five versions of the guide in total. The comments and consequent
Page 153

updates to each of the five versions of the guide are contained in appendix 17
to this thesis.
5 The guide was finalised using the comments from the discussions held with
managers. The five versions of the guide that were produced based on the 10
discussions were finalised with ‘version 5’. The last two versions were split into
the guide, which was designed to be used by a broad set of managers on a day-
to-day basis, and a Resources Manual, which was designed to be used by a
smaller set of managers less frequently. Appendix numbers 1 to 7 to this thesis
contains the five versions of the guide and the associated Resource Manuals.

Table 2: Research procedure
Page 154

Summary of sample population

Because the guide compares approaches managers have taken in formulating competitive actions, and in order to ensure its applicability
is as broad as possible, neither the managers who were interviewed nor their organisations were concentrated in any way. Rather, they
were drawn from different industries, territories and different types organisations. They were a different set of managers to those
interviewed in P2 in order for it to be as objective as possible. All the managers interviewed either make or influence decisions that lead to
competitive actions in their organisations. The guide was discussed with the four managers listed in the table below.

No. Position Industry/organisation Age Sex Education/training Home country
1 Founder Marketing services (advertising agency) 49 Male Bachelor in Mechanical Engineering South Africa
& CEO
2 Founder Healthcare services (multi-national company 54 Female BA Philosophy, Politics and South Africa
& CEO that managed healthcare programmes for Economics
large corporations and NGOs)
3 General Hospitality (South African owner-managed 36 Female Bachelor in Management Accounting South Africa
Manager hotel group that own five branded and Diploma in Hospitality
properties) Management from Cornell University
4 CEO Hospitality (Large Middle-Eastern hotel 50 Male Hotel Management Diploma from United Arab
group that operates around 70 different Ecole Les Roches Emirates
properties)

Table 3: summary of P3 interviewees

All the managers interviewed, and listed above, either make or influence decisions that lead to competitive actions. This was an important
point in the selection process, as the managers would have had to be suitably qualified to review the guide and offer suggestions on how
it could be improved, based on their own practical experiences.
Page 155

Competitive action guide development

The initial guide was developed by grouping actions or mechanisms into a number of
broad categories. The initial approach to developing the guide was to treat the stimuli
and environmental factors relevant to the competitive actions as variables in relation
their formulation. The guide was structured around how these variables shape the
action and, therefore, what managers should consider doing based on these variables.
The formulation of competitive actions was also dependent on the internal resources
and the competitive position of the company, brand, product or service in the first
version of the guide. Specifically, the guide was organised according to 21 different
variables in five separate categories. These are listed in Appendix 17.

The first iteration of the guide was circulated to interviewees 1, 2 and 3 and discussions
were subsequently conducted with them. Based on these discussions, the second
iteration departed from the approach of using 21 variables that was employed in the
first iteration as the discussions found this approach to be too cumbersome to use and
too difficult to understand. Instead, a graphical approach that makes use of a processual
flow-chart with different options related to each stage of the process was developed. A
graphic designer was employed to improve the visual appeal and usability of the guide.

The second iteration of the guide was circulated to interviewees 1,2 and 3 but, due to
interviewee 3’s non-availability, meetings could only be arranged with interviewees 1
and 2. Based on their comments, and in order to make the guide more compact, as well
user-friendly, the third iteration was split into two documents. These include the
Competitive Actions guide, comprising 6 pages, of which 3 were A3 sized pages that
open up, and a Resources Manual with 22 pages that describes some of the resources
that can be used to support the competitive actions formulation process covered in the
guide. A five step process identified in P2 was also developed into a process model
abbreviated as ‘SOLAR’, which is an acronym for:

• Stimulus
• Objectives
• Levers
• Actions
• Refinement

The third iteration of the guide was circulated to interviewees 1, 2 and 4. Telephonic
and email discussions were held with interviewee 4 and several meetings and a lot of
time was spent with the interviewee 1 between the third and fourth iterations of the
guide. Interviewee 2 was not available. Interviewees 1 and 4 made several points that
were incorporated into version 4. Several new stimuli were added and some of the
guide’s content was moved to the Resources Manual and vice versa. The objectives were
also arranged into three clusters, including:

• Recover
• Maintain
• Grow

The fourth iteration was only circulated to interviewees 1 and 4 and, after several
discussions with them, a number of changes were made to the guide and the Resources
Manual to update and improve version 4 and create the final iteration, version 5. Most
importantly, several changes were made to the diagrams, the resources key was moved
from the Resources Manual to the guide itself to make it easy to refer to the various
resource categories when using the guide and to create a tighter link between the guide
and the Resources Manual and the icons for each resource category were colour coded
to make them user-friendly.

Research outcomes

The primary desired outcome of the research was a guide that can be applied by
managers to the formulation of a wide range of different competitive actions. Secondary
desired outcomes included an understanding of when and why the themes identified in
P2 emerged in the formulation of competitive actions. After seven interviews and
extensive discussions with the managers that participated in the research and 10
iterations of the guide, as well as the Resources Manual in the more recent iterations,
the outcome of P3 includes:

1. A guide to assist managers in formulating competitive actions that comprises
three A4 size pages and four A3 size pages and uses diagrams and tables to make
its use as visual and intuitive as possible.
2. A Resources Manual that supports the guide by delving into more detail and
offering ideas and recommendations in relation to resources that can be used to
support the competitive action formulation process. These resources include
data, tools and human resources, as well as approaches to analysing
competitors, industries and to identifying and employing benchmarks.

The guide was designed to be quick and easy to understand and to appeal to a broad
range of managers of varying ages, levels and experience and educational backgrounds.
The Resources Manual is more theoretical in its approach and is not intended to appeal
to all managers. Rather, it is designed to offer deeper insight into issues to consider
when formulating competitive actions, as well as providing a set of resources to support
the process, for those managers who require it.

Page 157

Scope for further research

Further research could be carried out into the sensitivity that import substitution or the
level of world-wide competition has on the formulation of competitive actions. Import
levels, or the percentage of the product or service that is imported, could be used as a
proxy for the intensity of world-wide competition and, therefore, could be used to
understand the sensitivity it has on the formulation of competitive actions.

Share instability could be used as a proxy for industry instability and this could be used
to relate the efficacy of different competitive actions to the intensity of rivalry in
different industries. In other words, the degree to which market shares in an industry
are unstable indicates the intensity of rivalry in that industry and by mapping particular
competitive actions to industries of varying levels of rivalry, we may be able to
understand which actions are best suited to specific industries based on the intensity of
rivalry.

The importance of a product or service to its customers may also have a bearing on the
efficacy of different competitive actions and the efficacy of the methods used in
formulating them. Michael Porter (1980) argued that the importance of products to
customers will affect their tendencies to bargain for favourable prices. Therefore, it
could be argued that competitive actions should be formulated using different methods
based on the relative importance of the product or service being marketed to its
customer base.


The guide and the resources manual developed in P3 are designed to be used by
managers to support the formulation of competitive actions. The processual model and
the ideas and recommendations offered are based on the findings of 26 interviews
carried out in P2, as well as the SLR in P1. Therefore, the data the underlies the guide
and the manual is limited and the processual model, the idea and the recommendations
could be expanded on through additional research. Such research could also be used to
further validate the contents of the guide and the resources manual.

Many of the findings of this study and, hence, the ideas and recommendations offered
in the guide and the resources manual are vague because of the type of data gathered
and the breadth and depth of data used. Specifically, all the data gathered was
qualitative and based on a relatively small sample. Therefore, it was impossible to make
definitive suggestions regarding the possible outcome of certain actions. For example,
it was found that smaller companies tend to be more offensive in the competitive
actions they execute and larger companies tend to be more defensive but, based on the
type of research and the sample size, this finding cannot be generalised.
Page 158

References

Abell, D. (1978), “Strategic Windows”, Journal of Marketing, July, p 21-26

Abiodun, A.J. (2008), “Empirical Evidence of Executives’ Perception and Scanning of
Business Environment in Nigeria”, Petroleum - Gas University of Ploiesti Bulletin,
Economic Sciences Series, 1 September 2009, p27-35

Alchian, A.A. and Demsetz, H. (1973), “The property right paradigm”, The Journal of
Economic History, Vol. 33, Issue 1, p 16-27

Bailey, Johnson, Daniels (2000), Validation of a Multi-Dimensional Measure of Strategy
Development Processes”, British Journal of Management, Vol. 11, p151-162

Bain, J.S. (1959), “Industrial Organisation”, Wiley, New York

Bajic, D. and Rickard, T.C. (2009), “The Temporal Dynamics of Strategic Execution in
Cognitive Skill Learning”, Journal of Experimental Psychology, Learning, Memory and
Cognition. January 2009, Vol. 35, Issue 1, pgs 113-121

Baum, J.A.C. and Korn, H.J. (1996), “Competitive Dynamics of Interfirm Rivalry”,
Academy of Management Journal, April 1996, Vol. 39 Issue 2, p255-255

Bigné, J. Enrique; López, Natalia Vila (2002), “Competitive groups in the automobile
industry: a compared supply–demand approach”, Journal of Strategic Marketing, March
2002, Vol. 10 Issue 1, p21-45

Blankson, C. and Kalafatis, S.P. (2004), “The Development and Validation of a Scale
Measuring Consumer/Customer-Derived Generic Typology of Positioning Strategies”,
Journal of Marketing Management, Vol. 20, p 5-43

Blankson, C. and Kalafatis, S.P. (2007), “Positioning strategies of international and
multicultural-oriented service brands”, The Journal of Services Marketing, Vol. 21 Issue
6, p435-450.

Bloodgood, Turnley and Bauerschmidt (2007), “Intra-industry shared cognitions and
organizational competitiveness”, Strategic Change, John Wiley & Sons, Sept-Oct 2007

Bogner, W.C. and Barr, P.S. (2000), “Making Sense in Hypercompetitive Environments:
A Cognitive Explanation for the Persistence of High Velocity Competition”, Organization
Science, Vol. 11, No. 2, March-April 2000

Bougon, M.G.(1992), “Congregate cognitive maps: A unified dynamic theory of
organisation and strategy”, Journal of Management Studies, Vol. 29 No. 3, p369-389
Page 159

Bowman, C.; Daniels, K. (1995), “The Influence of Functional Experience on Perceptions
of Strategic Priorities”, British Journal of Management, September 1995, Vol. 6 Issue 3,
p157

Bowman, C. and Faulkner, D. (1994) “Measuring Product Advantage”, Long Range
Planning, Vol. 27, No. 1, p 110-132

Brown, S.L. and Eisenhardt, K.M. (1998)’ “Competing on the edge: Strategy as structured
chaos”, Harvard Business School Press, 1998, p299-322

Calori, R.; Johnson, G.; Sarnin, P. (1992) “French and British Top Managers'
Understanding of the Structure and the Dynamics of Their Industries: a Cognitive
Analysis and Comparison”, British Journal of Management. Jun92, Vol. 3 Issue 2, p61

Capelo, C. and Ferreira, D.J. (2009), “A feedback learning and mental models perspective
on strategic decision making”, Educational Technology Research and Development, Vol.
57 (5), October 2009, p629-644

Carlsson, C.; Walden, P. (1997), “Cognitive Maps and a Hyperknowledge Support System
in Strategic Management”, Group Decision & Negotiation, January 1997, Vol. 6 Issue 1,
p7-36

Chandler, A.D. (1962), “Strategy and Structure: Chapters in the History of the Industrial
enterprise”, MIT Press, 1962

Chen, S-L. and Liang, H-A. (2014), “Cause mapping of simple and complex marketing
strategies”, Journal of Business Research, Vol. 67, p2867–2876

Cheng, C-L and Chang, H-C (2010), “Cognitive complexity implications for research on
sustainable competitive advantage”, Journal of Business Research, vol. 63, p 67-70

Coburn, Mathias M.; Greenwood, Daniel J.; Matteo, Martha R. (2002), “Supporting
strategy with competitive analysis”, Research Technology Management. Sep/Oct 2002,
Vol. 45 Issue 5, p43-47

Collis, D.J. and Montgomery, C. (2008) “Competing on Resources”, Harvard Business
Review, July-August 2008, p 140-150

Collis, D.J. and Rukstad, M.G. (2008), “Can you say what your strategy is?”, Harvard
Business Review, April 2008, p 82-90
Constantineau, L.A. (1995), “Making competitive intelligence actionable”, Marketing
Research, Vol. 7 No. 1, p546-47

Page 160

Cool, K. and Schendel, D. (1988), “Performance Differences among Strategic Group

Members”, Strategic Management Journal, May/June 1988, Vol. 9 Issue 3, p207-223

Cunningham M.T. and Culligan G.L., “Competition and Competitive Groupings: An
Exploratory Study in Information Technology Markets”, Journal of Marketing
Management, Vol. 4, No. 2, p148-174

Daniels (1998), “Towards Integrating Emotions into Strategic Management Research -
Trait Affect and Perceptions of the Strategic Environment”, British Joumal of
Management, Vol. 9, p163-168

Daniels, K.; de Chernatony, L.; Johnson, G. (1995) “Validating A Method for Mapping
Managers' Mental Models of Competitive Industry Structures”, Human
Relations, September 1995, Vol. 48 Issue 9, p975-991

Daniels, Johnson, de Chernatony (2002), “Task and Institutional Influences on Managers'
Mental Models of Competition”, Organization Studies, Vol. 23 Issue 1, 2002 p 31-62

D’Aveni, R.A. (1995), “Coping with hypercompetition utilizing the new 7S’s framework”,
Academy of Management Executive, Vol. 9, No. 3, p 45-57

D’Aveni, R. (2007), “Mapping Your Competitive Position”, Harvard Business Review,
November 2007, p 110-120

D’Aveni, R.A. and Smith, K.G. (2010), “The Age of Temporary Advantage”, Strategic
Management Journal, Vol. 31, p 1371-1385

Day, G.S. and Nedungadi, P. (1994), “Managerial representations of competitive
advantage”, Journal of Marketing, April 1994, Vol. 58 Issue 2, p31-45

Di Benedetto, C.A. & Song, M. (2008), “Managerial perceptions of global pioneering
advantage: Theoretical framework and empirical evidence in the U.S. and Korea”,
Industrial Marketing Management, Vol. 37, Issue 7, October 2008, p863-872

Dearborn; de Witt, C. and Simon, H.A. (1958) “Selective Perception: A Note on the
Departmental Indentification of Executives”, Sociometry, Vol. 21, p140-144

Debreu, G. (1960), “Individual Choice Behaviour”, American Economic Review, March, p
186-188
De Chernatony, L.; Daniels, K.; Johnson, G. (1993), “A Cognitive Perspective on
Managers' Perceptions of Competition”, Journal of Marketing Management, October
1993, Vol. 9 Issue 4, p373-381

Page 161

Deephouse, D.L. (1999), “To be different or to be the same? It’s a question (and theory)
of strategic balance”, Strategic Management Journal, February 1999, Vol. 20 Issue 2,
p147-167

Demsetz, H. (1973), “Industry structure, market rivalry and public policy”, Journal of Law
and Economics, 16, p1-9

Denyer, D., Tranfield, D. and Van Aken, J.E. (2008), “Developing design propositions
through research synthesis”, Organization Studies, 2008, Vol. 29, Issue 3, p393-413

Dohyeon, K. (2013), “Cognitive communities and legitimacy based groups: the role of
external categorisation on cognitive similarity”, Academy of Strategic Management
Journal, 2013, Vol. 12 Issue 2, p1-29

Donnellon, A.; Gray, B. and Bougon, M.G. (1988), “Communication, meaning and
organised action”, Administrative Science Quarterly, Vol. 31, p43-55

Dutton, J.E. (1993), “Interpretations on automatic: a different view of strategic issue
diagnosis”, Journal of Management Studies. May 1993, Vol. 30 Issue 3, p339-357

Eden, Ackermann, & Cropper (1992), “The Analysis of Cause Maps”, Journal of
Management Studies, May 1992, Vol. 29 Issue 3, p309-324

Felin, T.; Foss, N.J.; Heimeriks, K.H.; Madsen, T.L. (2012), “Microfoundations of Routines
and Capabilities: Individuals, Porcesses, and Structures”, Journal of Management
Studies, Dec 2012, Vol. 49, Issue 8 p1351-1374

Ferreira, J.; Estevão, C. and Braga, V. (2010), “Strategic groups in hotel industry:
Empirical evidences”, China-USA Business Review, Vol. 9 No. 9, p1-16

Ferrier, W.J. (2001), “Navigating the competitive landscape: the drivers and
consequences of competitive aggressiveness”, Academy of Management Journal, Vol.
44, No. 4, p 858-877

Feurer, R.; Chahrbaghi, K. (1995), “Strategy formulation: a learning methodology”,
Benchmarking for Quality Management & Technology, Vol 2.1. 1995 pg 38

Fiol, C.M. (1995), “Corporate Communications: Comparing Executives’ Private and
Public Statements”, Academy of Management Journal, April 1995, Vol. 38 Issue 2, p522-
536
Fiske, S.T. (1989), “Examining the Role of Intent: Towards Understanding Its Role in
Stereotyping and Prejudice”, in J.S. Uleman and J.A. Bargh (Eds.). Unintended Thought,
New York: The Guildford Press, p253-283

Page 162

Fiske, S.T. and Taylor, S.E. (1991), “Social cognition”, McGraw-Hill series in social
psychology, 2nd Edition 1991

Gavetti, Giovanni; Levinthal, Daniel A.; Rivkin, Jan (2005), “Strategy making in novel and
complex worlds: the power of analogy”, Strategic Management Journal, August 2005,
Vol. 26 Issue 8, p691-712

Gimenez, F.A.P.; Pelisson, C.; Kruger, E.G.S.; Hayashi Jr., P. (2000), “Small firms’ owner-
managers construction of competition”, Journal of Enterprising Culture, December
2000, Vol. 8 Issue 4, p361

Ginsberg, A. (1994), “Minding the competition: from mapping to mastery”, Strategic
Management Journal, Winter 1994, Vol. 15, p153-174

González, J.M.H.; Calderón, M.Á.; González, J.L.G. (2012), “The alignment of managers'
mental models with the balanced scorecard strategy map”, Total Quality Management
& Business Excellence, June 2012 Vol. 23 Issue 5/6, p 613-623

Giaglis, G.M.; Fouskas, K.G. (2011), “The impact of managerial perceptions on
competitive response variety”, Management Decision, Vol. 49 No. 8, 2011, p1257-1275

Gresov, C. and Drazin, R. (1997), “Equifinality: Functional Equivalence in Organization
Design”, Academy of Management Review, April 1997, Vol. 22 Issue 2, p403-428

Gripsrud, G. and Grønhaug, K. (1985) “Structure and Strategy in grocery retailing: a
sociometric approach”, Journal of Industrial Economics, March 1985, Vol. 33 Issue 3,
p339-348

Hax, A.C. (1990), “Redefining the Concept of Strategy and the Strategy Formation
Process”, Planning Review, May/June 1990, Vol. 18 Issue 3, p34-40

Hedberg, B. and Jönsson, S. (1977), “Strategy formulation as a discontinuous process”,
International Studies of Management & Organization, Summer 1977, Vol. 7 Issue 2, p88-
109

Hedberg, B.L.T.; Nystrom, P.C.; Starbuck, W.H. (1976), “Camping on Seesaws:
Prescriptions for a Self-Designing Organization”, Administrative Science
Quarterly, March 1976, Vol. 21 Issue 1, p41-65
Hodgkinson, G.P., Johnson, G. (1994), “Exploiting the mental models of competitive
strategists: the case for a processual approach”, Journal of Management Studies, July
1994, Vol. 31 Issue 4, p525-551

Hodgkinson, G.P. (1997), “Cognitive inertia in a turbulent market: the case of UK
residential estate agents”, Journal of Management Studies, November 1997, Vol. 34
Issue 6, p921-945
Page 163

Hodgkinson, G.P. (2002), “Comparing Managers' Mental Models of Competition: Why
Self-report Measures of Belief Similarity Won't Do”, Organization Studies, 2002 Vol. 23
Issue 1, p63-72

Hofstede, G. (1980) “Culture and Organisations”, International Studies of Management
& Organization. Winter 1980/81, Vol. 10 Issue 4, p15-41

Hopkins, W.E.; Mallette, P. and Hopkins, S.A. (2013), “Proposed factors influencing
strategic inertia/strategic renewal in organisations”, Academy of Strategic Management
Journal, Volume 12, Number 2, p77-94

Houston, M.B.; Walker, B.A; Hutt, M.D.; Reingen, P.H. (2001), “Cross-unit competition
for a market charter: The enduring influence of structure”, Journal of Marketing, April
2001; Vol. 65 Issue 2, p19-34

Huff, A.S. (1990) “Mapping Strategic Thought”, John Wiley, 1990

Jacobson, R. (1992), “The Austrian School of Strategy”, Academy of Management
Review, Vol. 17, No. 4, p 782-807

Jaruzelski, B and Dehoff, K (2010), “How the Top Innovators Keep Winning”, Strategy +
Business magazine, issue 61, Winter

Jucevičienė, P.; Mozūriūnienė, V., (2009), “The Relationship between organisations’
knowing and organisations’ knowledge: the boundaries of recognition and
formalisation, Economics & Management., p1129-1138

Kaplan, R.S. and Norton, D.P. (1992), “The Balanced Scorecard--Measures That Drive
Performance”, Harvard Business Review. Jan/Feb1992, Vol. 70 Issue 1, p71-79

Kelly, M.L. (1955), “A study of the industrial inspection by the method of paired
comparisons”, Psychological Monographs: General and Applied, Vol 69 (9), 1955. p1-16

Kim, W.C. and Mauborgne, R. (1999), “Creating New Market Space”, Harvard Business
Review, January-February, p 83-93
King, A.W.; Fowler, S.W.; Zeithaml, C.P. (2001) “Managing organizational competencies
for competitive advantage: The middle-management edge”, Academy of Management
Executive. May2001, Vol. 15 Issue 2, p95-106

King, A.W.; Zeithaml, C.P. (2001) “Competencies and firm performance: Examining the
casual ambiguity paradox”, Strategic Management Journal. January 2001, Vol. 22 Issue
1, p75

Page 164

Kirzner, I.M. (1973), “Competition and entrepreneurship”, Chicago: University of

Chicago Press

Krieger, A.M. and Green, P.E. (2001), “A decision support model for selecting
product/service benefit positionings”, European Journal of Operational Research, Vol.
142, p187-202

Krzyzanowska, M.; Moszoro, M. (2012), “Managerial perception of competition:
evidence from Poland”, International Journal of Management Cases, Vol. 14 Issue 4,
p252-260

Krzyzanowska, M.; Tkaczyk, J. (2012), “Competitive landscape of the educational
market: A managerial perspective”, International Journal of Management Cases, 2012,
Vol. 14 Issue 4, p238-251

Lamberg, J-A. and Tikkanen, H. (2006), “Changing sources of competitive advantage:
cognition and path dependence in Finnish retail industry 1945-1995”, Industrial &
Corporate Change, October 2006, Vol. 15 Issue 5, p811-846

Leask, G. (2005), “Use of strategy frameworks to analyse competitive dynamics in the
pharmaceutical industry”, Journal of Medical Marketing, July 2005, Vol. 5.3, p209-218

Levitt, T. (1960), “Marketing myopia”, Harvard Business Review, July-August, p 45-56

Lim, L.K.S., Pathak, A. (2013), “Managers as paranoid strategists: a study of the nature,
causes and consequences of competitive paranoia”, International Journal of Business &
Management, Vol. 8 Issue 24, p84-94

Lyndon (1997(, “Understanding competitor’s strategies: the practitioners academic
gap”, Marketing Intelligence & Planning, Vol. 115, Issue 3

McCabe, D.L.; Dutton, J.E. (1993) “Making Sense of the Environment: The Role of
Perceived Effectiveness”, Human Relations, May 1993, Vol. 46 Issue 5, p 623-644

McNamara, G.M.; Luce, R.A.; Tompson, G.H. (2002) “Examining the effect of complexity
in strategic group knowledge structures on firm performance”, Strategic
Management Journal, February 2002, Vol. 23 Issue 2, p153

Mair, S.C. (2005), “Sustainable development, sustainable profit”, European Business
Forum, Winter 2005, Issue 20, p49-53

Manhas, P.S. (2010), “Strategic Brand Positioning Analysis through Comparison of
Cognitive and Conative Perceptions”, Journal of Economics, Finance & Administrative
Science, December, Vol. 15 Issue 29, p 15-33

Page 165

Mansfield, E., Schwartz, M. and Wagner, S. (1981), Imitation costs and patents: an
empirical study”, The Economic Journal, December, p 907-918

Mashina, Y., Pollock, T.G., Porac, J.F. (2004), “Are more resources always better for
growth? Resource stickiness in market and product expansion”, Strategic Management
Journal, Vol. 25, p 1179-1197

McGrath, R.G. and MacMillan, I.C. (1995), “Defining and developing competence: A
strategic process paradigm” Strategic Management Journal. May 1995, Vol. 16 Issue 4,
p251-275

Meredith, J. (1993), “Theory Building through Conceptual Methods”, International
Journal of Operations and Production Management, Vol. 13 (5), p 3-11

Mintzberg, H. and Lampel, J. (1999), “Reflecting on the Strategy Process”, Sloan
Management Review, Spring 1999

Mintzberg, H. and Waters, J.A. (1985), “Of Strategies, Deliberate and Emergent”
Strategic Management Journal, Vol. 6 p257-272

Mueller, D.C. (1986), “Profits in the Long Run”, Cambridge University Press

Narayanan, V.K.; Zane, L.J.; Kemmerer, B. (2011), “The Cognitive Perspective in Strategy:
An Integrative Review”, Journal of Management, 37.1 (Jan 2011), P305-351

Otenfeldt; Moore (1981), “Competitor analysis – A prize-centred approach”,
Management Review, May 1981, p23-37

Panagiotou, George (2006), “The impact of managerial cognitions on the structure -
conduct-performance (SCP) paradigm: A strategic group perspective”,
Management Decision., Vol. 44 Issue 3, p423-441

Paton, D. and Wilson, F. (2001), “Managerial perceptions of competition in knitwear
producers”, Journal of Managerial Psychology, Vol. 16, Issue 4 (2001), p289-300
Penrose, E. (1960), “The Growth of the Firm”, Business History Review, Vol. 34, 1960,
pg. 1

Peters, T.J. and Waterman, R.H. Jr. (1982), “In search of excellence”, Harper & Row, 1982

Petrisor, I. and Strain, N.A. (2013), “Approaches on the competitive intelligence”, The
USV Annals of Economic and Public Administration, Vol. 13 Issue 1 (17), p100-109

Peyrota, M.; Childsb, N.; Van Dorena, D. and Allena, K. (2002), “An empirically based
model of competitor intelligence use”, Journal of Business Research, Vol. 55 (2002),
p747 – 758
Page 166

Porac, J.F. and Thomas, H. (1990), “Taxonomic Mental Models in Competitor Definition”,
Academy of Management Review, 1990, Vol. 15, No. 2, p224-240

Porac, J.F., Thomas, H. (1994), “Cognitive Categorization and Subjective Rivalry Among
Retailers in a Small City”, Journal of Applied Psychology, Vol. 79, No.1, p 54-66, 1994

Porac, J.F., Thomas, H. and Baden-Fuller, C. (1989), “Competitive Groups as Cognitive
Communities: The Case of Scottish Knitwear Manufacturers Revisited”, Journal of
Management Studies. May2011, Vol. 48 Issue 3, p646-664.

Porac, Joseph F.; Thomas, H.; Wilson, F.; Paton, D.; Kanfer, A. (1995), “Rivalry and the
Industry Model of Scottish Knitwear Producers”, Administrative Science Quarterly. June
195, Vol. 40 Issue 2, p203-227

Porter, M.E. (1979), “The structure within industries and companies’ performance”,
Review of Economics and Statistics, Vol. 61, Issue 2, p 214-227

Porter, M.E. (1980), “How competitive forces shape strategy”, The McKinsey Quarterly,
Spring, p 34-50

Porter, M.E. (1980), “Industry Structure and Competitive Strategy: Keys to Profitability”,
Financial Analysts Journal, July-August, p 30-41

Porter, M.E. (1980), “Competitive Strategy: Techniques for Analysing Industries and
Competitors”, The Free Press, 1980

Porter, M.E. (1981), “The Contributions of Industrial Organisation to Strategic
Management”, Academy of Management Review, Vol. 6., No. 4, p 609-620
Prahalad, C. K.; Bettis, R.A., “The Dominant Logic: A New Linkage Between Diversity and
Performance”, Strategic Management Journal. Nov/Dec 1986, Vol. 7, Issue 6, p485-501

Prahalad, C.K.; Hamel, G. (1990), “The Core Competence of the organisation”, Harvard
Business Review, May-June 1990, p79-91

Qiu, T. (2008), “Scanning for competitive intelligence - a managerial perspective”,
European Journal of Marketing, Vol. 42 7/8, p 814-835

Ramirez, R.; Ostermanb, R. & Gronquist, D. (2013), “Scenarios and early warnings as
dynamic capabilities to frame managerial attention”, Technological Forecasting & Social
Change, Vol. 80, 2013, p825–838

Reger, R.K. and Huff, A.S. (1993) “Strategic Groups: A Cognitive Perspective”, Strategic
Management Journal, 1993, Vol. 14, p103-124

Page 167

Reger, R.K. and Palmer, T.B. (1996), “Managerial Categorization of Competitors: Using
Old Maps to Navigate New Environments”, Organization Science, Jan/Feb, Vol. 7 Issue
1, p22-39

Reihlen, M. and Ringberg, T. (2013), “Uncertainty, pluralism, and the knowledge-based
theory of the firm - from J.C. Spender's contribution to a socio-cognitive approach”,
European Management Journal, Vol. 31, p706-716

Rigby, D. (2001), “Management Tools and Techniques”, California Management Review,
Vol. 43, No. 2, Winter 2001

Rindova, V., Ferrier W.J. and Wiltbank, R. (2010), “Value from Gestalt: How sequences
from competitive actions create advantage for firms in nascent markets”, Strategic
Management Journal, Vol. 31, p 1474–1497

Rosa, J.A., Porac, J.F. (2002), “Categorization bases and their influences on product
category knowledge structures”, Psychology & Marketing, June 2002, Vol. 19 Issue 6,
p503-531

Sanchez and Heene (1997), “Reinventing Strategic Management - New theory and
practice for competence based competition”, European Management Journal Vol. 15,
No. 3, pp. 303-331

Schneider, S.C. and De Meyer, A. (1991), “Interpreting and responding to strategic
issues: the impact of national culture”, Strategic Management Journal, May 1991, Vol.
12 Issue 4, p307-320

Schoemaker, P.J.H. and Day, G.S. (2009), “How to Make Sense of Weak Signals”, MIT
Sloan Management Review, Vol. 50 No.3, p80-90

Schumpeter, J.A. (1934), “The theory of economic development”, Cambridge, MA,
Harvard University Press

Schumpeter, J.A. (1942), “Capitalism, socialism and democracy”, New York: Harpers

Schumpeter, J.A. (1942), “The Theory of Competitive Price”, The American Economic
Review, December, p 844-847

Schwenk, C.R. (1988), “The Cognitive Perspective on Strategic Decision Making”, The
Journal of Management Studies, Vol. 25 Issue 1, January 1988 p41-55

Shang, H.; Huang, P. and Guo, Y. (2010), “Managerial cognition: the sources of
sustainable competitive advantage in hypercompetition: A case study”, Nankai Business
Review International, Vol. 1 No. 4, 2010, pp. 444-459

Page 168

Shanley, M. (1993), “It matters what managers think: A cognitive approach to identifying
strategic industry groups”, Academy of Management Executive, November 1993, Vol. 7
Issue 4, p82-83

Shayne, G.M. and Wood, R. (2001), “Mental models, decision rules, and performance
heterogeneity”, Strategic Management Journal, June 2011, Vol. 32 Issue 6, p569-594

Sirmon, D.G., Hitt, M.A., Ireland, R.D. (2007), “Managing firm resources in dynamic
environments to create value: looking inside the black box”, Academy of Management
review, Vol. 32, Issue 1, p273-292

Smircich, L. & Stubbart, C. (1985), “Strategic Management in an Enacted World”,
Academy of Management Review, Vol. 10 No. 4, p724-736

Sogn-Grundvag, G., Gronhaug, K., Lorentzen, L. T., Bendiksen, B. I. and Gilmore, A.
(2007), “Responding to eroding competitive advantage: observations from the
Norwegian seafood industry”, Marketing Review, Fall 2007, Vol. 7 Issue 3, p235-246

Spender, J.C. (1989), “Industry recipes: an enquiry into the nature and sources of
managerial judgment”, Oxford: Basil Blackwell, 1989, p240-264

Stross, R.E. (1996), “Microsoft’s Big Advantage – Hiring only the supersmart”, Fortune,
25 November 1996, Vol. 134 Issue 10, p159-162

Stubbard, C.I. (1989), “Managerial Cognition: a missing link in strategic management
research”, Journal of Management Studies, Vol. 26 Issue 4, July 1998, p325-347
Sull, D.N. (2007), “Closing the Gap Between Strategy and Execution”, MIT Sloan
Management Review, Vol. 48.4 (Summer 2007), p30-38

Tallman, S., Jenkins, M., Henry, N., Pinch, S. (2004). “Knowledge, clusters and
competitive advantage”, Academy of Management Review, Vol. 29 Issue 2, April 2004,
p258-271

Tractinsky, N. and Lowengart, O. (2003), “E-retailers’ competitive intensity: A
positioning mapping analysis”, Journal of Targeting, Measurement and Analysis for
Marketing, Vol. 12, 2, p114-136

Walsh, J.P. (1988), “Selectivity and Selective Perception - An Investigation of Managers'
Belief Structures and Information Processing”, Academy of Management Journal, 1988,
Vol. 31, No. 4, P 873-896

Walsh, J.P. (1995), “Managerial and organisational Cognition: Notes from a trip down
memory lane”, Organization Science, May-June 1995, Vol. 6, p280-321

Page 169

Walsham, G. (1993), “Interpreting information systems in organisations”, Chichester:

John Wiley, 01/01/1993

Weick, K.E. (1995), “Sense making in organisations”, Thousand Oaks; Sage, 1995

Wiggins, R., Ruefli, T. (2005), “Schumpeter’s Ghost: Is hypercompetition making the best
of times shorter?”, Strategic Management Journal, Vol. 26, p 887–911

Wiggins, R., Ruefli, T. (2005), “Schumpeter’s Ghost: Is hypercompetition making the best
of times shorter?”, Strategic Management Journal, Vol. 26, p 887–911

Wissema, J. G.; van der Pol, H. W.; Messer, H. M. (1980), “Strategic Management
Archetypes”, Strategic Management Journal. January-March 1980, Vol. 1 Issue 1, p37-
47

Whitley, R. (1987), “Taking Firms Seriously as Economic Actors: Towards a Sociology of
Firm Behaviour”, “Organization Studies”, March 1987, Vol. 8 Issue 2, p125-147

Wooldridge, B. and Floyd, S.W. (1989), ‘Research notes and communications strategic
process effects on consensus’, Strategic Management Journal, May/Jun89, Vol. 10 Issue
3, p295-302

Zhao, Y.L. & Parry, M. (2012), “Mental Models and Successful First-mover Entry
Decisions: Empirical Evidence from Chinese Entrepreneurs”, Journal of Product
Innovation Management, July 2012, Vol. 29 Issue 4, p590-607

Page 170

Appendix 1: Competitive actions guide & resources

manual version 1
Page 171

Guide to formulating competitive actions

Introduction to the guide

In the actions that were analysed as part of this research, a specific process was
generally followed in their formulation. This process includes the following steps:

1. Stimuli or a stimulus triggers the action
2. Very soon after being confronted with stimuli or the stimulus, managers’
start to envision desired outcomes or objectives to the competitive actions
they are about to formulate and execute. In other words, they create
mental pictures of what they would like the end state of a competitive
action to be. This usually acts as a precursor to the formulation of the
action, or the actual mechanism that will produce the outcome itself.
3. Managers set about researching and developing the action they will take to
produce the outcome they seek to achieve. This varies from very informal
processes and cognitions to complex processes supported by the use of
various tools and techniques. In the interviews carried out as part of the
research, there appeared to be an inverse correlation between the tacit
knowledge managers’ use and how methodical they are in formulating
competitive actions and this was usually linked to their level of experience,
as well as the size of their organisations. It was found that the more
experienced the manager was, the more he or she tended to rely on tacit
knowledge and the younger they were the more they tended to use tools to
support their endeavours to formulate suitable actions. Smaller
organisations also tended to be less formal in their formulation of
competitive actions than larger ones.
4. The corollary of researching and developing a respond to the stimuli or
stimulus would be a specific action that would be executed with the aim of
achieving the objective or desired outcome.
5. Once the action had been executed managers would, firstly, compare the
outcome, or outcomes, to their objectives or desired outcomes, and,
secondly, feed it back into the competitive action cycle, either as a stimulus
to a new competitive action or as part of their frame of reference in
formulating parallel or future actions.

The guide uses the abovementioned process and the findings of the research to offer
insights and recommendations to managers at every step in formulating a competitive
action. The figure titled ‘General competitive action processes’ provides a summary of
the processes followed by the managers interviewed as part of the research. The
actions have been distilled into a three-step process, comprising ‘stimuli’, ‘objective
setting’ and ‘the mechanism’. Each of these have been clustered in accordance with
the findings of the research and the numbers below the labels in each box or circle
indicate the number of actions that were included in the particular cluster. The process
Page 1

of formulating the mechanism is described in this guide as the ‘Intervention’ and

contingency variable have been used to offer recommendations in relation to it. The
‘Intervention’ sits between the manager envisioning desired outcomes and the
mechanism used to achieve them. In other words, the intervention represents the
managers cognitions and the tools and techniques he or she uses to formulate relevant
actions.

The observations and the recommendations offered in this guide are predicted on the
analysis of 26 competitive actions related to interviews that were carried out and are
supported by the findings of a systematic literature review that was undertaken of the
relevant available literature.

In the context of this research, ‘Competitive actions’ are actions that managers take to
compete more effectively and, ultimately, to improve their companies’ profitability.
They are limited to actions that are externally oriented and include mechanisms such
as communicating marketing messages to consumers, re-pricing or re-packaging
product or service offerings, developing new products or services, acquiring new
products or services through corporate actions and bundling products and services.
They exclude actions that are internally oriented and designed to streamline
operations and reduce costs.

The intervention is essentially the formulation of the mechanism and, as the focus of
this guide is the formulation of competitive actions, the ‘intervention’ is its locus. The
principles of contingency theory, which is a theory based on the use of quantitative
data, has been used to explore the different options available to managers based on
21 different contingency variables in five separate categories, including:

Stimuli

How managers respond to different stimuli have been described and
recommendations based on different stimuli have been provided in this section. The
section has been clustered around eight different categories of stimuli, including:

1. Consumer misperceptions
2. Threats from new market entrants
3. Changes in market conditions, including regulatory, economic or consumer
behaviour changes
4. Shareholder pressure to improve performance
5. The emergence of new technologies
6. Poor sales performance
7. Customer requests
8. Top management pressure to diversify businesses

Page 2

Objectives

The objectives that managers set themselves as a result of their stimuli and the
context under which they operate are listed and discussed. These have been clustered
into the following four groups:

1. Increase share of existing market
2. Maintain market position and profit levels
3. Expand business through new unit, product or service
4. Generate or increase sales in a new market


• Industry maturity
• Degree of turbulence in the industry
• Industry fragmentation

Company-level variables

• Company size relative to competitors
• Company profitability relative to competitors

Manager-level variables

• Manager’s age
• Level of formal training of manager
• Manager’s location relative to home market
• Broadness of functional background of manager
Page 3

Stimuli

Competitive Consumer Threat Change in Shareholder New Poor sales Customer Top
action mis- from new market pressure to technology performance request management
perception market conditions improve (3) (6) (1) pressure to
stimuli
(3) entrant (5) performance diversify

(1) (6) business (1)

Competitive Maintain
Increase share Expand Generate or
action of existing market
business increase sales
desired market position and through new in a new
outcomes (15) profit levels unit, product market (4)
(2) or service (5)

Communication Updating, re-

Competitive Acquisition of a
to change packaging, Development or Discontinuation Establish
complimentary
action consumer extending or re- launch of a new of a product or
product or
presence in a
mechanisms perception or pricing an product (7) service (2) new market (2)
service (2)
create existing product

awareness (4) (9)

Figure 2: Project 2 competitive action processes
Page 4

This part of the guide covers the factors that are antecedent to the action and that
cannot be changed, including the stimuli. The stimuli are the factors that trigger the
competitive action and they’ve been clustered into the following eight categories
covered below. The stimuli or the stimulus can be regarded as the initial step in the
process of formulating competitive actions.

Consumer misperception

‘Consumer misperception’ relates to the market perceiving the attributes of a
company’s products or services, or their prices to be different to what they actually
are. Consumer misperceptions can also be associated with a myriad of brand
attributes, such as the values associated with the brand.

In the actions analysed as part of the research, the stimuli emanated from feedback
received form customers. This feedback could be received through interactions that
salesmen have with customers, public surveys, focus groups, interactions that call
centre agents have with customers that are logged through a CRM1 system or any
other relevant source. This does imply that the company must have regular and
substantial interactions with their customers in order to be aware of their
misperceptions in relation to the company’s products, services or its brand values.

This particular type of stimulus is not peculiar to any particular environment and can
apply to all companies, regardless of size, profitability, the maturity of the industry
they operate in, the degree of turbulence in the industry or any other factor. In the
sample set of competitive actions analysed, this stimulus always led managers to strive
to increase their share of an existing market and was the trigger to interventions that
gave rise to a number of mechanisms, as outlined in the figure overleaf.

Tips & implications for managers

1. To be aware of possible customer misperceptions about your products, services
or your brand, collect data regarding customer perceptions using client facing
staff, public surveys, focus groups, interactions that call centre agents have
with customers that are logged through a CRM system or any other relevant
source.
2. To address customer misperceptions be prepared to use multiple mechanisms,
as a single mechanism is unlikely to change a misperception.

1 Customer Relationship Management
Page 5

Communication received directly from customers

indicating that there is a general misperception
about one or more of a product, service or brands
attributes or price

Management intervention

Mechanism Mechanism Mechanism Mechanism
Change in general market perception regarding the

formerly misperceived product, service or brand
attribute or price

Figure 1: Adjustment of a consumer misperception

In every instance, the consumer misperception stimuli led the manager to set the
objective of increasing his or her company’s share of an existing market.

Threat from new market entrant

In the 26 competitive actions analysed in this research, only one was triggered by a
threat from a new market entrant. As would be expected, the company was firmly
entrenched in the industry and part of a well-defined strategic group2. The industry
was, however, still experiencing significant growth and was in a relatively turbulent
state, which presented the new entrant with an opportunity to enter the fray.
Specifically, as the industry and, by implication, the products being produced by its
participants, were still evolving, the new and much smaller competitor was able to fill
a niche by offering new product functionality.

2 A ‘strategic group’ is a group of direct competitors that typically procure raw materials form the same
suppliers, hire from the same talent pools and target the same customers
Page 6

The incumbent’s response was to quickly develop the new functionality being offered
by the new entrant in partnership with pilot customers. They then proceeded to roll it
out to as many existing customers, as rapidly as possible in a defensive action to clip
the new entrant’s wings. Based on the Project 2 analysis, the incumbents desired
outcome relative to this stimulus was to maintain its current market position and level
of profitability.


1. For an incumbent industry participant, a response to this stimulus could be to
replicate the product or service in its entirety, or its new functionality or
pricing, in order to stave off new competition.
2. For a new market entrant, an industry that is growing and is relatively
turbulent, could present great opportunity. Given these dynamics, managers
should look for areas that are not currently being served, including functional
gaps, price points and brand attributes. Using a tool such as Kim and
Mauborgne’s ‘new value curve’ approach (1999) or Bowman and Faulkner’s
‘Customer Matrix’ (1994) to map the exiting market offerings’ price points and
product attributes and identify gaps that exist would be useful. These tools are
discussed in more detail later in this guide in the ‘Poor sales performance’
section.
3. Where significant factors to distinguish the incumbent from the new entrant
exist, an approach could be to consider the incumbent’s strengths and the
barriers to competing using a tool such as the ‘5-Forces’ model published in
Porter’s article ‘Industry Structure and Competitive Strategy: Keys to
Profitability’ (1980).

Change in market conditions

A ‘Change in market conditions’ encompasses changes in regulations, economic
conditions or consumer behaviour and can give rise to new opportunities or threaten a
company’s existing business model, or the business in its entirety. Specific to the
research undertaken, the stimuli included a change in interest rates, regulators
introducing new laws, the collapse of a financial market, a changes in the way people
consume media and changes in consumer tastes in relation to FMCG3 products. In
response to this stimulus, the managers interviewed elected to either try to:

• Maintain their market position and their profit levels
• Increase their share of an existing market
• Expand business through the introduction of a new unit or a new product or
service offering

3 Fast Moving Consumer Goods
Page 7

The objectives of the competitive actions envisaged by these managers were largely
dependent on whether they were responding to threats or opportunities. As would be
expected, threats were met with simply wanting to maintain their current market
positions, profit levels and, in one case, wanting to provide the best possibly return to
shareholders even if it meant repositioning or discontinuing the business. On the other
hand, managers responded to opportunities by trying to increase their share of an
existing market or, where there was opportunity for it, launching new products,
services or new business units.


1. When confronted with a change in market conditions, which could be a change
in consumer behaviour, a change in regulations or a change in economic
conditions, the first step should be to classify what the change means to the
business – is it an opportunity or a threat. Once managers have classified the
change as either an opportunity or a threat. This may sound obvious, but
managers often to see the opportunity in a change in market conditions. Once
the manager is clear about what the change means, or could mean, to the
business, they’ll be in a good position to think about what they want to achieve
as an outcome or outcomes to the competitive action. Should the change
threaten the business, maintaining the businesses existing market position and
profitability would be desirable outcomes, Should the manager construe the
change as presenting an opportunity or opportunities, increasing market share
within an existing market or expanding the business through the introduction
of a new product would be a good outcome. Introducing a new product, service
or business unit, either in an existing market or in a parallel market, would be
desirable outcomes.
2. Once an objective or objectives to the competitive action has been established,
there are a number of tools that could be used to support the manager’s
intervention to produce a mechanism. These include the ‘5-Forces’ model
published in Porter’s article ‘Industry Structure and Competitive Strategy: Keys
to Profitability’ (1980). Such tools should be used to better understand the
change and the effect it has on the industry and the company’s position
specifically.

Shareholder pressure to improve performance

As could be expected, the competitive actions that emanated from shareholder
pressure to improve performance in our research were all associated with the
objectives of either increasing market share, increasing sales or expanding the
business and, ultimately, becoming more profitable. Pressure is exerted on managers
by shareholders across emerging, growth and mature markets to improve their
performance and companies in emerging industries are often managed by
entrepreneurial owners with high growth objectives and expectations.
Page 8

All the competitive actions analysed that were triggered by pressure from
shareholders to improve performance were offensive, as opposed to defensive, insofar
as they were formulated with the intention of gaining market share from competitors,
rather than being formulated to defend an existing market position. The actions
included introducing new offerings to an existing market or penetrating new markets
and, in every instance, a high degree of interaction with customers and prospective
customers was undertaken to inform the formulation of the competitive action. A
number of different tools were used, including:

• The competitive compass, a tool that used the Resource Based View (Penrose,
1959) to assist managers in identifying the market position best suited to their
respective organisations
• Market segmentation
• Porter’s five forces (Porter, 1980)
• Customer surveys
• Research carried out by marketing agencies

The Competitive Compass and market segmentation are particularly well suited to
crowded industries but would be less relevant in nascent or growth industries.

Shareholder pressure to improve
performance

Expand business
Generate or increase
Increase share of through a new
sales in a new
existing market product/service or
market/s
new business units/s

Figure 2: Outcomes envisaging and the mechanisms that were applied

The figure above depicts the objectives set by managers interviewed when
experiencing pressure from their shareholders to improve performance.

Page 9

Tips and implications for managers

1. When faced with pressure from shareholders to increase performance,
understanding your market is key and, therefore, collecting data about market
needs, especially in relation to the products and services that customers and
prospective customers desire, their possible price points and the attributes that
are important should be a priority. This can be achieved through the
interactions sales people have with customers, surveys, focus groups, and the
use of agencies to carry out market research, as well as through ethnographic
research., which can be very powerful. Ethnography is the study of people in
their own environment through the use of methods such as participant
observation and face-to-face interviewing. It is also important to collect and
use data about competitors’ product or service attributes and prices to inform
the formulation of appropriate actions.
2. Consider segmenting your market in order to understand the relative
performances of the different segments and them you could focus on in order
to increase revenue or profitability.
3. Tools such as the Resource Based View (Penrose, 1960), the 7S’s (Peters &
Waterman, 1982) and Porter’s 5-forces (Porter, 1980) could be used to better
understand your company’s capabilities relative to competitors and how to
position your business for growth and to become more profitable.

New technology

The emergence of new technology can present either a threat or an opportunity to a
business. In the actions that were analysed that emanating from the emergence of
new technology, managers either tried to use the new technology to stave off
competition from the companies’ main rivals or used it to enter new markets and,
thereby, to increase revenues. This dichotomy is depicted in the figure below.

New technology acts as a stimulus to a
competitive action

Fend off competition from main rival Increase revenue by using the new
and maintain or increase share of technology to repackage a service
existing market offering and enter a new market
Figure 3: Outcomes envisaged following the emergence of new technology
Page 10

In every instance, these competitive actions involved using the new technology to
update, repackage or extend an existing product or service offering. Managers were
very methodical in their approaches to formulating competitive actions and went to
great lengths to research and collect data to support their efforts in this regard.


1. In setting objectives, which will inform the formulation of the competitive
action or actions, it would help to be clear about whether the new technology
will be used to fend of competitors or to increase revenue by offering a new
product or service or entering a new market. This will allow you to be more
deliberate in the approach you use to formulate the action or actions.
2. As new technology is often rolled out in certain markets before others, it would
be a good idea to look to other markets where the technology has already been
applied by businesses and to analyse their successes and failures when
formulating competitive actions involving the new technology.
3. To anticipate the acceptance of the new technology and refine ideas about
how it can be applied, data and the opinions of customers, prospective
customers and individuals with expert knowledge about it will be incredibly
valuable. This data and these opinions can be gathered through the use of
customer questionnaires, interviews with customer and prospective customers
and the use of external consultants.

Poor sales performance

The stimulus to this cluster of actions tended to be linked either to products or
services that were no longer optimally positioned in the market, in terms of their
attributes and prices, or to markets that had grown more competitive and had possibly
become saturated. What was common to all the actions analysed is the high reliance
that the managers placed on customer feedback regarding their products’ or services’
attributes and their pricing in order to effectively formulate their competitive actions.


1. Repositioning a product in the market, discontinuing it or introducing a new
product or service to address poor sales performance will require data
concerning customers and prospective customers tastes, requirements and
price sensitivities’. This data should be gathered as the starting point to
formulating a competitive action to respond to poor sales performance. It
could be gathered through customer surveys to better understand their
behaviour and their requirements, as well as other methods, such as focus
groups and ethnographic studies.
2. To reposition a product or service offering, a tool such as Bowman and
Faulkner’s (1994) ‘Customer Matrix’ or D’Aveni’s (2007) tool for predicting
Page 11

future competitive environments could be used. The Customer Matrix

comprises ‘Perceived Use Value’ along the one axis and ‘Perceived Price’ along
the other and was designed to understand a product or brand’s position in
relation to its competitors through the lens of the individual customer.
Constructing the matrix is an iterative process that starts with the application
of hard information that is then supplemented by experience and perceptions
and refined further as more data is gathered. D’Aveni’s tool focuses on how
customers determine the value of perceived benefits. This involves using a
technique to pre-empt rivals’ competitive actions through the use of price-
benefit maps that are extrapolated to predict competitors’ strategic intent.
Regression analysis is used to examine the relationship between a dependent
variable (price in this case) and several independent variables (product
benefits) and to create a price-benefit model.
3. In a market that is becoming ever more saturated, managers could considering
Kim and Mauborgne’s (2005) ‘Blue Ocean’ strategy and the ‘new value curve’
approach (1999), where a systematic approach to value innovation is proposed
as a way of avoiding head-to-head competition. The pretext of their research is
that most companies’ focus on matching and beating their rivals and that they
should instead consider substitute industries to establish new value curves. To
discover where a new value curve lies, they suggest managers should ask four
basic questions:

• What factors should be reduced well below the industry standard?
• What factors should be eliminated that the industry has taken for
granted?
• What factors should be created that the industry has never been offered
before?
• What factors should be raised well beyond the industry standard?

Customer request

Of the 26 competitive actions that were analysed, only one action was triggered by a
customer request and this could be viewed as a reactionary approach to developing
and marketing products and services, insofar as the manager waited for a customer to
present a new requirement, as opposed to developing the product in anticipation of
market requirements.

Because the stimulus to the action was a customer request, the manager was reliant
on information, particularly with regard to technical requirements, from the customer
and this did mean that the product was being developed for one customer specifically
but in the hope that it would have a much broader market. The manager interviewed
had a good understanding of the competitive products that were available, as well as
market requirements and how they were evolving.

Page 12

Stimulus to action
Customer provides requirements for a new product
the company is sure it can satisfy

Objective defined
Company wishes to expand its business based on
being able to satisfy a customer requirement

Mechanism
Company researches, develops and launches the
new product in response to the customer’s
requirement

Figure 4: Competitive action process triggered by a customer request

1. In responding to single customers’ requirements, managers should also be
aware of the broader market requirements and should make decisions
regarding the development and promulgation of the new product or service
based on the economics of both the sponsoring customers and the broader
market. This necessitates engaging with the broader market to understand
their requirements and price sensitivities’, as well as competitive offerings. Tool
such as Bowman and Faulkner’s (1994) ‘Customer Matrix’ or D’Aveni’s (2007)
tool for predicting future competitive environments, both of which are
discussed in the previous section, could be used.
2. Product development that’s customer led is usually associated with businesses
that have very active relationships with a relatively small set of customers and
with products that are developed to meet the customers’ technical
requirements that are often very peculiar. Under these circumstances it may be
a good idea to test competitors’ products to ensure you are aware of their
technical attributes and specifications, as this will inform your market
positioning decisions when formulating competitive actions.
3. In order to develop new and innovative products that need to meet rigorous
customer requirements, managers could look at other industries products that
have similar applications and technical attributes. For example, the
manufacturer of brakes for very large trucks studied the brakes used for
aircraft for this reason.
Page 13

Top management pressure to diversify business

Of the 26 competitive actions that were analysed, only one was triggered by pressure
from top management to diversify the business. It was a bank with an auto-finance
business that performed very well in its home market and that wanted to expand but
couldn’t in its home market without compromising the quality of loans it made. It was
a U.S. bank and it made the decision to establish subsidiaries in other states and tried
to replicate the success there that it had experienced in its home state.

The action was successful and the subsidiaries were able to compete effectively by
combining the knowledge and business culture managers from the home market
brought with them to the subsidiaries with the local market knowledge that managers
that were hired in the new markets had. Of course, they were also starting from a
‘zero base’ in the new markets where they established subsidiaries and were,
therefore, able to grow far more rapidly than they would have been able to in their
home market.


1. Companies that have been successful in their native market, but are finding it
hard to continue growing, should consider expanding into new territories
where they can reapply the business models that have made them successful at
home. Geographic expansion can be costly and the costs need to be balanced
with the additional profits that will be earned in the new markets. Unless the
company has been particularly successful in its home market and has
developed a competitive advantage over similar companies in other markets,
the chance of it being able to compete effectively through geographic
expansion is low.
2. When expanding into new markets, try to use both managers that have spent a
number of years in the home market and have become familiar with the
company’s processes and culture, and managers from the new markets that
will be familiar with local market anomalies. This combination can result in new
businesses being able to outsmart their competitors by applying the learning’s
from other territories.

Page 14

Objective setting

The objectives of the 26 competitive actions recorded and analysed have been distilled
into four categories, including:

Increase share of existing market

Increasing their share of an existing market was the most prevalent objective that
managers set themselves. In fact, this was the objective of 15 of the 26 actions
analysed. Managers that set the objective of increasing their share of an existing
market went on to use one or more of three mechanisms, as depicted in the figure
below.

Increase share of an existing market

Updating,
Communication to
repackaging, Development or
change consumer
extending or re- launch of a new
perceptions or to
pricing an existing product
create awareness
product

Figure 5: Mechanisms used to increase the share of an existing market

Updating, repackaging, extending or re-pricing an existing product was the most
prevalently used mechanism to achieve a larger share of an existing market. Poor sales
performance was the most prevalent stimulus to this action. The use of data, collected
mainly through surveys, was used extensively to arrive at the most appropriate
mechanism, as well as tools such as Porter’s (1980) 5-forces and external consultants
and marketing agencies.


1. The easiest and most cost-effective route to achieving an increase in the share
of an existing market is through the updating, repackaging, extending or re-
pricing of an existing product or service. This objective and mechanism is best
Page 15

suited to mature industries, while developing a new product is better suited to

emerging and growth industries, where product or service standards are still
evolving.
2. When managers wish to increase the share of an existing market, they should
pay close attention to their competitors and their respective product and
service offerings. Tools such as Bowman and Faulkner’s (1994) ‘Customer
Matrix’ or D’Aveni’s (2007) tool for predicting future competitive environments
could be used. These tools are discussed earlier in this guide in the ‘Poor sales
performance’ section.

Maintain market position and profit levels

These objectives emanate from either a threat from a new market entrant or changes
in market conditions, including regulatory changes. To achieve this objectives,
managers either discontinued products or launched new products. The competitive
action analysed showed that the mechanisms emanating from a desire to maintain a
company’s market position or profit levels were convergent with industry norms. In
other words, managers sought to use mechanisms that would render their products,
services, marketing methods or business models closer to those of their competitors.


1. The chosen mechanisms would be defensive, insofar as they would be
formulated to protect an existing market positions or a company’s current
profit levels. With this in mind, competitors market positions, as well as their
comparative advantages and the likely evolution of their products or services is
very important when formulating these competitive actions. To map your
company’s strengths relative to those of your competitors, adopting a Resource
Based View (Penrose, 1960) and considering the different resources needed to
compete effectively would be a good idea. To try to determine how
competitors’ product or service offerings will evolve, it would be useful to use
D’Aveni’s (2007) tool for predicting future competitive environments. This tool
is discussed in more detail earlier on in this guide in the ‘Poor sales
2. Based on the research carried out, it would also be a good idea to consider
parallel or associated industries, in which the underperforming products or
services could be pivoted to look different or provide a new set of customer
benefits. The pivoting of exiting product or service offerings could be achieved
through partnerships, including joint ventures and mergers, with a company or
companies in the associated industries.

Page 16

Expand business through new unit, product or service

In the analysis of the 26 different competitive actions, there were two paths that
managers followed as a consequence of wanting to expand their businesses through
the introduction of a new product or service. They included:

1. To develop a new product or service offering internally
2. To acquire a company with complimentary products or services

The mechanisms used are generally offensive, insofar as they are formulated with the
intention of gaining market share from competitors, and they were also generally
divergent from industry norms. This was because managers were trying to break with
what they and their competitors had been doing in an attempt to make their product
or service offerings more appealing to consumers. In some instances, managers’
bundled different products or services together to develop unique market offerings
and to raise their competitive barriers. The figure below depicts these two possible
paths.

Desired outcome
Expand business through the
introduction of a new product, service
or unit

Mechanism 1 Mechanism 2
Develop or launch a new product or Acquire a company with complimentary
service offering internally products or services
Figure 6: Mechanism options related to the outcome of expanding a business through new products,
services or units

Customer surveys were used in around 50% of all cases to better understand the
markets. International industry trends were also analysed and approaches such as the
Resource Based View were used.


1. When the desired outcome is to expand the business through the introduction
of a new product, service or business unit, it is worthwhile considering other
products or service in the market that could be bundled with the company’s
existing products or services in order to create unique offerings. These
Page 17

offerings would need to be distinguished from anything competitors will be

able to offer and, therefore, they will allow the company to create barriers to
competing directly. This could be achieved through acquiring a company or
companies with the complimentary products or services or forming joint
ventures or partnerships with them. The managers involved in the formulation
of these actions should have a good grasp on the competitive environment and
the complimentary products and services that exist in the market. This
knowledge should not just be limited to the products and services of the
company’s most direct and immediate competitors, but the managers should
also be aware of products and services in associated or parallel industries.
2. Depending on the mechanism or mechanisms that will be used to achieve the
objective, data in relation to customer requirements and price sensitivities’
may be imperative. For example, if a new product or service offering is going to
be developed, or if products and service are going to be bundled together, it is
important to know how much value customers and prospective customers
place on the attributes and benefits of the new products, services or the
bundled market offerings. Surveys could be used to collect this data and a tool
such as Bowman and Faulkner’s (1994) ‘Customer Matrix’ could be used to map
product attributes and prices relative to those of competitors to get a good
understanding of where the new market offering will be positioned relative to
competitive offerings. The ‘Customer Matrix’ is discussed in more detail in the
‘Poor sales performance’ section of the guide.
3. In instances where managers seek to diverge from industry norms by offering
products or services that either focus on attributes or benefits that competitors’
products do not, or by offering new attributes or benefits, manager could
consider using Kim and Mauborgne’s (2005) ‘Blue Ocean’ strategy or ‘new
value curve’ approach (1999), where a ‘systematic approach to value
innovation’ is proposed as a way of avoiding head-to-head competition. These
approaches are discussed in more detail in the ‘Poor sales performance’ section
of the guide.

Generate or increase sales in a new market

The objective of either entering a new market or increasing sales in a new or
developing market was always associated with profitable companies that were able to
commit substantial budgets to achieving these outcomes within the 26 competitive
actions analysed. These actions were triggered by pressure from either shareholders or
top management to improve performance or to diversify the business and the
managers concerned sought to either replicate the success they had experienced in
their home markets, to diversify their businesses or to use new technology to update
or reconfigure existing products to enter new markets. The three mechanisms that
were used are depicted in the figure below.

The managers concerned were highly methodical in formulating the relevant actions,
which could be a function of the profit positions of their companies, and the
Page 18

mechanisms employed were always offensive, in that they were formulated with the
goal of penetrating new markets and capturing market share from the incumbent
market participants. High reliance was placed on customer feedback, which was
derived from a number of different sources, including marketing agencies, surveys and
interviews with existing customers and consultants.

Desired outcome
Generate or increase sales in a new market

Mechanism 3
Establish a presence in a
Mechanism 1
Mechanism 2 new market with either
Update, repackage,
Development or launch an existing product or
extending or re-pricing
a new product or service service or one of the
an existing product
newly updated or

developed products or
services
Figure 7: Mechanisms used to generate or increase sales in new markets

1. Entering a new market is costly and adequate budget should be available to do
so. It’s important to understand the new markets properly, which requires data
and advice that could be obtained through surveys, from marketing agencies
and consultants and through discussions with existing customers to understand
what can be replicated elsewhere and how the company’s product or service
may be updated.
2. Experienced managers that have a good knowledge of the company’s products
and services and of the successes the company has experienced that could be
replicated or used in new ventures should formulate these actions.
3. In highly competitive or turbulent industries, the use of new technology should
be viewed as a way of distinguishing market offerings and raising competitive
barriers, as should the bundling of existing products and services, either with
each other or with new technologies, products and services.

Page 19


This section is concerned with the competitive environment in which the firm
operates. Specifically, phenomena such as the number of direct competitors, as well as
competitors in the broader competitive set, the intensity of rivalry between the
competitors, the state of evolution of the industry and the rate of change being
experienced within the industry in relation to technology, processes and operating
models is important. In some instances, the variables below have been used as proxies
for these phenomena.

Industry maturity

Based on the research, the structure of the industry in any specific market is normally
related to its maturity. In mature industries, such as the automotive or the FMCG4
industries, managers were very aware of whom their competitors were and their
relative positions in the market. As a result, they acted in very deliberate ways when
gathering market intelligence and when formulating and executing competitive actions.
Managers operating in emerging or growing industries, and whose industrial structures
were therefore still evolving, tended to not have defined their competitors that clearly.
They were also less deliberate in their approaches to gathering market intelligence and
formulating and executing competitive actions than managers operating in mature
industries.

Managers operating in mature industries had very precise sales data for their brands,
as well as for their competitors’ brands and were able to estimate the income and
expenses associated with producing and marketing them. The approach to formulating
competitive actions was also very precise. Surveys were used to gauge market
acceptance and tools were often used to estimate sales volumes related to new
products being considered and how much would need to be spent on marketing to
achieve these volumes. The managers operating in emerging or growing industries
were, by contrast, less aware of alternative products to theirs and were less aware of
the compositions of their competitive sets. These managers usually operated in
nascent markets and their industries were relatively unstructured and the players in
the industry were fragmented. Therefore, there wasn’t really a need to be all that
aware of their rivals or to use sophisticated methods for gathering market intelligence
and for formulating competitive actions.

The interviews also showed that managers operating in emerging or growing industries
often sought to develop products that filled specific market needs, which is a function
of the maturity of the industry they operate in and its relatively fluid structure. In
contrast, managers at the larger companies that were interviewed formulated and

Page 20

executed competitive actions in order to respond to competitive pressures and to fend

off new market entrants.

Of the 26 competitive actions analysed, there was no apparent correlation between
maturity of an industry, whether it was emerging, growing or mature, and the types of
actions managers formulated and executed or whether these actions where divergent
or convergent from the norms of the industry and whether their objectives were
offensive or defensive.


• In emerging industries, where industry norms are still being established, it is
usually possible to construe competitive actions in relation to unsatisfied
consumer needs, regardless of what competitors are doing. In other words, the
less mature the market is, the more managers should focus on meeting customer
needs, rather than focusing on trying to satisfy gaps that exist in competitors’
offerings when formulating their competitive actions.
• In growing industries, where competitive industrial structures are starting to
emerge, competitive actions should be formulated in anticipation of how the
competitive environment is likely to evolve. The future state of the industry can
be anticipated using tools such as Richard D’Aveni’s tool for predicting future
competitive environments published in his article titled ‘Mapping Your
Competitive Position’ in the Harvard Business Review in November 2007. This
tool is discussed in more detail earlier on in this guide in the ‘Poor sales
• In mature industries, where competitive dynamics are developed and managers
are aware of who their competitors are, competitive actions should be
formulated with cognisance of the market positions of their competitors’
products and services, as well as expectations of rivalry that could follow any
particular action. A tool such as Bowman and Faulkner’s (1994) ‘Customer Matrix’
could be used to understand a product or brand’s position in relation to its
competitors through the lens of the individual customer. This tool is discussed in
more detail earlier on in this guide in the ‘Poor sales performance’ section.

Degree of turbulence in the industry

Based on the 26 competitive actions analysed in the research, there appears to be no
correlation between the maturity of an industry and the relative turbulence found
within it. In fact, in our sample set, stable industries became turbulent because of
changes in regulation, changes in market conditions, the advent of new technologies
and new competitors disrupting them. In the steel industry, which can be regarded as
very mature, unless there’s a war or a lot of infrastructure projects are being
undertaken, its in trouble and can be categorised as turbulent, due to competitors
exiting the industry and those remaining adopting aggressive competitive stances.
Page 21

Managers should be aware that, as industries become more turbulent, managers’ tend
to revert to automatic sense-making frameworks that are often based on out-dated
experiences and knowledge. In examining the differences between automatic and
controlled processing by managers in an increasingly dynamic industry, Reger and
Palmer (1996) found that managers relied on cognitive maps that reflected obsolete
industry boundaries during a period of significant environmental upheaval. They also
found that managers’ cognitive maps, on a collective basis, became less consensual as
the environment became more turbulent. Managers at competing firms, therefore,
tend to view competition quite differently in turbulent environments to stable
environments.

By contrast, when environments are relatively stable for long periods of time,
reinforcement of well-learned, ready-made categories occur (Reger and Palmer 1996,
Dutton 1993). This results in a strong convergence between automatic and controlled
schemas. Automatic and controlled mental models are expected to remain similar until
the environment changes substantially enough to render them obsolete (Reger and
Palmer 1996).

Changing environment

CONTROLLED
MODE

RE-INTERPRETATION
CONTROLLED
MODE OF ENVIRONMENTAL

AUTOMATIC EVENTS
MODE
AUTOMATIC MODE
Inertia
Stable environment Changing environment
produces strong produces weaker
correspondence between correspondence between
cognitive processing cognitive processing modes
modes and accurate and less accurate

interpretation of interpretation of environment

environment in both in automatic mode.
modes
Figure 8: Cognitive interpretation in stable and changing environments
Page 22

Cognitive interpretations of competitive environments differ between stable and

turbulent environments and, as competitive environments become more turbulent,
managers rely more on existing mental maps and their cognitions shift from
‘controlled’ to ‘automatic’ processing. In other words, cognitive inertia sets in as the
environment becomes unfamiliar or unpredictable. Bogner & Barr (2000) suggest that
the cognitive frameworks that managers had used to make sense of and act within
their industry are significantly compromised when it becomes turbulent. They suggest
that the very sense making actions that managers undertake to build new frameworks
can result in industry-level beliefs that perpetuate competitive turbulence and, in
effect, institutionalise hyper-competition.


• Managers should be aware that stable industries could become turbulent very
easily and very quickly. Such turbulence can be the result of a regulatory
change, a new market entrant into the fray, a change in market conditions such
as a change in consumer behaviour or new technology disrupting the old.
• Accumulated experience in a stable environment leads managers to develop
ingrained schemas that allow automatic information processing. This can be
advantageous to firms as managers become more adept at applying tacit
knowledge in formulating competitive actions but, as environmental change
accelerates, these schemas can become out-dated and, therefore, no longer
relevant. Therefore, in turbulent times, managers should be more data driven
than conceptually driven. It may also be necessary to commit more resources
to understanding competitive environments when industries become turbulent,
particularly for the purpose of understanding how environmental changes
affect market positioning of products and services relative to those of
competitors.
• Smaller industry participants are able to gain market share from larger industry
participants by seeking out the opportunities presented by the turbulent state
of the industry. This would be achieved not by disrupting the market, but by
identifying gaps that exist in the incumbents’ product, service or brand
attributes or benefits created by the turbulence and developing market
offerings to address them. In the United Kingdom the large grocery retailers,
including Sainsburys, Tesco, Waitrose, Iceland et al. where so busy fighting
amongst themselves for market share that it was relatively easy for Aldi and
Lidl to enter the market with fresh and uncharted market positioning objectives.
• Many decisions related to the formulation of competitive actions are made
under stress and time pressure and, despite sophisticated planning and
decision support systems aimed at coercing managers into controlled
processing, automatic cognitive processing may be the dominant mode in
turbulent environments. Akin to a pilot acting in an emergency, when
managers are overwhelmed by environmental changes and forced to make
many decisions in relatively short timeframes, it is hard for them to resist
reverting to ‘automatic’ cognitive processing. The best way to overcome this is
Page 23

to reassign aspects of the competitive action formulation process to managers

that are abstracted from the day-to-day operations of the business and that are
given the time to formulated actions in a controlled manner.
Industry fragmentation

Based on the 26 competitive actions that were analysed, there is a correlation
between industry fragmentation and the maturity of the industry. In other words,
competitors in nascent industries tend to be less concentrated that in mature
industries. These fragmented industries were also characterised by high levels of
innovation, in terms of continually developing new product and service offerings.

As a result of their competitive environments being less established and relatively
fluid, there was far less of a need for managers to be as aware of who their rivals were
in fragmented industries. This is not to say that managers in fragmented industries
don’t operate in competitive groups or that they aren’t aware of whom their
competitors are. Porac, Thomas and Baden-Fuller (1989) noted that cognitive
oligopolies, in which managers tended to select a few, very similar organisations as
competitive referents existed in fragmented environments too.

As product or service offerings were being developed in markets that were less
crowded, managers were less constrained by what was already available and there
was, therefore, also less of a need for them to use sophisticated methods for gathering
market intelligence and for formulating competitive actions.


1. Industries with high levels of competitor concentration, or well-established
strategic groups, can easily be disrupted, and there are many examples to
substantiate this. Managers operating in environments with high competitor
concentration should be aware of this and should look beyond just their direct
competitors to companies operating in peripheral industries that could become
competitors, as well as new market entrants that could become competitors.
2. As the competitive groupings within industries become more concentrated, the
need to be aware of the competitive environment, particularly who your
competitors’ are, what their product and service offerings are and how these
are likely to change in retaliation to your competitive action or actions,
increases. To anticipate this, tools such as Richard D’Aveni’s tool for predicting
future competitive environments, published in his article titled ‘Mapping Your
Competitive Position’ in the Harvard Business Review in November 2007, could
be used. To map the existing competitive environment and factors that are
likely to have a bearing on a competitive action, the ‘5-Forces’ model published
in Porter’s article ‘Industry Structure and Competitive Strategy: Keys to
Profitability’ (1980) could be used.
Page 24

3. Parallels can be drawn between the fragmented industry setting, the ‘Blue
ocean strategy’ (Kim and Mauborgne, 2005) phenomenon and the ‘new value
curve’ approach that Kim and Mauborgne allude to in their 1999 article
‘Creating New Market Space’, published in the Harvard Business Review
(January-February, p 83-93). Fragmented industries provide the perfect setting
to develop new and innovative products. As such, fragmented industries offer
managers the possibility of acting in environments less constrained by industry
standards, engrained technical and functional product attributes and benefits.
Fragmented industries also provide managers with a blank canvas to apply
marketing approaches, possibly from other industries, that haven’t been
applied before.
4. For industries where competitors are concentrated, Kim and Mauborgne’s ‘new
value curve’ can be applied. They propose a ‘systematic approach to value
innovation’ as a way of avoiding head-to-head competition, which they state
“can be cutthroat, especially when markets are flat or growing slowly”. As
mentioned previously in this guide, the research found there to be a strong
correlation between the maturity of the industry and the concentration of
competitors. The pretext of Kim and Mauborgne’s research is that most
companies focus on matching and beating their rivals and that they should,
instead, consider substitute industries to establish new value curves. To
discover where a new value curve lies, they suggest manager’s should ask four
basic questions:

• What factors should be reduced well below the industry standard?
• What factors should be eliminated that the industry has taken for granted?
• What factors should be created that the industry has never been offered
before?
• What factors should be raised well beyond the industry standard?

Company-level variables

As the title suggests, The ‘Company-level variables’ section is based on the influence
that attributes associated with the company have on the competitive actions. The
section makes recommendations that managers can use in the formulation of
competitive actions and different approaches they could adopt, based on their own
companies attributes and operating conditions, relative to those of their competitors.

Company size relative to competitors

From the 26 competitive actions that were analysed, it is evident that the larger the
company, the more sophisticated it tends to be in formulating competitive actions and
the more it tends to rely on tools, such as surveys and software to predict sales
performance based on a competitive action and the marketing budget that would
required to achieve that performance. It is also evident that there is a correlation
Page 25

between the size of the company and the level of formal training that its managers
have received. Consequently, the larger the company is, the more methodical
managers tend to be in formulating competitive actions.

The research also showed that managers at larger companies became comfortable
with their competitive sets over time and were psychologically resistant to new
entrants. This attitude resulted in them reacting very strongly to threats from new
entrants, often with the intention of blocking these threats and defending their
positions with incredible energy and resources and couldn’t be matched by the
smaller, new entrants.


1. As indicated in the ‘Age of manager’ section below, age is often
synonymous with work experience and more experienced managers tend to
have more tacit knowledge to draw from when formulating competitive
actions. Consequently, older managers tend to take a less structured
approach to formulating competitive actions and rely less on formal tools
and techniques. The corollary of this is that, where a company is not going
to use tools, such as surveys or software programs, to support their
competitive action formulation processes, it may be advantageous to
employ and involve older, more experienced managers in the competitive
action formulation process. Their experience may serve as a substitute for
knowledge gained through the use of these tools. This tacit knowledge is
gained through experiencing similar actions that had similar stimuli.
2. Smaller companies seeking to disrupt industries should consider the
potential rivalry that they will experience from the incumbent industry
participants and shouldn’t under-estimate the energy and resources that
they will commit to fending off competitive threats.

Company profitability relative to competitors

Competitive actions are usually funded from cash flow and, therefore, low profitability
can constrain the company’s ability to properly execute competitive actions. This can
also place less profitable companies at risk of being the target of competitive actions
by their more-profitable competitors. The competitive actions of the most profitable
companies interviewed were often, but not always, triggered by pressure from
shareholders to use excess funds to improve the profitability of the relevant
businesses. These competitive actions included, amongst other actions, acquiring
other businesses that had product or service offerings that could be used to
compliment the company’s existing product or service offerings.

It was also observed in the research that companies enjoying abnormal profits were
often inclined to rest on the laurels and to only start formulating and executing
Page 26

competitive actions as a means of maintaining their profit levels when the industry
started tending towards market equilibrium and, consequently, profit levels started to
normalise.

An interesting phenomenon that emerged from the research was a dichotomy
between companies whose market behaviour was convergent with that of their
competitors, predicated on the objective of maintaining industry profit levels, and
companies whose market behaviour diverged with the general behaviour of their
competitors in an attempt to increase their profit levels beyond those of their
competitors. Based on the research, this phenomenon can’t be attributed to the size
of the company, to the maturity of the industry or the degree of turbulence being
experienced in it. In other words, it applies to companies large and small, mature and
growing or emerging and to all sorts of industries. Competitive actions formulated with
the objective of diverging from industry norms tended to be formulated and executed
by companies whose profits were either waning, who were in the emerging or growth
phases of their business life cycles and trying to grow and become profitable as quickly
as possible or companies whose managers or shareholders were dissatisfied with the
profit level of their industry or their direct competitive set.


1. When the industry that a company operates in, or the strategic group that the
company is part of or aspires to become part of, is enjoying attractive profit
levels, it may be worthwhile formulating competitive actions that will result in
convergence with the other industry participants or with the target strategic
group5, as similarity of perceived similarity will allow the company to price its
products or services in line with those of its competitors and will allow it to
procure inputs from the same suppliers at the same or similar prices, including
human resources, as it should be able to recruit from the same talent pool.
2. As the profits in an industry, or within a strategic, that has been enjoying
abnormal profits start to wane, it would be a good idea to start formulating
competitive actions that will result in divergence from industry or strategic
group norms with the objective of generating profits in excess of those
generated by other industry or strategic group participants.
3. Often due to budget constraints, less profitable companies are forced to be
innovative in the competitive actions they formulate and execute. Leadership
plays a large role, as leaders are able to motivate managers and employees to
be innovating, by doing more with less resource.

Manager-level variables

5
Porter (1980) defined a strategic group as a group of firms in the same industry making
similar decisions in key areas.

Page 27

The manager-level variables focus on suggestions and different approaches that could
be followed on the basis of the manager or managers involved in formulating the
competitive action or actions.
Age of manager

In the research age has often been used as a proxy for experience for the analysis
purposes. This is because it is hard to quantify experience but there is a general
correlation between the level of experience a manager has and his or her age. From
the competitive actions analysed, it is apparent that more experienced managers, or
older managers to be accurate, employ different methods in formulating competitive
actions than their less-experienced or younger counterparts do. Specifically,
experienced manager’s tend to rely on the tacit knowledge they’ve accumulated over
the years while less experienced managers rely more heavily on tools such as Porter’s
(1980) five forces and data from sources such as surveys and focus groups.

The phenomenon of managers’ experiences being applied in their decision-making
processes is not new. Schneider and Shiffrin (1977) identified two qualitatively distinct
processing modes, being ‘Automatic’ and ’Controlled’. Automatic processing was
described as unintentional, involuntary, effortless, autonomous and occurring outside
of awareness (Reger and Palmer 1996, Bargh 1989, Johnson and Hasher 1987,
Kahneman and Treisman 1984, Logan and Cowan 1984, Uleman 1989). In contrast,
controlled processing was described as flexible, within an individual’s intentional
control, effortful, active, constrained by short-term attention resources and motivated
or strategic (Reger and Palmer 1996, Atkinson & Shiffrin 1968, Bargh 1989, Logan,
1980, Neely 1977, Uleman 1989). Uleman (1989) formulated an expanding continuum
of multiple, fuzzy and overlapping cognitive processing modes that form a progression
from absolutely automatic to unconditionally controlled.

Decision-making continuum

Controlled processing Automatic processing

\

Competitive actions

Figure 9: Controlled processing versus automatic processing
Page 28

Reger and Palmer (1996) found that as situational uniqueness increases, accurate
interpretation becomes more difficult and, in unfamiliar environments, automatic
category assignments based on out-dated maps are likely to result in erroneous
actions, as automatic judgments are made without reflection. They also found that
managers’ cognitive maps tended to diverge as the environment became more
turbulent. Many decisions are made under stress and time pressure and, despite
sophisticated planning and decision support systems aimed at guiding managers
towards controlled processing, automatic processing may be the dominant mode in


1. Managers’ should be cognisant of the value of experience and the tacit
knowledge held by older managers, as well as the possible shortcomings of
less-experienced, younger managers that don’t have the same knowledge base
or practical experiences to draw from in formulating competitive actions. The
experience and tacit knowledge held by more experienced managers can be
substituted with tools and data gather through surveys and other means when
younger, less experienced managers formulate competitive actions.
2. Managers should be aware that managers who rely on experience and tacit
knowledge gained through pervious actions, are likely to become less adept at
interpreting their competitive environment, as well as the stimuli that trigger
competitive actions, and in formulating competitive actions as their
competitive environments undergo significant change and as new and
disruptive product and service offerings are introduced to their markets. In
such situations managers should be more data driven and less conceptually
driven in formulating their competitive actions. Moreover, it may be advisable
to commit more resources and to encourage the use of tools in the competitive
action formulation processes in order to promote automatic processing, as
opposed to controlled processing.

Level of formal training of manager

As mentioned previously, the 26 competitive actions analyses showed that larger
companies tended to place greater emphasis on formal training when employing
managers than smaller companies did. This could be an explanation for why larger
companies tend to be more methodical in their approaches to formulating competitive
actions.

The research found that younger managers with extensive formal training in business
and marketing disciplines but, due to their age, less experience, were relatively
methodical in their approaches to formulating and executing competitive actions while
older managers, who had accumulated substantial tacit knowledge over many years
but had no or little relevant formal training, relied more on dialogues with other
Page 29

managers, employees and customers, as well as their own knowledge, to formulate

and execute competitive actions.

This phenomenon could also be explained by larger companies using tools and
controlled data sources and following structured processes to formulate competitive
actions, while also employing managers with extensive formal training in marketing
and business disciplines, rather than the managers being the cause of larger
companies adopting relatively methodical approaches to the formulation of

In the Venn diagram below the bubble labelled ‘Continuum of inputs and referents’
represents all the possible cognitive and material inputs and referents managers could
use to inform and formulate the competitive actions they execute. ‘Experience and
tacit knowledge’ refers to the knowledge and the relevant experienced gained by older
managers over many years, while ‘Tools and controlled data sources’ refers to the
tools available to managers in formulating competitive actions and data sources, such
as surveys, focus groups and published research. The tools include both proprietary
tools, such as software programs, used to estimate sales volumes resulting from a
particular competitive action, as well as tools developed and published by academics
and practitioners, such as the 7S model published by Waterman, Peters and Phillips in
their 1980 article ‘Structure is not organisation’, Richard D’Aveni’s tool for predicting
future competitive environments published in his article titled ‘Mapping Your
Competitive Position’ or the ‘5-Forces’ model published in Porter’s article ‘Industry
Structure and Competitive Strategy: Keys to Profitability’ in 1980. The ‘Formulation
and execution of competitive actions’ bubble refers to all possible cognitions, inputs
and referents managers could use in formulating and executing competitive actions.

Continuum of inputs and referents

Experience and Tools and

tacit controlled data
\

knowledge sources

Formulation and execution of
competitive actions

Figure 10: Inputs and referents for formulating competitive actions
Page 30


1. An awareness of the continuum between the application of experience and
tacit knowledge and the use of tools and controlled data sources and the
approaches different managers are likely to adopt should be useful to
managers in managing competitive action formulation and execution
processes. Furthermore, they should be aware that managers that have
undertaken substantial formal training are more likely to use tools and to
gather data through surveys and other means than managers with little or no
formal training, who tend to draw from their experiences and reply on their
tacit knowledge in formulating competitive actions.
2. It is important to make sure those managers who lack formal training in
marketing and business disciplines to effectively formulate competitive actions
have enough relevant practical experience to draw on. It may also be a good
idea to assemble teams comprised different and complimentary skill sets to
formulate and execute competitive actions. These teams are likely to comprise
technical product experts, managers who have relevant market experience and
understand the environment well and managers who have formal training in
the formulation of competitive actions normally gained through being training
in a business or marketing discipline.

Manager’s location relative to home market

The 26 competitive actions that were analysed in the research showed that managers
operating in their home markets had an advantage over those operating in foreign
markets insofar as they had an affinity with local cultural and nationalistic norms.
Likewise, managers operating in foreign markets had an advantage insofar as they
were able to apply learning’s and tacit knowledge gained in their home markets to the
new ones. In every instance of managers from foreign markets successfully
formulating and executing competitive actions, they did so with the support of local
managers.

Hodgkinson and Johnson (1994) noted, “Managers frames of reference are influenced
by their experiences, national culture is a strong influencer, and their frames of
reference are, as a result, broader than organisational or industry level ones”. Based
on the findings of the research, it isn’t possible to determine whether it’s more
advantageous for:

1. Managers to operate in their home markets
2. Managers to operate in foreign markets once they’ve gained significant
knowledge in the formulation and execution of competitive actions in their
home markets

Page 31

Each of the above scenarios has advantages and disadvantages and, if possible, it is a
good idea to combine, or team, the two categories of managers described for the
formulation and execution of competitive actions.


1. If the competitive action requires a fresh or different approach, a manager
operating in a different market to his or her home one could be advantageous.
By the same token, if the action requires an understanding of local market
dynamics and cultural nuances, it could be disadvantageous.
2. In many instances, the best approach may be to combine the new thinking and
knowledge that the manager from a different location brings with the
understating of local cultural and business norms that a manager or managers
operating in their home market possess.

Broadness of functional background of manager

The 26 competitive actions analysed showed that managers’ backgrounds resulted in
functional biases in their formulation of competitive actions. For example, a manager
with a sales background would tend to focus on sales and marketing oriented actions
in response to stimuli while a manager with a research and development background
would tend to focus on product development oriented actions in response to stimuli.
Marketing managers used surveys to gather information while those with sales
backgrounds replied more on personal dialogues. Managers with engineering
backgrounds placed more emphasis on the technical differentiators of their product or
service offerings.

Dearborn and Simon (1958) observed, “Functions within organisations influence
managers’ frames of reference”. Bowman & Daniels (1995) found that “When
managers are asked to reflect their firms’ situations, there is evidence of functional
bias”. The interviews confirmed that functional biases exist in the formulation and
execution of competitive actions. This was pervasive across the research. The corollary
of this is that the skills and knowledge required applied to the formulation of particular
competitive actions should be matched to those required for it to be as effective as
possible. It’s possible that these skills sets and knowledge bases in certain instances
exist in one manager but it is more likely that they will be found in a combination, or
team, of different managers with disparate functional backgrounds.


1. Where the skills and knowledge needed to effectively formulate a particular
competitive action don’t reside in one single manager, a team with a mix of
different functional backgrounds may be more effective. If you’re a specialist
without a broad functional background, think about the skills and knowledge
Page 32

that are needed to effectively formulate your specific action requires and
acquire the additional skills and knowledge that you need.
2. Because actions typically require an array of different skills, a manager with a
broad functional background is likely to be better at co-ordinating and
managing the efforts of the team formulating the competitive action.
Page 33

Page 172


manual version 2
Page 173

Formulating competitive actions
A practical guide to the formulation of competitive actions for strategy and marketing managers
Author: Richard Shaw

August 2016
CONTENTS
Introduction to the guide..................................................................................................................................................................................................................................................................................................... 1
Competitive actions in the context of this guide.......................................................................................................................................................................................................... 1
Objective of the guide........................................................................................................................................................................................................................................................................................................ 2
Competitive actions process flow....................................................................................................................................................................................................................................................................... 3
Competitive actions resources key................................................................................................................................................................................................................................................................... 4
Stimuli............................................................................................................................................................................................................................................................................................................................................................................ 5
Declining or compromised performance....................................................................................................................................................................................................................................... 5
External or environmental changes........................................................................................................................................................................................................................................................... 6
Shareholder or management plans........................................................................................................................................................................................................................................................... 9
Objectives......................................................................................................................................................................................................................................................................................................................................................... 11
Actions..................................................................................................................................................................................................................................................................................................................................................................... 15
Feedback loop......................................................................................................................................................................................................................................................................................................................................... 19
Resources...........................................................................................................................................................................................................................................................................................................................................................21
Data........................................................................................................................................................................................................................................................................................................................................................................21
Customer surveys...............................................................................................................................................................................................................................................................................................................21
Focus Groups and interviews.....................................................................................................................................................................................................................................................................21
Ethnographic studies..................................................................................................................................................................................................................................................................................................21
Informal channels.............................................................................................................................................................................................................................................................................................................. 22
Tools..................................................................................................................................................................................................................................................................................................................................................................... 23
Customer matrix.................................................................................................................................................................................................................................................................................................................. 23
Primary benefit map......................................................................................................................................................................................................................................................................................................24
Ansoff’s growth matrix............................................................................................................................................................................................................................................................................................. 25
Porter’s 5-forces.....................................................................................................................................................................................................................................................................................................................26
Core competency.............................................................................................................................................................................................................................................................................................................. 27
New value curve................................................................................................................................................................................................................................................................................................................... 28
Competitors......................................................................................................................................................................................................................................................................................................................................... 28
Competitors’ products and services........................................................................................................................................................................................................................................... 28
Competitors’ pricing models..................................................................................................................................................................................................................................................................... 28
Intensity of rivalry............................................................................................................................................................................................................................................................................................................... 29
Relative company size...................................................................................................................................................................................................................................................................................................... 29
Useful in objective setting and in deciding on which of the 5 levers to use............................................................................................. 29
Relative profitability...................................................................................................................................................................................................................................................................................................... 30
Resource based view.................................................................................................................................................................................................................................................................................................. 30
Benchmarks........................................................................................................................................................................................................................................................................................................................................... 32
Competitive actions in parallel industries and other territories......................................................................................................................................... 32
Evolution of industries in other territories...................................................................................................................................................................................................................... 33
Team.................................................................................................................................................................................................................................................................................................................................................................... 33
Education & training................................................................................................................................................................................................................................................................................................... 33
Level of experience of managers...................................................................................................................................................................................................................................................... 34
Functional biases............................................................................................................................................................................................................................................................................................................... 35
National & cultural backgrounds....................................................................................................................................................................................................................................................... 35
Relevant experience in other territories and parallel industries......................................................................................................................................... 36
Industry.......................................................................................................................................................................................................................................................................................................................................................... 36
Industry maturity................................................................................................................................................................................................................................................................................................................. 36
Fragmentation..........................................................................................................................................................................................................................................................................................................................37
Strategic groups & cognitive communities................................................................................................................................................................................................................... 38
Degree of turbulence................................................................................................................................................................................................................................................................................................ 39
References...................................................................................................................................................................................................................................................................................................................................................... 43
Formulating competitive actions | Richard Shaw – August 2016

INTRODUCTION TO THE GUIDE
In the actions that were analysed as part of this research, a specific process was generally followed in their
formulation. This process includes the following steps:
1. Stimuli or a stimulus triggers the action
2. Managers set about researching and developing the action they will take to produce the outcome
they seek to achieve. This varies from very informal processes and cognitions to complex processes
supported by the use of various tools and techniques. In the interviews carried out as part of the
research, there appeared to be an inverse correlation between the tacit knowledge managers’ use
and how methodical they are in formulating competitive actions and this was usually linked to their
level of experience, as well as the size of their organisations. It was found that the more experienced
the manager was, the more he or she tended to rely on tacit knowledge and the younger they were
the more they tended to use tools to support their endeavours to formulate suitable actions. Smaller
organisations also tended to be less formal in their formulation of competitive actions than larger ones.
3. The corollary of researching and developing a respond to the stimuli or stimulus is a specific action that
would be executed with the aim of achieving the objective or desired outcome.
4. Once the action has been executed managers compare the outcome to their objectives and, secondly,
feed it back into the competitive action cycle, either as a stimulus to a new competitive action or as
part of their frame of reference in formulating parallel or future actions.
The guide uses the abovementioned process to offer insights and recommendations to managers at every
step in formulating a competitive action. The figure titled ‘Process flow - competitive action development’
provides a summary of the processes followed by the managers interviewed as part of the research. The
actions have been distilled into a three-step process, comprising ‘stimulus’, ‘objectives’ and ‘actions’. Each
of these has been clustered in accordance with the findings of the research. A contingency approach has
been used to propose processes to follow and resources to employ in formulating competitive actions. In
other words, the recommendations offered in this guide are predicated on the use of different resources
and processes depending on environmental factors, as well as the stimuli and the objectives related to
the action.
Competitive actions in the context of this guide

In the context of this research, ‘competitive actions’ are actions that managers take to compete more
effectively and, ultimately, to improve their companies’ profitability. They are limited to actions that are
externally oriented, including, for example, communicating marketing messages to consumers, re-pricing
or re-packaging product or service offerings, developing new products or services, acquiring new products
or services through corporate actions and bundling products and services. They exclude actions that are
internally oriented and designed to streamline operations and reduce costs.
Formulating competitive actions | Richard Shaw – August 2016 1

Objective of the guide
While the guide does not cover every possible competitive action or every possible permutation to the
formulation of competitive actions, it seeks to offer ideas and recommendations about competitive actions
in relation to a significant number of events that may trigger these actions and in relation to the objectives
managers’ envision for them.
Universe of possible competitive actions
Options covered in the guide
Individual, chosen action
Figure 1: Extent of options covered in the guide
The guide also proposes resources that managers could consider using in the formulation of their
competitive actions. In summary, the objective if this guide is to provide managers with a toolbox to assist
them in efficiently formulating effective competitive actions.

COMPETITIVE ACTIONS PROCESS FLOW
Declining or External or
Stimulus to the Shareholder or
compromised environmental
action (context) management plans
performance change
Restore or
Objective Increase market
maintain Innovate
(desired outcome) share
performance
Actions Price Product Place Business model Communication

(available levers)
Feedback loop
Actual outcomes
Why does this action work or not?
Figure 2: Competitive action process flow

COMPETITIVE ACTIONS RESOURCES KEY
The elements listed below represent suggested inputs to the formulation of competitive actions. There
are six sets of inputs and a contingency approach has been followed insofar as the use of the different sets
is dependant on the stimulus of the action. In the ‘Stimulus’ section that follows in this guide, each of the
three clusters of stimuli have been broken down into a range of possible stimuli and the appropriate sets
of inputs have are indicated for each one.
Data Tools Competitors

• Customer surveys • Customer matrix • Competitors’ products/
• Focus groups • Primary benefit map services
• Ethnographic studies • Ansoff’s growth matrix • Competitors’ pricing
model
• Informal channels • Porter’s 5-forces
• Intensity of rivalry
• Core competency
• Relative company size
• New value curve
• Relative profitability
• Resource based view
Benchmarks Team Industry

• Competitive actions in • Education & training • Industry maturity
parallel industries • Level of experience of • Fragmentation
• Competitive actions in managers • Strategic groups &
other territories • Functional biases cognitive communities
• Evolution of industries in • National & cultural • Degree of turbulence
other territories backgrounds
• Relevant experiences
in other territories and
parallel industries
Figure 3: Competitive actions formulation tool box
The abovementioned inputs are described in greater detail later in the guide in ‘Competitive action
resources’ section.

STIMULI
The stimuli are the factors that trigger the competitive action and have been clustered into the three
categories listed below. The inputs needed to set objectives for and formulate competitive actions have
been listed and recommendations in relation to setting objectives based on different stimuli have been
provided in this section.
1. Declining or compromised performance

2. External or environmental changes
3. Shareholder or management plans
Declining or compromised performance

The stimuli to this category of actions tend to be linked either to products or services that were no longer
optimally positioned in the market, in terms of their attributes and prices, or to markets that have grown
more competitive and have possibly become saturated. The research shows that managers place a high
degree of reliance on customer feedback in order to effectively formulate their competitive actions.
Inferior performance Waning or

compared with stagnant sales
competitors
STIMULUS
Unsuitable product Declining profitability
Declining or
mix or pricing for a due to increased
compromised
particular market competition
performance
OBJECTIVE
Increase market share
Figure 4: Stimuli and objectives related to declining or compromised performance

Stimulus Points for consideration
Inferior sales performance or Has your competitive set changed and has your decline in sales or profitability been the
profitability when benchmarked result of new market entrants?
against competitors How have competitors’ products, service or brands evolved in relation to yours?
Have competitors resource bases changed or have they developed new competencies?
Waning or stagnant sales Are you aware of the possible reasons for waning or stagnant sales and has data, such
as customer surveys, as well as data gathered through informal channels, been use to
validate this?
Have you considered your competitors, their brands and their product or service offerings
and how you and your brand and product or service offerings compare?
Declines in profitability due to Have you considered the recent evolution of your industry and are you able to identify
increased competition the stage of its life cycle? Specifically, has it matured and stabilised, resulting in lower
profit margins?
Instead of constantly fighting rivals through cost cutting and imitation, have you considered
creating a new market space, as Kim and Mauborgne (1999) postulate in their article
‘Creating New Market Space’ and their book, ‘Blue Ocean strategy’?
Product mix, product attributes Do you have sufficient data to reposition or update your product mix, product attributes
or pricing have become, or or pricing structures? This data can be collected from informal channels, such as managers
are becoming, unsuitable for a speaking with shop floor staff and directly with customers, as well as formal channels.
specific market Have you assembled, or do you have access to, the right mix of marketing, commercial,
financial and product specialists to find solutions to optimally repositioning or updating your
product mix, product attributes or pricing structures?
Table 1: Points for consideration related to declining or compromised performance
In terms of objective setting, the logical desired outcome to these stimuli is an increase in market share.
The permutations to the objective of increasing market share are dealt with in the ‘Objectives’ section of
this guide.
External or environmental changes

This category is focused on the influence of external factors outside the control of managers and examples
of these stimuli include:
• Customer requests for specific functionality or a new or enhanced product or service offering
• Changes in regulation or the introduction of a new regulation or set of regulations
• The introduction of new technology, such as improved Internet connectivity, new mobile devises, more
affordable computer hardware and new telecommunications technology
• Changes in economic conditions, such as an interest rate change or an increase or decrease in the rate
of economic growth
• Changes in competitors’ product mixes, their pricing or market approaches
• New market entrants that threaten the existing competitive environment
• A change in market conditions, such as a change in consumer behaviour or taste, a change in interest
rates or a change in regulation

Changes in a
competitor’s product
mix, pricing or
marketing approach
Customer request for a

Introduction of
specific functionality
new technology
or a new product
Changing or evolving Change in economic

customer requirements conditions (e.g. interest
or tastes rates, growth)
STIMULUS
Threat from new External or Regulatory change
market entrant environemtal
change
OBJECTIVES
Restore or maintain
Increase market share Innovate
performance
Figure 5: Stimuli and objectives related to external or environmental changes

Customer request for specific Does the new functionality, enhancement or new product or service offering have a broad
functionality or a new product enough market to justify its development?
Will the functionality make the product competitive or more competitive than it already is
and does the benefit outweigh the cost?
What will the consequences of not developing the new functionality, enhancement or new
product or service offering be?
Regulatory change Have you considered the impact the regulatory change will have on your competitors and
their products and services relative to your business and your products and services?
Have you looked to similar businesses to yours with similar products or services in other
countries or markets that have regulations and regulatory environments similar to those that
you will have once the change has been implemented?
Introduction of new technology Have you assembled, or do you have access to, the right mix of skills and experience to
work out how your product or service offerings can be optimised using the new technology?
Have you considered your competitive environment, each of your competitors and the
competitive advantage or advantages that the new technology could give you?
Have you looked at to other countries or markets where the technology has already been
deployed to see how its deployment has resulted in success or failure?
Changes in economic Are you able to develop new products or services or update existing ones by pre-empting
conditions (e.g. interest rates, the change in economic conditions?
growth) Have you considered the impact the economic change will have on your competitors and
their products and services relative to your business and your products and services?
Changes in a competitor’s Have you considered using tools such as the Customer Matrix (Bowman and Faulkner, 1994)
product mix, pricing or and the Primary Benefit Map (D’Aveni, 2007) to understand how the competitor’s changes
marketing approach impact the positioning of your brand, product or service?
Have you used the Resource Based View (Penrose, 1959) and considered your core
competencies (Prahalad and Hamel, 1990) to establish how best to compete with the
relevant competitor following the implementation of their changes?
Have you collected sufficient data to understand how customers perceive the changes and
your relative market position?
Have you assembled a team with, or do you have access to, the right mix of skills and
experience to work out how your product or service offerings can be optimised using the
new technology?
Threat from a new market Do you know in detail what the new market entrant is offering as a product or service and
entrant what their unique selling points are? This data can be collected through informal channels,
such as speaking with customers that have been in contact with the new market entrant.
Are you aware of the dynamics of the industry and is the new market entrant able to either
join or rival any of the existing strategic groups?
experience to properly evaluate the threat that the new entrant poses and how you can best
deal with it?
Changing or evolving customer Do you have adequate data to understand the changes or the evolution of your customer
requirements or tastes requirements or tastes?
Are you using tools such as the Customer Matrix (Bowman and Faulkner, 1994) or the Primary
Benefit Map (D’Aveni, 2007) to map the changing or evolving customer requirements or
tastes and how they relate to yours and your competitor’s product or service?
experience to properly evaluate the changes or the evolution and to effectively respond to
it or them?
Table 2: Points for consideration related to external or environmental changes
In terms of objective setting, there are three suggested objectives, including:

1. Restore or maintain existing performance
2. Increase market share
3. Innovate
Each of these objectives is covered in subsequent sections of this guide.

Shareholder or management plans
This category is focused on pressure exerted on managers by their stakeholders and examples of these
stimuli include:
• Use retained earnings or new capital to start a new business or develop a new product or service
offering
• Extend the existing product or service offering
• Change customer perceptions about product or service attributes or prices
• Review markets, the product portfolio and prices to optimise profits
• Diversify geographically to reduce risk or concentration
• Expand geographically to improve profitability
Use retained earnings

or new capital to start
a new business or
Expand geographically develop a new product/
to improve profitability service offering
Diversify business Extend existing

geographically to reduce product/service
risk or concentration offering
Review markets, STIMULUS Change customer perceptions

product portfolio Shareholder or about product/service
and pricing to management attributes or price
optimise profits plans
OBJECTIVES
Increase market share Innovate
Figure 6: Stimuli and objectives related to shareholder or management plans

Use retained earnings or new Have you thoroughly mapped your resources and competencies to those of your
capital to start a new business competitors and considered your relative advantages?
or develop a new product or Have you considered how you may be able to use your existing resources, processes and
service offering intellectual property to develop a new business or product or service offering in an efficient
and cost-effective manner?
Extend the existing product or Are you aware of the market requirements in relation to your existing product or service
service offering offering and how you could more accurately and comprehensively meet them?
Have you gathered sufficient market data using surveys, focus groups and informal channels
to make informed decisions regarding product or service offering extensions?
Change customer perceptions Do you have sufficient data to really know how customers perceive the respective product
about product or service or service attributes of prices? Apart from data collected through formal channels, such as
attributes or prices surveys, has data collected through informal channels, such as sales people speaking with
customers and employees perceptions, been taken into account?
Have the desired customer perceptions been clearly articulated and documented?
Diversify geographically to Which market or markets offer the greatest diversification effect (i.e. which markets, in terms
reduce risk or concentration of performance and risk, are least correlated with your home market)?
Are you certain that your products or services will be accepted in the target markets and
what data has been collected to support this?
Have you thoroughly considered the competitors in the target markets and have you
properly evaluated the effects of possible rivalry when you launch in the new markets?
Expand geographically to Are you certain that businesses in new markets will be more profitable than your business
improve profitability in your home market and, if so, have you considered multiple markets and compared them
against each other?
Has your product or service offering been developed to its fully potential in your home
market to the point you have a ‘tried and tested’ solution to take to new markets?
Have you properly considered your competitors in the new markets and have you properly
evaluated the effects of possible rivalry when you launch in the new markets?
Table 3: Points for consideration related to shareholder or management plans

OBJECTIVES
The research showed that after being stimulated to act, manager envisage desired outcomes and set
objectives as a first step. Thereafter, they formulate actions to achieve the objectives. Managers are
inhibited by various constraints in formulating actions and need to act within predefined parameters in
trying to meet their objectives.
The objectives that managers set themselves as a result of their respective stimuli are listed in this section
and the levers that can possibly be used to execute actions that follow on from each of the objectives
are discussed. The objectives have been clustered into the following three broad sets of objectives that
managers could choose from:
1. Restore or maintain performance
2. Increase market share
3. Innovate
The applicability of employing the various levers is often constrained by internal and external factors and
influenced by the stimulus to the action and the context in which the managers formulate them. Five broad
groups of levers have been identified, including:
1. Price
2. Product
3. Place
4. Business model
5. Communication
For each of the three objectives, the corresponding levers have been clustered into the columns below the
objective. The focus of this section is on the internal and external factors that managers could think about
when deciding which lever or levers to use, as well as the influence that the stimulus and the context could
have on them.

Restore or maintain performance
Price Product Communication

• Price has proved to be the • Agents, distributors as well as • Marketing messages may be
easiest lever to use with the subsidiaries and divisions within supported, and constrained,
most direct effect. It can also businesses are often unable to by group level marketing
be applied in every situation alter or influence the functional campaigns or policies. This
(i.e. no matter what the and technical attributes of the applies, especially to agents
stimulus to the action is, its products they market and, and distributors.
objective or its contextual therefore, cannot use the • It may be worthwhile
setting). product lever, except to bundle considering what has been
• Changes in price can also different product together or done elsewhere by associated
have the effect of altering pre-configure products for companies or business unit.
consumers’ perceived value of specific markets.
a product or service. • Product or service attributes
• Price changes can be obscured can take time to change or
to become opaque to update, due to R&D production
consumers by, for example, and distribution routines and
cross subsidising financing stock that may need to be
plans or including extended depleted before new products
warranties with a product. can be introduced.
• Product functionality can be
expanded as an effective
means of responding to
competitive pressures
from new rivals, as well as
existing competitors.
Figure 7: Considerations for levers to use to restore of maintain performance

Price Product Place Communication

• Price is always the • The segmentation • The company’s • While we often think
easiest lever to pull of markets and distribution channels of communication
in order to increase understanding often inhibit market purely in terms of
market share. different segments’ share. Changing, advertising and
However, this may requirements and updating or public relations,
be met by intense tastes enables adding additional there are a host
rivalry, possibly in company’s to tailor channels can be of other means of
the form of price product variants to a cost effective creating marketing
wars and particularly different segments. and expeditious messages. For
in oligopolistic Each segments’ way of increasing example, a
industrial structures. offering can also market share. showroom with
• Revenue is always be mapped to • Where the marginal a particular look
limited by what competitors’ cost and effort of and feel and in a
consumers are offerings to increasing market specific location
prepared to pay differentiate them. share in a particular sends a message
for products and • New technologies market is high, new to customers
services. However, can often be used to markets where the and prospects.
not all consumers create competitive cost and effort of • Communication can
are willing to pay advantage. Early expanding is likely be used to make
the same and adopters may also to be relatively lower the use of a specific
additional revenue benefit from first could be considered. product or products
can often be realised mover advantages. • Concentration of more compelling by
by segmenting the • Maintaining a broad a specific offering making consumers
market according range of competing in a single, or few, aware of their own
to price sensitivity. products may make markets can be risky, peculiarities. For
Product or service a company’s market particularly when the example, reminding
attributes are often presence more company has a large certain consumers
used to distinguish pervasive but it is share of the market. of their own health
the different sectors also expensive to The risks relate to issues may give
from one another. do so and there is the performance of specific product
a trade-off with the the market as well or company an
benefits of focusing as the actions of advantage over its
on fewer products competitors and, competitors.
• Products can in such a scenario,
be bundled in expanding into other
combinations markets would be
exclusive to worth considering.
the company.
Figure 8: Considerations for levers to use to increase market share

Innovate
Product Place Business model

• Regulation and economic • While we normally think of • Business models are often
constraints may govern innovation in product terms moulded to suit environmental
what is possible, in terms of and, to a lesser extend, in factors, such as competition
product innovation. Likewise, terms of business models, and regulation. For example,
changes in regulation or innovation can also apply to many investment banking
economic conditions may new territories. Specifically, business models have been
provide opportunities for new territories can be sought developed in response to
product innovation. where the success of a product taxes. Changes in external
• Changes in consumer or service in a particular market factors can threaten business
behaviour and tastes, as can be replicated. This may models but can also present
well as social issues, such as mean adapting the product opportunities to adjust or
environmental impact, may or service for the new market rethink business models.
present opportunities for or it may be maintaining its • Applying existing products to
product innovation. originality in order to increase meet new requirements, often
the chance of success through in new markets, can develop
• Competitive barriers can replication. As examples,
be raised by bundling a new business models. For
consider products such as example, the low-cost carrier
combination of products motor vehicles, that are usually
together than no other single model can be applied to the
adapted for new markets, private jet market to provide a
competitors has. versus a product such as cost and time effective solution
• Product innovation can take the Coca-Cola, where deviating to busy business travellers.
guise of adapting an existing from the original product
product or service for another will compromise the chance • New technologies can enable
market with the same or similar of success. changes to business models.
consumer requirements. For example, Software as a
Service (SAAS), has allowed
• By tracking evolving consumer many software and software
tastes, requirements and service companies to radically
behaviour, derivatives of change their business models.
existing products can be
created to exploit the changes.
Figure 9: Considerations for levers to use in innovating

ACTIONS
As mentioned previously in this guide, the process of formulating specific actions tends to follow the
establishment of objectives. The actions are then formulated with the aim of accomplishing the objectives.
There is a range of levers that can be used to execute the actions and they have been clustered into the
following five groups:
1. Price
2. Product
3. Place
4. Business model
5. Communication
This section describes very specific actions associated with the five levers listed above that could be used.
This section is indented to spawn ideas, in terms of actions that could be formulated to meet managers’
objectives. The specific actions listed in this section are also meant to help managers think about the
appropriateness or relevance of applying one or more of the five levers before deciding on a course
of action. In considering the five levers and the specific actions listed in this section, managers should
ask themselves:
1. How could each of the five levers be used to achieve my objective?
2. In the context of my objective, which lever or levers would be most relevant and why?
Bundle after-sales support

service or extended warranty
with used-products to
compete more effectively with
competitors’ new products.
Segment the market and Cross subsidise finance

provide a range of price costs from purchase price
points for different product Price to compete more effectively
and service offerings to with compromising the value
capture marginal revenue. of the perceived value of the
product/service offering.
Figure 10: Actions associated with the ‘price’ lever

Develop a derivative of Research products and services
an existing product that in parallel industries in order
satisfies the tastes, attitudes to develop an improved
and price elasticity of a new market offering.
consumer segment.
Bundle sets of synergistic Develop new functionality to

products in instances where close product gaps, match
competitors only have access competitors’ functionality and
to part of those product sets to fend off rivals.
raise competitive barriers.
Expand into parallel industries’ Use a change in the economic

that target the same market environment to update an
segments by altering existing Product existing product or develop a
products or introducing new one.
new ones.
Segment the market and Carry out regular and extensive

provide variations of product consumer surveys and update
or service offerings to capture or replace products in response
marginal revenue. to evolving consumer tastes
or attitudes.
Discontinue a particular product Customise products for specific

or products to focus on another, market requirements in response
remaining product or products. to local consumer behaviour,
tastes and perceptions of value.
Figure 11: Actions associated with the ‘product’ lever

Establish subsidiaries in
new but similar territories to
market existing products in
order to reduce geographic
concentration
Establish new distribution Distribute existing products in

channels and promotion new markets on the basis of
mechanisms, such as consumer behaviour, tastes,
product showrooms for Place elasticity of demand and
greater penetration of an competitive environments to
existing market. optimise sales.
Seek out another territory

with similar market dynamics
and consumer tastes for
geographic expansion
when an existing market
for a particular product
is saturated.
Figure 12: Actions associated with the ‘place’ lever
Use a change in regulation

to update or to abandon an
existing business model or
to develop a new business.
Use new technologies that

allow faster and cheaper Bundle products together
processing, cheaper data to increase competitive
storage and improved barriers and improve
Business plan competitive position.
connectivity to develop
new business models, such
as SaaS.
Use existing technology to Acquire businesses with

develop a new product or complimentary products
service offering exploiting or services in order to
partnership with, for strengthen customer
example, retailers and relationships and open up
local government. cross-selling opportunities.
Figure 13: Actions associated with the ‘business model’ lever

Develop a marketing
campaign to communicate
product changes that result
in competitive advantage
that consumers may not
be aware.
Communicate the factors Devise a communication

that make a product campaign to reset product/
or service proposition service price perceptions
compelling to prospective Communication without compromising
customers that may not be the perceived value of the
aware of them. product/service offering.
Use new technologies for

omni-channel distribution
of information previously
distributed through print.
Figure 14: Actions associated with the ‘communication’ lever

Page21
Competitive strategy cycle
FEEDBACK LOOP
Competitive intelligence gathering, competitive positioning, the formulation of competitive actions
and the subsequent execution of these actions are often treated as discreet processes in literature
on the subject. The research found that these these are usually, but not always, well-integrated and
iterative processes. The research also showed that competitive actions were far more effective when
tight integration exists between these processes. Constantineau (1995) suggests, “The application
of competitive intelligence would be more effective if those collecting the intelligence engaged in
discussions with decision makers, made the information more widely available and if they developed
alternative scenarios of likely outcomes to elicit reaction.
Managers develop a view of

how their brands or products
are positioned relative to
competitors
1.
Stimulus triggers
competitive
action
Managers take 2.
5.
decisions about Data is collected
Execution of
actions that need to to equip the
competitive
be taken in order to manager
actions
attain the ideal or for the action
desired positioning of
their brands or
products relative to
competitors 4.
3.
Competitive
Objectives
action
are set
formulation
Managers develop views on the

ideal or desired positioning of
their brands or product
Figure 15: Competitive strategy cycle
A good example is a bank that used their anticipation of a downward shift in interest rates to develop
a new mortgage product. The product’s principal feature was a reduced rate on the mortgage loan for
the first two years - they initially thought of setting this at 5.5% (from 8%) by ended up setting it at 4.5%
deciding this would make the impact they needed based on interactions with the marketing department
and, ultimately, with customers.
In this example the communication channels between customer-facing staff, the marketing department,
the Strategy & planning department, the banks economists and the Asset & Liability committee (ALCO)
were open and fluid. The different inputs, including macro-economic analysis, customer surveys, market
analysis, ALCO committee discussions used to develop the new product were tight and, for example, the
marketing department and the economists knew of the ALCO’s objective of growing the mortgage book,
the Strategy & planning department and the ALCO were informed by the economists of the anticipated
decrease in interest rates and the marketing department worked with the Strategy & Planning department
and the customer–facing departments of the bank to ensure the successful roll-out of the new product.

This is a good example of how competitive actions are developed in a stepped and iterative process
based on dialogues with partners and customers. This example also shows how competitive intelligence
can be integrated with the competitive action formulation and execution process. This type of iterative
process based on dialogue and competitive intelligence was pervasive across the competitive actions
that were analysed. One of the luxury car distributors relied heavily on the feedback they received from
customers and employees while formulating their competitive actions and the manager interviewed at the
flooring retailer in a developing market spent over a month in the store observing customer interactions
and customer comments while formulating his set of competitive actions.
Feurer and Chahrbaghi’s (1995) research asserts that gaps exist between companies’ knowledge and
their competitive positions and concludes that it is difficult to formulate strategies through a process
of conception using a mechanistic approach. Therefore, strategy formulation should be regarded as
a process of continuous learning, which includes learning about the organisations goals, the effect of
possible actions towards these goals and how to implement these actions. They argue that the speed and
the quality of implementation of actions will be influenced by the organisations cognitive and behavioural
learning capabilities.

RESOURCES
This section describes some of the resources available to managers in formulating the competitive actions
covered in the previous sections of this guide. These resources are also referred to in the ‘Stimuli’ section
of the guide, where different resources have been associated with different stimuli. It is intended that,
based on the stimulus, managers will select a number of resources that can be used as a tool kit to support
their formulation of an action.
Data
Customer surveys
Useful in objective setting and formulating actions
Customer surveys are an effective way to gather large amounts of quantitative data as the starting point
to formulating a competitive action. However, the data is not rich, insofar as it is usually limited to a
relatively small set of questions and answers and fails to capture the emergent issues, or the opinions of
respondents that lie outside the scope of the questions. The data may also be biased by the profile of
the respondents.
The advantages of customer surveys and the data that is gathered is that, provided the sample set is large
enough, the data is generalisable and can be used for quantitative analysis. Customer surveys can also be
used to raise awareness of a product or brand amongst the respondents and, in the research for this guide,
one of the companies involved had surveyed one million respondents to both gather data to guide them
in the development of a new, replacement product and to promote the brand and its associated products.
Focus Groups and interviews

Useful in formulating actions related to ‘price’, ‘product’, ‘business model’ and ‘place’
Focus groups will produce richer data than customer surveys, which should allow managers to better
understand the issues relevant to their competitive actions, as well as emergent issues, and should allow
them to further interrogate issues and opinions that emerge during the course of the focus group or
the interview.
The disadvantage of focus groups and interviews is that the sample sets are normally too small for the
results to be generalisable and, therefore, they cannot be used for quantitative analysis. Based on the
research, focus groups and interviews are generally used further into the competitive action formulation
process than customer surveys and are more effective after some data has already been gathered, through
a method such as customer surveys, and the manager or interviewer, therefore, has a foundation from
which to ask questions and interrogate issues and opinions.
Ethnographic studies
Useful in objective setting and in formulating actions related to ‘price’, ‘product’ and ‘place’
Ethnography is a research method based on observing consumer behaviour. As the name implies, it
has its roots in observing and understanding the behaviour of different ethnic groups. In the context of
formulating competitive actions, an ethnographic study would involve spending time, possible days or
even weeks, with consumers, observing, recording and analysing their behaviour.
For example, an airline wishing to improve its customer service may assign a manager to check-in, wait for,
board and take flights with paying customers right up to the point they collect their baggage on arrival
at their destinations and leave the terminal buildings. The manager would observe the comments, their
actions and, particularly, what they like and dislike, what they appreciate and what frustrates them. This
data could then be analysed to affirm what they airline is doing well and could be used as a competitive
advantage and what could be improved on and how this could be achieved in a ways that will best
respond to customers’ dislikes and frustrations.

A good example of ethnography is the success a vacuum cleaner manufacturer experienced when they
discovered the various attachments that came with their machines, including nozzles, would invariable
get lost. They discovered this by spending time with their consumers in their homes and learnt that the
loss of the attachments caused them great frustration. They responded by attaching clasps for the various
attachments to their vacuum cleaners. One of the retailers that participated in my research spent over a
month in the store observing customer interactions and customer comments while formulating his set of
Managers interested in using ethnographic studies to collect data and understand the behaviour of their
consumers could read an article by Richard Elliott & Nick Jankel-Elliott published by the Quantitative
Market Research journal (2003: 6, 4, pg. 215) called Using ethnography in strategic consumer research.
Informal channels
Informal channels were widely used amongst the managers interviewed and the quality and relevance of
the data was often underrated. These informal channels include, inter alia:
1. Discussions with customer facing employees, such as the sales staff and call centre operators, about
the feedback they receive from customers. This feedback ranged from how customers perceived the
prices of products and the relative perceived value to how well garments fitted them and what they
thought made products special and distinguished them from competitors’ products or services.
2. A discussion with employees that had previously worked for competitors and were able to share
information regarding competitors pricing strategies, product research and development plans and
processes, distribution networks etc.
3. Discussions with customers, either through telephone or email communication, or at the point of sale,
such as on the shop floor, about issues and opinions relevant to the competitive action.
4. Discussions with partner organisations that understand the external environment, particularly the
requirements, policies and actions of competitors and customers alike.
In every instance, the data gathered through informal channels was valuable, as it was rich and pertinent
to the issues customers were confronted with and that were important to them. In cases were data was
gathered from staff, it was often the same staff that executed the actions and being part of their research
and formulation made them feel they were part of the end-to-end process and served to motivate them to
ensure its success.
Examples include the re-pricing of credit default swaps by a financial trading house that underwrites
them. The manager that formulated and executed the action noted, “during this period we monitored
what our competitors were doing and we found they were re-pricing their products. We did this by
hiring from competitors, being friendly with competitors to the point we could talk with them about
their pricing strategies, as well as talking to the banks, which were our common clients, about how our
competitors were pricing their products”. One of the luxury car distributors that participated in my
research relied heavily on the feedback they received from customers and employees while formulating
their competitive actions.
Another good example is a software company based in London. After hearing about a new competitor
providing a system to automate a particular function, they spoke with a few of their existing clients about
the functionality and were told “we are currently performing these functions manually and would like
to automate them but it wouldn’t be worth the trouble of doing so on our own”. Given this feedback,
they started discussions with a law firm that advised clients regarding this function and, the manager
interviewed noted, “this led to us forming a partnership with them and we started specifying the
functionality for a product to compete with the new market entrants”. They then, “mocked up a few web
pages to show what the new functionality would look like and our clients were enthusiastic”, which led

them to develop the product and piloted it with two clients before launching it. This is a good example of
how data can be gathered through dialogues with partners and customers. This example also shows how
competitive intelligence can be integrated with the competitive action formulation and execution process.
Tools
Customer matrix
Useful in objective setting and in using the product and price levers to formulate competitive actions
The Customer Matrix was developed by Bowman and Faulkner and is described in their 1994 article titled
‘Measuring Product Advantage Using Competitive Benchmarking and Customer Perceptions’ published in
the Long Range Planning journal (Vol. 27, No. 1, p 110-132). The matrix was measures product advantage,
which is premised on the notion that “competition is acted out through the purchasing behaviour of
individual customers” and, therefore, the basic unit of analysis should be the individual customer and not
the firm, the market or the industry. The matrix comprises ‘Perceived Use Value’ along the one axis and
‘Perceived Price’ along the other.
Perceived* High
use value
B C
D A
Low
Low High Perceived

price
Figure 16: The customer matrix

*Perceived use value (PUV): how valuable the product or service is perceived in use by the customer
The most desirable quadrant is the one with the highest perceived use value and the lowest perceived
price, while the least desirable is the one with the highest perceived price and the lowest perceived
use value. The matrix was designed to help managers better understand a product or brand positions
in relation to their competitors through the lens of the individual customer. Constructing the matrix is
an iterative process that starts with the application of hard information that is then supplemented by
experience and perceptions and refined further as more data is gathered.

Innovation High
Low
Low High Costs
Figure 17: The producer matrix
The authors have also applied their matrix to the producer view and the relationship between ‘innovation’
and ‘cost’, which allows producers to marry their internal dynamics with their customers’ perceptions
regarding price and use value.
Primary benefit map

Useful in using the product lever to formulate a competitive action
The Primary benefit map was developed by Richard D’Aveni and is proposed to predict future competitive
environments by focusing on how customers determine the value of perceived benefits. This involves
using a technique to pre-empt rivals’ competitive actions through the use of price-benefit maps that
are extrapolated to predict competitors’ strategic intent. Regression analysis is used to examine the
relationship between a dependent variable (price in this case) and several independent variables (product

Price
Actual 1997
Primo
Projected 1999
Samur-Ion
Neutryno Actual 1999
Tokyo Tech
Primary benefit: Performance
Primary benefits can be defined as either the relative market position of a particular product or a specific
functional or technical attribute of the product. The Primary benefit map was published in D’Aveni’s article,
“Mapping Your Competitive Position”, in the Harvard Business Review in November 2007 (p 110-120)
Ansoff’s growth matrix

Useful in objective setting
Ansoff’s growth matrix was designed to provide managers with a tool to assist in making marketing related
decisions for future growth. It was published in Igor Ansoff’s article ‘Strategies for Diversification’ in the
Harvard Business Review (Vol. 35 Issue 5,Sep-Oct 1957, pp. 113-124).
Increasing risk
Product
Existing products New products
Market
Increasing risk
Existing markets Market penetration Product development
New markets Market development Diversification

The matrix provides a “joint statement of a product line and the corresponding set of missions which
products are designed to fulfil” and describes four different growth alternatives, including:
• Market penetration, in which the company aims to grow using existing product or service offerings in
existing markets. This entails increasing market share within existing market segments.
• Market development, in which the company aims to expand into new markets using existing product or
service offerings.
• Product development, in which the company aims to create new products or services targeting existing
markets to achieve growth.
• Diversification, in which the company aims to grow its market share by launching new product or
service offerings in new markets. This is the riskiest approach as both product and market development
is required.
Porter’s 5-forces
Useful in objective setting and determining which of the 5 levers to use in formulating competitive
actions
The Five forces model published by Michael Porter in his 1980 book ‘Competitive Strategy: Techniques
for Analysing Industries and Competitors’, provides a framework for analysing the level of competition
within industries. In the book, Michael Porter asserts that firms will have unique strengths and weaknesses
in dealing with industry structure and industry structure shifts over time and, therefore, understanding
industry structure must be the starting point for strategic analysis. The ‘Five Forces’ is a model for
assessing a number of important economic and technical characteristics of an industrial organisation and
Porter suggests that, once the industry structure has been analysed, offensive or defensive actions can be
taken to reposition the brand or product to compete optimally.
Threat of new
entrants
Bargaining power of Bargaining power

suppliers Industry rivalry of buyers
Threat of substitute
products or services
Because the model is aimed at understanding the dynamics of the industrial organisation, and precludes
factors pertinent to the formulation of competitive actions, such as relative product or service attributes,
consumer trends and attitudes and the experiences and skill sets of the managers formulating the actions,
it has limited applicability in this context. It’s real value, in this context, lies in analysing competitive
forces as inputs to the formulation of the action and, therefore, in setting objectives for the action and in
deciding which of the five levers referred to in this guide to use, possibly in combination with each other.

In addition to the Five forces model, a 2 x 2 model for predicting the rate and stability of returns in an
industry based on entry and exit barriers is also provided in the book, as is a 2 x 2 model for deciding on
the Page30
adoption of one of three generic strategies based on the uniqueness perceived by customers of the
Competencies:
product The the
offering and Roots of Competitiveness
firms cost position.
Core competency
Useful in deciding which of the five levers to use and in formulating competitive actions once a lever or
a combination of levers have been selected
Prahalad and Hamel described competencies as the root of competitiveness in their 1990 article ‘The core
competence of the corporation’ published in the Harvard Business Review (v. 68, no. 3, p 79–91). They
postulate that a core competency results from a specific set of skills or production techniques that deliver
additional value to the customer. These lead to the development of core products that can be used to
build many products for end users, which enables the company to access a wide variety of markets.
End products
1 2 3 4 5 6 7 8 9 10 11 12
Business Business Business Business

1 2 3 4
Core
product 2
Core
product 1
Competence Competence Competence Competence

1 2 3 4
Core competencies are developed through the process of continuous improvements over the period
of time rather than a single large change. The article is particularly useful in helping managers analyse
their companies competencies when deciding on which new markets to enter, how to update or enhance
existing products or business models or which new products to develop to ensure optimal success.

New value curve
Useful in objective setting and when pursuing an ‘Innovate’ objective
The New value curve provides a fresh approach to competitive positioning that is premised on establishing
what Kim and Mauborgne (1999) refer to as ‘new value curves’ in their article ‘Creating New Market Space’
published in the Harvard Business Review. They promote a ‘systematic approach to value innovation’ as a
way of avoiding head-to-head competition, which they state “can be cutthroat, especially when markets
are flat or growing slowly”. The pretext of their research is that most companies focus on matching and
beating their rivals and, as a result, their actions tend to converge along the same basic dimensions
of competition.
Kim and Mauborgne contend that firms can position their products or brands in new market spaces by
employing different patterns of strategic thinking. This approach to competitive positioning is premised
primarily on considering substitute industries to establish new value curves. The key to discovering a new
value curve lies in four basic questions:
1. What factors should be reduced well below the industry standard?
2. What factors should be eliminated that the industry has taken for granted?
3. What factors should be created that the industry has never been offered before?
4. What factors should be raised well beyond the industry standard?
New value curves attempt to transform enormous latent demand into real demand. Strategic groups can
generally be ranked in a rough hierarchical order built on two dimensions; price and performance. The
key to creating new market space across existing strategic groups is to understand what factors determine
buyers’ decisions to trade up or down from one group to another. This requires that companies challenge
the functional-emotional orientation of their industries.
Competitors
Competitors’ products and services
Useful in formulating actions related to the ‘Product’ lever
In conjunction with some of the use of tools described above, including the Customer matrix, the
Primary benefit map, Ansoff’s growth matrix and the Core competence model, information about
competitors products and services would be needed to formulate actions related to the ‘product’ lever.
This information would be used as inputs to the tools listed above and would typically include details of
competitive product’s functional and technical features, particularly those features that are unique to that
product or services. Information about how the product or service in question has evolved in the past and
how it is likely to evolve would also be useful, particularly for use in conjunction with the Primary benefit
map. This information can be obtained from a number of sources, including:
• Publicly available marketing material, such as advertisements, brochures and other sales collateral
• Employees that used to work for competitors and have good knowledge of their products or services
• Managers or employees of either customers or suppliers that are common to the company and its
competitors
• Marketing agencies, consultants and market research agencies, such as GfK, that either gather industry
data or work with competitors
Competitors’ pricing models

Useful in formulating actions related to the ‘Price’ lever
As with the ‘Competitors’ products and services, Information about competitors’ pricing models will be
needed if some of the tools described above are to be used, particularly the Customer matrix and the
Primary benefit map. This information would be used as inputs to these tools and would typically include
existing pricing models for competitors’ product or services, as well as information about how these

models are likely to be updated in response to changes in their competitors pricing models, or in response
to any other form of increased rivalry for that matter. This information can be obtained from a number of
sources, including:
competitors
Intensity of rivalry
The intensity of rivalry within an industry and between competitors should serve to inform the objective
or objectives set for an action and, as a consequence, the actions themselves. For example, where rivalry
is intense, managers may consider innovating by developing a new product or a new business model in
order to avoid further competitive pressure, as proposed by Kim and Mauborgne suggest in their article
‘Creating new market space’. Where rivalry is less intense and the industry may still be growing and
enjoying abnormal profits, managers would probably feel less compelled to devote capital expenditure
to the research and development of a new product or service and would rather pursue an action such as
launching a communications campaign to make consumers more aware of existing products or service with
the objective of increasing market share.
This is affirmed by Giaglis and Fouska’s (2011) study published in their article ‘The impact of managerial
perceptions on competitive response variety’. The study explores the relationship between management
perceptions of their competitive environments and their responses to rivalry. It finds that management
perceptions of the intensity of competition; threats of substitution and increased buyer power are
correlated with broader and more innovative competitive reactions.
It should also be pointed out that managers’ often avoid deviating from the conventions set by strategic
groups for fear of rivalry from other firms in the grouping. This is particularly applicable to oligopolies. For
example, managers of an airline or a bank may be reluctant to decrease their pricing below that of their
competitors because of the rivalry it may trigger.
Relative company size

Useful in objective setting and in deciding on which of the 5 levers to use
In analysing competitors and in trying to anticipate rivalry following a competitive action, it is worthwhile
mapping the relative sizes of the various competitors, the markets serve and the customer requirements
they fulfil. Once this is understood, the effects of the competitive action can be better anticipated.
For example, if it is known that there is a much larger competitor, with the advantage of greater economies
of scale and, therefore, lower production costs, already fulfils a particular customer requirement it would
not make sense to try to satisfy that same requirement, even in an indirect manner, as this would probably
mean ending up in the ‘gap in the middle’, as described by Michael Porter (1980) and as illustrated in the
figure below.
Pursuit of niche markets Gap in the middle Pursuit of mass markets

and specific customer and broad customer
requirements requirements
Figure 18: Company size considerations

Smaller companies operating within an industry or a strategic group would be better off considering niche
markets for expansion or profit preservation and developing products and services that meet specific
customer requirements, rather than broad ones.
It was observed that managers at large companies make a mental assumption that their companies should
be able to compete more effectively than their smaller competitors because of their more comprehensive
and more developed resource bases. For example, the manager at a large IT company stated that
by combining their resources, including both internal resources and those made available to them by
partners at preferential rates because of their size, they would have a competitive advantage over smaller
competitors in price and in the functional breadth of their solution offerings. A manager at another large IT
company was surprised that a small competitor could enter their competitive set because he thought they
would not be able to fulfil their customers rigorous procurement requirements.
It is also worth noting that, based on the research, larger companies tend to formulate and execute
competitive actions in order to fend off competitive threats from smaller competitors or as a reaction
to shrinking sales figures or market share, while smaller companies that tend to formulate and execute
competitive actions with the objective of growing their businesses.
Relative profitability
Better profitability usually translates into more retained earning and, therefore, a larger war chest to use to
defend a market position, increase market share or innovate new products, services or business models.
This war chest could, however, also be funded through a rights issue or debt or, in the case of one of the
companies used in the research, the investment of a new shareholder. In this instance, the war chest was
used to acquire companies that own complimentary services that could be bundled with the acquirers
existing products and services to create new and unique solutions and to cross sell products and services
between the collective companies customer bases.
Although this practice it is now perceived as anti-competitive behaviour in most jurisdictions, more
profitable businesses have often used their financial positions to supress or drive rivals out of their
markets. A good example of this was British Airways and American Airlines ganging up on Laker Airways
and, more recently, on Virgin Atlantic to drive them out of the trans-Atlantic airline market. In the case of
Laker Airways, they forced the airline into bankruptcy by colluding to cut their prices to point where Laker
could only compete on a loss-making basis. They continued to do so until Laker Airways was forced out of
business and then raised their prices again. Partly due to the intervention of the regulator, British Airways
and American Airlines weren’t as successful with Virgin Atlantic.
Higher profits need not necessarily be used to defend market positions or increase market share as
blatantly as in the example above. They could, for instances, be used to innovate by either updating
existing or developing new products, services or business models, placing less profitable companies, that
are unable to do so, at a disadvantage. It’s important for managers to be aware of the ramifications of their
profit positions relative to their competitors when they set objectives and when they decide which of the
five levers to use, and how to use them, in the formulation of their competitive actions.
Resource based view

Collis and Montgomery (1995) provide a framework that companies can use to differentiate themselves
from rivals in their article ‘Competing on Resources,’ which is premised on the Resource Based View
(RBV) concept described by Edith Penrose in her 1959 article ‘The theory of the growth of the firm’.
Collis and Montgomery assert that resources cannot be evaluated in isolation because their collective

value is determined in the interplay with market forces. In other words, a resource that is valuable in
a particular industry or at a particular time might fail to have the same value in a different industry or
chronological context.
Scarcity
Value creation zone
Demand Appropriability
The framework combines the internal analysis of phenomena within the company and the external analysis
of the industry and the competitive environment. Specifically, the framework suggests companies should
focus on defining their valuable resources that enable them to perform activities better or more cheaply
than their rivals. The article lists five key characteristics that valuable resources should have, including:
• They’re difficult to copy
• They depreciate slowly
• The company, not its employees, suppliers, or customers, control its value
• They can’t be easily substituted
• They’re superior to similar resources that competitors own

It Competitive Advantage
Resource Competitive advantage

in Great Britain
Freehold 1% occupancy costs versus

Tangible 3% to 9% industry average
locations
Customer recognition
Brand with minimal advertising
reputation
No promotional sales
Intangible
Lower labor turnover

Employee
loyalty 8.7% labor costs versus
10% to 20% industry average
Supplier Lower costs and higher

chain quality of goods sold
Capabilities
Managerial Few layers of hierarchy

judgment
Amongst a number of other companies, the article by Collis and Montgomery (1995) analysed the retailer
Marks & Spencer’s to illustrate the application of the RBV using practical examples. The figure above
summarises the RBV of Marks & Spencer’s.
Benchmarks
Competitive actions in parallel industries and other territories
Useful in deciding which of the 5 levers to use and how to use them in formulating competitive actions
Replicating or learning from competitive actions in other territories or parallel industries can be applied
to any of the five leavers. For example, ride-hailing service, Uber’s, business model has been used in of a
number of other business applications, including food delivery services, corporate jet rentals and home
appliance rentals. In the research we also came across competitors pricing policies and communication
campaigns being copied and competitors’ product features being adapted for application in another
market or to provide a competitive advantage.

Using the competitive actions from other territories or parallel industries can be used in conjunction with
a tool such as the Customer matrix or the Primary benefit map, both of which are covered in the ‘Tools’
section of this guide. The ‘new’ perceived product value, product features or the price of the product
following can be mapped against competitive offerings to try to ascertain the efficacy of the action before
implementing it.
Evolution of industries in other territories

In carrying out research for this guide, a manager of a telco1 in a developing economy stated that most
of their competitive actions are copied from telco’s in developed countries. A media group said they
looked to other markets to see what had been done and they could use in formulating their competitive
actions. The media group saw similar companies in other territories acquiring related media businesses
and bundling the newly acquired businesses products with their own. They followed suit and started
developing new solutions based on bundled media products and services.
The same or similar industries in different territories often follow the same evolutionary patterns but at a
staggered pace. It may be a good idea to identify territories that are evolutionary front-runners and study
them for ideas and input into in deciding which of the 5 levers to use and how to use them in formulating
Team
Education & training
Useful in creating teams to formulate competitive actions at the point of the stimulus
Based on the research, the dichotomy between competitive actions carried out by managers with relevant
and formal graduate and post-graduate business or marketing qualifications and those without, primarily
entrepreneurs, is clear.
Level of manager’s formal training
Figure 19: Managers’ training and level of sophistication of methods used
While the methods used by managers without relevant graduate and post-graduate business or marketing
qualifications are somewhat divergent, it is clear that there is a relationship between the level of training
of the manager and the sophistication of the methods they use in developing their competitive actions.
Particularly, it is clear that managers with more extensive relevant graduate and post-graduate training
used more sophisticated methods.
1 Telecommunications corporation

Regarding causality, it could be argued that larger companies tend use more sophisticated methods
and also place greater emphasis on formal qualifications when employing managers and, therefore, the
sophistication of methods employed is a function of the size of the company and their recruitment policies,
rather than being a direct a result of the level of training of the manager.
When selected team members to formulate and execute competitive actions, managers should be
aware that, if the tasks leading up to the action require a thorough and deliberate approach, they would
probably be better served using staff with formal educations in business or marketing disciplines. Should
the formulation of the action require a more entrepreneurial approach, for example combining products
in new and innovative ways where no data is available to predict how the market would respond or in
addressing to sagging sales due to evolving customer tastes, a more experienced manager should
probably be sought and less emphasis could be placed on his or her education and formal training.
Other skills and training backgrounds could also be considered, depending on the type of action. For
example, if the action involves trying to understand how consumer behaviour is changing or tastes are
evolving and responding to these changes, the skills of an anthropologist could prove to be useful.
Level of experience of managers

My research showed that younger managers, particularly when they have had extensive formal training
in business and marketing disciplines but, due to their age, less experience, tended to be relatively
methodical in their approaches to formulating and executing competitive actions and relied on frames
of reference developed through training. Older and more experienced managers who had accumulated
substantial tacit knowledge over many years but had no relevant formal training, relied more on dialogues
with other managers, employees and customers, as well as their own knowledge, to formulate and execute
competitive actions. Younger managers also tend to have fresh ideas and mental maps based on past
experiences tend to be less deeply ingrained.
Greater reliance on informal methods, such

as discussions with staff and customers and
intuition, to formulate competitive actions
Greater reliance on formal methods,

such as tools and industry data, to
formulate competitive actions
Manager’s age and level of experience
Both approaches are valuable in the formulation of competitive actions and companies would often be
well served by creating teams that comprise both younger but well educated managers with older and
more experienced one, provided possible conflicts and clashes between the different approaches can
be managed.

Functional biases
Bowman’s and Daniels (1995) study on the influence of functional experience on perceptions of strategic
priorities concludes that when managers are asked to reflect on their own company’s situations there is
evidence of functional bias in the perceptions of priorities derived from generic competitive strategies.
Career backgrounds influence managers’ frames of reference (Whitley, 1987). Hodgkinson and Johnson
(1994) argue that the diversity of managers’ frames of reference influences their perceptions of competition
and how their brands or products are positioned in the market.
Hofstede (1980) suggests that managers’ frames of reference influence their perceived control of the
environment and strategic behaviour. There are, of course, also factors within the organisation that
influence managers’ mental models. At the level of functional groups, for example, there are functionally
specific belief systems and perceptions of issues (Dearborn and Simon, 1958; Handy, 1985). Whitley
(1987) argued that managers’ views of the world are shaped, at least in part, by their career backgrounds.
There is a continual interplay between the individual, the context in which he or she operates, the frames
of reference related to these contexts, and the political and social processes at work (Hodgkinson and
Johnson, 1994).
When assembling teams to formulate and execute competitive actions, it may be a good idea to list
the skill sets and the experiences that are ideally required. Thereafter, you could shortlist the staff that
could possibly participate in formulating and executing the specific action and, lastly, map the skills
and experiences of the shortlisted staff to those required for the action. A mix of staff with different
functional backgrounds and biases could prove to be very valuable in covering all bases when formulating
National & cultural backgrounds

Managers formulating and executing competitive actions in their home markets have an advantage over
those operating in foreign markets insofar as they have a better understanding of the local culture and
national peculiarities. Managers formulating and executing competitive actions in foreign markets have
an advantage insofar as they bring learning’s of competitive actions successfully executed in their home
markets with them and were able to apply learning’s and tacit knowledge gained in their home markets
to the new ones. However, in every instance of managers from foreign markets successfully formulating
and executing competitive actions, they did so with the support of local managers. It’s noteworthy that
when a local manager was also involved in the formulation and execution of competitive actions led by
foreign managers in my research, the competitive action appeared to have been executed with relatively
positive results.
Managers draw on a series of frames of reference to make sense of their worlds. Hodgkinson and Johnson
(1994) found that managers’ frames of reference are influenced by their experiences and that national
culture is a strong influencer. As a result, their frames of reference are broader than organisational or
industry level frames. It also suggests that the diversity of frames of reference goes still wider than the
organisation or industry level and that there is increasing evidence that national culture affects managers’
interpretations and responses to strategic issues.
My research showed that a mix of different national and cultures backgrounds could be advantageous
in the formulation of competitive actions, particularly when the frames of reference of a manager that
has successfully responded to a particular stimulus in a foreign territory is combined with those of a local
manager, who understands local national and cultural nuances. It’s worth considering the national and
cultural backgrounds of staff that will be, or could be, employed in the formulation of competitive actions
in relation to the external environment at the point the team is assembled.

A good example of the combination of local and foreign managers for the purpose of formulating
competitive actions is a car distributor in an emerging market. Foreign managers, who had experience in
building the brand and marketing their products in other parts of the world, worked with the local General
Manager, who had been working in his market for over 20 years, had lived in the country his entire life and
who’s frames of reference had been developed through his life and work experiences. A set of actions
where formulated to pre-launch the automobile brand in this market and tasks, such as designing and
developing marketing material and then deciding on which advertising channels to use, where successfully
completed with the input of both sets of managers.
Relevant experience in other territories and parallel industries

Experiences gained in other territories or parallel industries can often be used with great success in the
formulation and execution of competitive actions. In my research we came across many instances of
managers looking at other industries in their own territories or the same industries elsewhere, either for
inspiration in formulating their competitive actions or to find specific opportunities they could exploit. In
two cases, products that were successful in one market were produced or exported to another where there
was less competitive pressure and, therefore, higher margins.
It may be useful to take stock of the experiences that staff that could be employed in the formulation
and execution of the requisite competitive action have had in other territories or industries to ascertain
possible relevance.
Industry
Industry maturity
The structure of the industry in any specific market tends to be related to its maturity. In mature industries,
such as the automotive or the FMCG2 (soft drinks, fabric softener, confectioneries and under-arm
deodorants) industries, managers are very aware of whom their competitors are and their relative positions
in the market. As a result, they act very deliberately when gathering market intelligence and when
formulating and executing competitive actions. Managers operating in emerging or growing industries,
whose industrial structures are therefore still evolving, tend not to have their competitors defined that
clearly. They are also less deliberate in their approaches to gathering market intelligence and formulating
and executing competitive actions than managers operating in mature industries.
Managers tend to be more deliberate in the

formulation of competitive actions
The formulation competitive actions

and the methods managers’ employ
tend to be more emergent
Industry maturity
Figure 21: The formulation of competitive actions and industry maturity

Based on my research, the competitive set tended to be fragmented and opaque to managers operating
in nascent industries, while in mature industries the competitive set tended to be well established and
managers’ frames of reference and they tended to be more aware of who their competitors were and what
their competitors were doing in the context of competitive actions. The managers that were interviewed at
IT companies, whose industrial structures were still evolving and, therefore, their competitive sets were not
as clearly defined as those of the automotive or FMCG industries, were less deliberate in their approaches
to gathering market intelligence and formulating and executing competitive actions. They viewed their
competitive environments less clearly than those in the automotive and FMCG industries and were less
aware of how competitors might react to their competitive actions. They were also less formulaic in how
they gathered data and made decisions related to competitive actions.
A fruit juice manufacturer had very precise sales data for his brands and those of his competitors and
was able to estimate the income and expenses associated with producing and marketing his brands, as
well as those of his competitors’. The approach to formulating competitive actions was also very precise,
surveys were used to gauge market acceptance and a tool was used to estimate sales volumes related
to new products being considered and how much would need to be spent on marketing to achieve
these volumes.
One of the managers interviewed at a company that produces smart cards, was aware that if all they
did was produce and market them, their competition would be intense and their margins would be low.
The manager also took a resource based view of the business and, taking into account their size and the
relatively high skills sets and the corresponding cost of their personnel, decided to use the smart cards
they produced as a mechanism to deliver services that fulfilled very specific needs. In doing so, they
were able to achieve much higher margins than they could otherwise. The manager wasn’t aware of what
the alternatives to the solutions they provided were. Neither was she aware of their competitors. As the
business was highly innovative and the markets they entered or created were nascent, the industry was
unstructured and the players in the industry were highly fragmented. Therefore, there wasn’t really a need
to be all that aware of their rivals or to use sophisticated methods for gathering market intelligence and for
formulating competitive.
It is useful to be aware of high mature the industry you operate in is and how well developed it’s structures
are. This has an impact on the data that is available to you and your competitors and it’s sources, as well
as the rivalry you are likely to experience, which affects the objectives you can set for yourself and the type
of actions that are likely to be successful. It is also worth reading the section that follow, particularly those
about ‘Fragmentation’ and ‘Strategic groups & cognitive communities’.
In mature industries Competitors’ data (sales data etc.) should be available through formal channels, such
as marketing agencies to use in formulating competitive actions. You could try to augment this data with
data obtain through informal sources, such as employees that used to work for competitors and shared
customers that are prepared to talk about your competitors to gain a more well-rounded view of your
competitors’ plans and actions. In nascent industries competitors’ data (sales data etc.) won’t be readily
available so you will need to use informal sources, such as employees that used to work for competitors
and shared customers that are prepared to talk about your competitors.
Fragmentation
Useful for understanding industry structures, particularly in objective setting and in deciding on which of
the 5 levers to use
The fragmentation of competitors in an industrial structure is more likely to be evidenced in a nascent or
growing industry than a mature one, where industrial structures have been established over many years.
In my research, we analysed the way in which a smart card producer that uses the cards as mechanisms
to develop and launch products that fill specific market needs view and relate to competitors and
potential competitors. The company sought to avoid competing with other smart card producers’ head

on by finding unsatisfied customer needs that they could respond to with solutions that used the smart
card as a delivery mechanism. These customer needs where synonymous with nascent and fragmented
markets and their focus was on satisfying customer needs with little or no consideration for the
competitive environment. This is a function of the maturity of the industry they operate in and its relatively
unorganised structure.
Fragmented industries can present great opportunities and the smart card producer is a very good
example of how companies can avoid head-to-head competition by seeking out unsatisfied customer
requirements in parallel industries that are nascent and fragmented. This is the approach advocated by
Kim and Mauborgne in their 1999 article in their article ‘Creating New Market Space’ published in the
Harvard Business Review. They describe the approach as seeking ‘new value curves’.
If you are operating in a nascent or growing industry, it is worth asking yourself if you are aware of
possible new market entrants? In many organisations, the links between the market intelligence gathering
function and the sales, marketing and planning functions are weak. With these functions integrated, the
organisation will be in a better position to anticipate and deal with threats from new market entrants
as early on as possible, which is particularly pertinent to fragmented industries whose structures are
still evolving.
If you’ve identified a threat from a new market entrant, you should be able to clearly describe their
product or service offerings and identify the market segments or niches they’re targeting. As an integrated
organisation, it would be worth scanning the market periodically to identify threats from possible new
entrants as early on as possible. Once identified, you should gather intelligence on their product or service
offerings and identify the market segments or niches they are targeting.
Strategic groups & cognitive communities

the 5 levers to use
Strategic groups are part of the way strategists organise and make sense of their competitive
environments (Reger & Huff, 1993). Specifically, managers simplify their competitive environments by
focusing upon a subset of firms competing within an industry (Daniels, Johnson and de Chernatony, 2002;
Easton et al. 1993; Gripsrud and Gronhaug 1985; Hodgkinson and Johnson 1994; Lant and Baum 1995).
They simplify their competitive environments further by categorising their competitors (Porac, Thomas and
Baden-Fuller. 1989; Porac and Thomas 1990, 1994; Reger and Huff 1993). They define their own business
in terms of the label they use to define the cognitive category in which their business is placed (Porac,
Thomas and Baden-Fuller1989) and hence consider their company to be competing most closely with
other companies in that category (Porac and Thomas 1994). Porac, Thomas and Baden-Fuller (1989) use
the term ‘cognitive oligopolies’ to refer to the tendency of managers, even in fragmented environments,
to select a few, very similar organisations as competitive referents. They propose two criteria to distinguish
competitors from non-competitors:
1. The first distinction is made on the basis of technology and companies are competitors when they
share similar technological attributes.
2. The second distinction is made on the basis of product substitutability and companies are deemed to
be competitors when they produce products that can be substitutes for one another in the satisfaction
of a customer requirement.
The construction of cognitive groups allows managers to estimate the effects of environmental changes
on sets of organisations within an industry, instead of having to estimate the effects on all firms individually
(Porac, Thomas and Baden-Fuller, 1989). Firms that produce similar products or provide similar services are
often similarly affected by the conditions to which they are exposed (Tallman et al., 2004). Prevailing wage
rates, raw material availability and shifting customer demands are examples of environmental conditions
that similarly impact organisations within a cognitive group. These conditions can possess both limiting
and enabling characteristics that can affect the direction of change for the organisation (Bloodgood and

Morrow, 2003). Managers are attuned to how firms within their cognitive group compete with one another
and are likely to use competitive analysis to help them better understand and predict these organisations’
actions (Porter, 1980).
Though essentially an individual-level concept, cognitive frameworks are influenced by the interactions
individuals have with others (Bogner and Barr, 2000). As interactions occur among a number of different
individuals within a given social grouping, the commonly shared ideas begin to take on an existence of
their own, independent of the individuals that created them, and frameworks that exists at supra-individual
levels begin to emerge (Wiley, 1988). These “shared belief systems” make coordinated activity possible
by providing a common framework for observing and interpreting new stimuli and for coordinating
appropriate action (Kelly, 1955).
Individuals in an industry interact with each other. They go to the same conferences and exhibitions,
they read the same industry literature and they recruit staff from the same labour pool (Reger and Huff,
1993). They share the same suppliers in their value chain activities and observe what competitors do
through benchmarking (Porac et al., 1989). As a result, shared beliefs about competitive challenges and
opportunities are created through the cross-fertilisation of such interaction. Potentially, this may lead to the
adoption of similar ideas and practices and thus may hinder differentiation.
Over time, individuals within the firm share experiences and knowledge with one another, and a base of
common knowledge and ‘views of the world’ begin to form (Bogner and Barr, 2000). Interactions among
firms within an industry create a similarity in beliefs and actions that has led others to suggest the existence
of industry-level frameworks. It would also appear that individuals might hold somewhat different construct
systems yet share common category structures at the level of the industry. Furthermore, it appears
that there is divergence between the mental models of senior managers, which results from the task
environment and their objectives of differentiating their products and brands through competitive actions,
yet cognitive convergence exists at the functional management level, where managers are influenced by
the institutional environment and motivated by conformity with industry standards and processes.
It is also evident form my research that oligopolies act in a coordinated fashion in the context of
competitive actions. Kelly (1995) noted “Shared belief systems enable coordinated activity by providing
a common framework”. These structures are associated with industry maturity. In other words, as an
industry matures so the structures become more and more engrained. My research confirms this insofar
as managers in the mature industries, including the automotive, financial services, FMCG and fashion
industries, were far more aware of their competitors and, therefore, the structures of their industries,
than the managers operating in nascent (emerging and growth) industries, including the information
technology, smart cards and new media industries. Wiley (1988) asserts that supra-individual level
frameworks emerge as interactions take place among different individuals within a given social grouping
and the commonly shared ideas begin to take on an existence of their own, independent of the individuals
that created them.
Managers operating within defined strategic groups may consider deviating from industry norms, in the
context of product development, communication campaigns and the reconfiguration of product or service
offerings or the way in which they are packaged, in an attempt to increase their profit levels above their
industry norms. Managers may also prefer to take comfort in not to deviating from industry norms for fear
of possibly compromising their profits.
Degree of turbulence
Useful in understanding the effect turbulent environments might have on competitive actions
throughout the formulation process
Conventional cognitive frameworks employed to make sense of industrial competitive environments may
not work in turbulent industries. Bogner and Barr (2000) describe the cognitive frameworks employed in
hypercompetitive industries as “adaptive sense-making” and suggest that in hypercompetition those

processes continue indefinitely as members of the industry continually seek to disrupt it. Further, they
argue that these processes can become institutionalised as standard operating procedures within firms
and as shared recipes within industries, which in tum perpetuates hyper-turbulent conditions. Thus,
hypercompetition becomes a relatively permanent situation, though it may be punctuated by brief periods
of stability.
Schneider and Shiffrin (1977) observed two qualitatively distinct processing modes in their study, being
‘Automatic’ and ’Controlled’. Automatic processing was described as unintentional, involuntary, effortless,
autonomous and occurring outside of awareness. In contrast, controlled processing was described as
flexible, within an individual’s intentional control, effortful, active, constrained by short-term attentional
resources and motivated or strategic. Uleman (1989) formulated an expanding continuum of multiple,
fuzzy and overlapping cognitive processing modes that form a progression from absolutely automatic to
unconditionally controlled.
Competitive action formulation
Figure 22: Controlled vs. automatic decision making in the context of competitive action formulation
Reger & Palmer (1996) found that as situational uniqueness increases, accurate interpretation becomes
more difficult and, in unfamiliar environments, automatic category assignments based on out-dated
maps are likely to result in erroneous action, as automatic judgments are made without reflection.
They concluded that managers’ cognitive maps, on a collective basis, became less consensual as the
environment became more turbulent. However, the mean number of constructs per individual increased
only slightly and not significantly.

Automatic mode Controlled mode
Controlled
Elicited through construct naming and
multidimensional competitor ratings
Automatic
Page48
Elicited through similarity
Cognitive interpretations in stable and
judgements in triadic comparisons
changing environments
Pure automatic processing Pure controlled processing

(unobserved theoretical construct) (unobserved theoretical construct)
Figure 23: Continuum of processing modes
Reger and Palmer (1996) stated that many strategic decisions are made under stress and time pressure
and, despite sophisticated planning and decision support systems aimed at coercing executives
into controlled processing, automatic cognitive processing may be the dominant mode in strategic
issue diagnosis.
Controlled mode
Re-interpretation
of environmental
events
Controlled mode
Automatic mode
Inertia
Automatic mode
Stable environment produces strong Changing environment produces weaker

correspondence between cognitive correspondence between cognitive
processing modes and accurate processing modes and less accurate
interpretation of environment in interpretation of environment in
both modes automatic mode
Figure 24: Cognitive interpretations in stable and changing environments

When environments are relatively stable for long periods of time, reinforcement of well-learned, ready-
made categories occurs (Reger and Palmer 1996, Dutton 1993). This results in a strong convergence
between automatic and controlled schemas. Automatic and controlled mental models are expected to
remain similar until the environment changes substantially enough to render them obsolete (Reger and
Palmer 1996).
Consistent with Schumpeter’s (1942) and the Austrian school of economics theory of innovation and
abnormal profits, Wiggins & Ruefli (2005) assert that no one except the innovator makes a genuine ‘profit’
and that the innovator’s profit is always quite short-lived. Their research finds that:
• Periods of persistent superior economic performance have decreased in duration over time
• Hypercompetition is not limited to high-technology industries, but occurs throughout most industries,
but that superior economic performance decreases in duration over time in both ‘high-tech’ and ‘low-
tech’ industries but at a slower rate in ‘low-tech’ industries
Over time, companies increasingly have sought to sustain competitive advantage by concatenating a
series of short-term competitive advantages. Schumpeter and Wiggins & Ruefli contend that the only way
to sustain superior economic performance or abnormal profits is to constantly innovate.
My research found that the intensity of competition is also a function of cultural and national norms, as well
as regulation. For example, the anti-corruption laws introduced in Mainland China caused considerable
competitive upheaval in the fashion industry and the procurement regulations imposed on state-owned
entities in Kazakhstan guided the way in which other state-owned entities marketed and sold their
products and services. D’Aveni (1994) noted that the airline, banking, and telecom industries in the United
States had been hypercompetitive for some time but yet in Japan, and to a lesser extent continental
Europe, social and cultural norms imposed constraints on adapting such rapid and discontinuous
change frameworks.
Managers that find themselves operating in competitive environments that are turbulent, or are becoming
ever more turbulent, should be aware of the impact the situational uniqueness is likely to have on
their environmental interpretations and their mode of processing. Regarding how to effectively deal
with increasing turbulence, managers could consider one of two approaches, depending on the core
competencies of their companies. These include:
1. Innovate in order to sustain superior economic performance. This innovation could apply to products,
pricing policies, communication campaigns, sales and distribution structures and practices or
business models.
2. Look to apply your core competencies to other products or services or in other industries or territories
where ‘new value curves’, as advocated by Kim and Mauborgne in their article ‘Creating New Market
Space’ published in the Harvard Business Review in 1999.
In either instance, it would be worthwhile reading the article by Prahalad and Hamel (1990) titled ‘The
core competence of the corporation’ and the article by Collis and Montgomery (1995) ‘Competing on
Resources’, which provides a framework that companies can use to differentiate themselves from rivals that
is premised on the Resource Based View (RBV) concept described by Edith Penrose in her 1959 article ‘The
theory of the growth of the firm’.

REFERENCES
1. Ansoff, I. (1957) Strategies for Diversification, Harvard Business Review, Vol. 35 Issue 5,Sep-Oct 1957,
pp. 113-124
2. Bloodgood, J.M. and Morrow, J.L. (2003), S trategic Organisational Change: Exploring the Roles of
Environmental Structure, Internal Conscious Awareness and Knowledge, Journal of Management
Studies, Vol. 40 Issue 7, November 2003, p1761-1782
3. Bloodgood, Turnley and Bauerschmidt (2007), Intra-industry shared cognitions and organizational
competitiveness, Strategic Change, John Wiley & Sons, Sept-Oct 2007
4. Bogner, W.C. and Barr, P.S. (2000), M

aking Sense in Hypercompetitive Environments: A Cognitive
Explanation for the Persistence of High Velocity Competition, Organization Science, Vol. 11, No. 2,
March-April 2000
5. Bowman, C. and Faulkner, D. (1994) M

easuring Product Advantage, Long Range Planning, Vol. 27, No.
1, p 110-132
6. Collis, D.J. and Montgomery, C. (2008) C

ompeting on Resources, Harvard Business Review, July-
August 2008, p 140-150
7. Constantineau, L.A. (1995), M

aking competitive intelligence actionable, Marketing Research, Vol. 7
No. 1, p546-47
8. Daniels, Johnson, de Chernatony (2002), T

ask and Institutional Influences on Managers’ Mental
Models of Competition, Organization Studies, Vol. 23 Issue 1, 2002 p 31-62
9. D’Aveni, R. (2007), M
apping Your Competitive Position, Harvard Business Review, November 2007, p
110-120
10. Dearborn; de Witt, C. and Simon, H.A. (1958) S elective Perception: A Note on the Departmental
Identification of Executives, Sociometry, Vol. 21, p140-144
11. Dutton, J.E. (1993), Interpretations on automatic: a different view of strategic diagnosis, Journal of
Management Studies, Vol. 30 Issue 3, May 1993, pg 339-357
12. Elliott, R. and Jankel-Elliott, N. (2003), U

sing ethnography in strategic consumer research,
Quantitative Market Research journal, Vol. 6, Issue 4, pg 215
13. Feurer, R.; Chahrbaghi, K. (1995), S

trategy formulation: a learning methodology, Benchmarking for
Quality Management & Technology, Vol 2.1. 1995 pg 38
14. Giaglis, G.M.; Fouskas, K.G. (2011), T

he impact of managerial perceptions on competitive response
variety, Management Decision, Vol. 49 No. 8, 2011, p1257-1275
15. Gripsrud, G. and Grønhaug, K. (1985) S tructure and Strategy in grocery retailing: a sociometric
approach, Journal of Industrial Economics, March 1985, Vol. 33 Issue 3, p339-348
16. Hodgkinson, G.P. and Johnson, G. (1994), E xploiting the mental models of competitive strategists: the
case for a processual approach, Journal of Management Studies, July 1994, Vol. 31 Issue 4, p525-551
17. Hofstede, G. (1980) C

ulture and Organisations, International Studies of Management & Organization.
Winter 1980/81, Vol. 10 Issue 4, p15-41
18. Kelly, M.L. (1955), A

study of industrial inspecption by the method of paired comparisons,
Psychological Monographs: General and Applied, Vol 69 (9), 1955. p1-16

19. Kim, W.C. and Mauborgne, R. (1999), C
reating New Market Space, Harvard Business Review, January-
February, p 83-93

February, p 83-93
21. Penrose, E. T. (1959), T

he Theory of the Growth of the Firm, New York: John Wiley
22. Penrose, E.T. (1960), G

rowth of the Firm – A Case Study: The Hercules Powder Company, Business
History Review, 1960; 34, p1-23
23. Porac, J.F., Thomas, H. (1994), C

ognitive Categorization and Subjective Rivalry Among Retailers in a
Small City, Journal of Applied Psychology, Vol. 79, No.1, p 54-66, 1994
24. Porac, J.F., Thomas, H. and Baden-Fuller, C. (1989), C

ompetitive Groups as Cognitive Communities:
The Case of Scottish Knitwear Manufacturers Revisited, Journal of Management Studies. May2011,
Vol. 48 Issue 3, p646-664.
25. Porter, M.E. (1980), C

ompetitive Strategy: Techniques for Analysing Industries and Competitors, The
Free Press, 1980
26. Prahalad, C.K. and Hamel, G. (1990). T

he core competence of the corporation, Harvard Business
Review (v. 68, no. 3) pp. 79–91.
27. Reger, R.K. and Huff, A.S. (1993) S

trategic Groups: A Cognitive Perspective, Strategic Management
Journal, 1993, Vol. 14, p103-124
28. Reger, R.K. and Palmer, T.B. (1996), M

anagerial Categorization of Competitors: Using Old Maps to
Navigate New Environments, Organization Science, Jan/Feb, Vol. 7 Issue 1, p22-39
29. Schneider, W. and Shiffrin, R.M., (1977) C

ontrolled and automatic human information processing: I.
Detection, search and attention, Psychology Review, Vol 84 (1), January 1977, pg 1-66

ontrolled and automatic human information processing: II.
Perceptual learning, automatic attending and a general theory, Psychology Review, Vol 84 (2), March
1977, pg 127-190
31. Schumpeter, J.A. (1942), T

he Theory of Competitive Price, The American Economic Review,
December, p 844-847
32. Tallman, S., Jenkins, M., Henry, N., Pinch, S. (2004). K

nowledge, clusters and competitive advantage,
Academy of Management Review, Vol. 29 Issue 2, April 2004, p258-271
33. Uleman (1989)
34. Whitley, R. (1987), T

aking Firms Seriously as Economic Actors: Towards a Sociology of Firm Behaviour,
– Organization Studies, March 1987, Vol. 8 Issue 2, p125-147
35. Wiggins, R., Ruefli, T. (2005), S

chumpeter’s Ghost: Is hypercompetition making the best of times
shorter?, Strategic Management Journal, Vol. 26, p 887–911

Page 174


manual version 3

Page 175

A practical guide to the formulation of competitive actions

for strategy and marketing managers

October 2016
HOW TO USE THE GUIDE
The guide was developed to assist managers in the formulation of competitive actions. It can be used by
individuals but should ideally be used in group settings, as the research has found that individuals rarely
have all the skills and experience required to effectively formulate competitive actions, while groups,
comprised of managers with a range of experiences and different skills sets are in a much stronger position
to do so. The guide provides managers with ideas and recommendations that can be used to support the
formulation of competitive actions and follows a framework, abbreviated as SOLAR, which based on the
process managers followed in the research that succeeded the guide. The SOLAR framework is described
in the table below.
Key Step Description

S Stimulus The competitive action process is triggered by a stimulus or stimuli. These can either be external stimuli,
such as the emergence of a new rival or a change in the competitive landscape, or internal stimuli, such as
a long-term business plan introduced by the top management team.
O Objectives Before formulating appropriate actions in response to the stimuli, the research has shown that managers
used the data available to them to envisage the desired outcomes to the actions and to set objectives.
L Levers The levers that can be used in formulating actions are explored.
A Actions Using the selected levers, specifics are formulated competitive actions.
R Refinement The outcomes of actions are fed into follow up or repeat actions, thereby refining actions on an iterative basis.
The guide is not designed to be exhaustive, in terms of covering every possible or permutation in the
formulation of competitive action. Rather, as the diagram below indicates, it deals with a significant
number of competitive actions and seeks to help managers distil their options into a few that are the most
appropriate, giver the stimulus, the
Competitive actions covered in the guide
Range of actions narrowed

through use of the guide
A contingency approach was taken in developing the guide. Meaning, the ideas and recommendations
offered are based on variables, such as stimuli, the managers’ objectives, the environmental context and
the parameters in which the manager is operating. For example, a manager at a company that distributes
products developed and owned by a separate entity, have no control, and probably very limited influence,
over product development initiatives and, therefore, the ‘product’ lever would be unavailable to them. The
guide is split in two sections:
1. A short guide based on the SOLAR framework, which makes use of diagrams and tables as far as
possible
2. A ‘Resources’ guide that describes a list of resources that could be used by managers to support the
Formulating competitive actions | Richard Shaw – October 2016 1

SOLAR PROCESS FLOW
• Changes in a competitor’s
• Expand geographically to
product mix, pricing or
improve profitability
marketing approach
• Use retained earnings or new
• Customer request for a
capital to start a new business
specific functionality or a
or develop a new product/
new product
service offering
• Introduction of
• Diversify business
new technology
geographically to reduce risk
• Changing or evolving or concentration
customer requirements
• Extend existing
• Inferior performance or tastes
product/service offering
compared with competitors
• Change in economic
• Review markets, product
• Waning or stagnant sales conditions (e.g. interest
portfolio and pricing to
rates, growth)
• Unsuitable product mix or optimise profits
pricing for a particular market • Threat from new
• Change customer perceptions
market entrant
• Declining profitability due to about product/ service
increased competition • Regulatory change attributes or price
EMERGENT
PLANNED
Stimulus Shareholder or
performance change management plans
Objective
Restore performance Maintain performance Increase market share
Levers Price Product Place Business model Communication
Action Action
Refine Refine the action


STIMULI
Inferior sales performance or Has your competitive set changed and has your decline in sales or profitability been the result of new market entrants?
DECLINING OR COMPROMISED
profitability when benchmarked How have competitors’ products, service or brands evolved in relation to yours?
against competitors
PERFORMANCE
Waning or stagnant sales Are you aware of the possible reasons for waning or stagnant sales and has data, such as customer surveys, as well as data gathered through informal channels, been use to validate this?
Have you considered your competitors, their brands and their product or service offerings and how you and your brand and product or service offerings compare?
Declines in profitability due to Have you considered the recent evolution of your industry and are you able to identify the stage of its life cycle? Specifically, has it matured and stabilised, resulting in lower profit margins?
increased competition Instead of constantly fighting rivals through cost cutting and imitation, have you considered creating a new market space, as Kim and Mauborgne (1999) postulate in their article ‘Creating New Market Space’ and their book, ‘Blue Ocean strategy’?
Product mix, product attributes Do you have sufficient data to reposition or update your product mix, product attributes or pricing structures? This data can be collected from informal channels, such as managers speaking with shop floor staff and directly with customers, as well
or pricing have become, or as formal channels.
are becoming, unsuitable for a Have you assembled, or do you have access to, the right mix of marketing, commercial, financial and product specialists to find solutions to optimally repositioning or updating your product mix, product attributes or pricing structures?
specific market
Customer request for specific Does the new functionality, enhancement or new product or service offering have a broad enough market to justify its development?
functionality or a new product Will the functionality make the product competitive or more competitive than it already is and does the benefit outweigh the cost?
What will the consequences of not developing the new functionality, enhancement or new product or service offering be?
Regulatory change Have you considered the impact the regulatory change will have on your competitors and their products and services relative to your business and your products and services?
Have you looked to similar businesses to yours with similar products or services in other countries or markets that have regulations and regulatory environments similar to those that you will have once the change has been implemented?
Introduction of new technology Have you assembled, or do you have access to, the right mix of skills and experience to work out how your product or service offerings can be optimised using the new technology?
EXTERNAL OR ENVIRONMENTAL CHANGE
Have you considered your competitive environment, each of your competitors and the competitive advantage or advantages that the new technology could give you?
Have you looked at to other countries or markets where the technology has already been deployed to see how its deployment has resulted in success or failure?
Changes in economic Are you able to develop new products or services or update existing ones by pre-empting the change in economic conditions?
conditions (e.g. interest rates, Have you considered the impact the economic change will have on your competitors and their products and services relative to your business and your products and services?
growth)
Changes in a competitor’s Have you considered using tools such as the Customer Matrix (Bowman and Faulkner, 1994) and the Primary Benefit Map (D’Aveni, 2007) to understand how the competitor’s changes impact the positioning of your brand, product or service?
product mix, pricing or Have you used the Resource Based View (Penrose, 1959) and considered your core competencies (Prahalad and Hamel, 1990) to establish how best to compete with the relevant competitor following the implementation of their changes?
marketing approach
Have you collected sufficient data to understand how customers perceive the changes and your relative market position?
Have you assembled a team with, or do you have access to, the right mix of skills and experience to work out how your product or service offerings can be optimised using the new technology?
Threat from a new market Do you know in detail what the new market entrant is offering as a product or service and what their unique selling points are? This data can be collected through informal channels, such as speaking with customers that have been in contact with
entrant the new market entrant.
Are you aware of the dynamics of the industry and is the new market entrant able to either join or rival any of the existing strategic groups?
Have you assembled a team with, or do you have access to, the right mix of skills and experience to properly evaluate the threat that the new entrant poses and how you can best deal with it?
Changing or evolving customer Do you have adequate data to understand the changes or the evolution of your customer requirements or tastes?
requirements or tastes Are you using tools such as the Customer Matrix (Bowman and Faulkner, 1994) or the Primary Benefit Map (D’Aveni, 2007) to map the changing or evolving customer requirements or tastes and how they relate to yours and your competitor’s product
or service?
Have you assembled a team with, or do you have access to, the right mix of skills and experience to properly evaluate the changes or the evolution and to effectively respond to it or them?
Use retained earnings or new Have you thoroughly mapped your resources and competencies to those of your competitors and considered your relative advantages?
capital to start a new business Have you considered how you may be able to use your existing resources, processes and intellectual property to develop a new business or product or service offering in an efficient and cost-effective manner?
SHAREHOLDER OR MANAGEMENT PLANS
or develop a new product or

service offering
Extend the existing product or Are you aware of the market requirements in relation to your existing product or service offering and how you could more accurately and comprehensively meet them?
service offering Have you gathered sufficient market data using surveys, focus groups and informal channels to make informed decisions regarding product or service offering extensions?
Change customer perceptions Do you have sufficient data to really know how customers perceive the respective product or service attributes of prices? Apart from data collected through formal channels, such as surveys, has data collected through informal channels, such as
about product or service sales people speaking with customers and employees perceptions, been taken into account?
attributes or prices Have the desired customer perceptions been clearly articulated and documented?
Diversify geographically to Which market or markets offer the greatest diversification effect (i.e. which markets, in terms of performance and risk, are least correlated with your home market)?
reduce risk or concentration Are you certain that your products or services will be accepted in the target markets and what data has been collected to support this?
Have you thoroughly considered the competitors in the target markets and have you properly evaluated the effects of possible rivalry when you launch in the new markets?
Expand geographically to Are you certain that businesses in new markets will be more profitable than your business in your home market and, if so, have you considered multiple markets and compared them against each other?
improve profitability Has your product or service offering been developed to its fully potential in your home market to the point you have a ‘tried and tested’ solution to take to new markets?
Have you properly considered your competitors in the new markets and have you properly evaluated the effects of possible rivalry when you launch in the new markets?

OBJECTIVES – LEVERS
Price has proved to be the easiest lever to use with the most direct effect. It can also be applied in every situation (i.e. no matter what the stimulus to the action is, its objective or its contextual setting).
Changes in price can also have the effect of altering consumers’ perceived value of a product or service.
Price changes can be obscured to become opaque to consumers by, for example, cross subsidising financing plans or including extended warranties with a product.
Revenue is always limited by what consumers are prepared to pay for products and services. However, not all consumers are willing to pay the same and additional revenue can often be realised by segmenting the market according
Price
to price sensitivity. Product or service attributes are often used to distinguish the different sectors from one another.
Price changes can be obscured to become opaque to consumers by, for
example, cross subsidising financing plans or including extended warranties
with a product.
agents, distributors as well as subsidiaries and divisions within businesses are often unable to alter or influence the functional and technical attributes of the products they market and, therefore, cannot use the product lever, except
to bundle different product together or pre-configure products for specific markets.
Product or service attributes can take time to change or update, due to R&D production and distribution routines and stock that may need to be depleted before new products can be introduced.
Competitive barriers can be raised by bundling a combination of products together than no other single competitors has. Regulation and economic constraints may govern what is possible. Likewise,
changes in regulation or economic conditions may provide opportunities
for product innovation.
Changes in consumer behaviour and tastes, as well as social issues, such as environmental impact, may present opportunities for product development.
Product innovation can take the guise of adapting an existing product or service for another market with the same or similar consumer requirements.
Product
By tracking evolving consumer tastes, requirements and behaviour, derivatives of existing products can be created to exploit the changes.
Maintaining a broad range of competing products may make a company’s market presence more pervasive but it is also expensive to do so and there is a The segmentation of markets and understanding different segments’
trade-off with the benefits of focusing on fewer products requirements and tastes enables company’s to tailor product variants
to different segments. Each segments’ offering can also be mapped to
competitors’ offerings to differentiate them.
New technologies can often be used to create competitive advantage. Early
adopters may also benefit from first mover advantages.
Products can be bundled in combinations exclusive to the company.
while we normally think of innovation in product terms and, to a lesser extend, in terms of business models, innovation can also apply to new territories. Specifically, new territories can be sought where the success of a product or service in
a particular market can be replicated. This may mean adapting the product or service for the new market or it may be maintaining its originality in order to increase the chance of success through replication. As examples, consider products
such as motor vehicles, that are usually adapted for new markets, versus a product such as Coca-Cola, where deviating from the original product will compromise the chance of success.
The company’s distribution channels often inhibit market share. Changing,
updating or adding additional channels can be a cost effective and
expeditious way of increasing market share.
Where the marginal cost and effort of increasing market share in a particular
Place
market is high, new markets where the cost and effort of expanding is likely
to be relatively lower could be considered.
Concentration of a specific offering in a single, or few, markets can be
risky, particularly when the company has a large share of the market. The
risks relate to the performance of the market as well as the actions of
competitors and, in such a scenario, expanding into other markets would be
worth considering.
business models are often moulded to suit environmental factors, such as competition and regulation. For example, many investment banking business models have been developed in response to taxes. Changes in external factors
can threaten business models but can also present opportunities to adjust or rethink business models.
Business model Applying existing products to meet new requirements, often in new markets, can develop new business models. For example, the low-cost carrier model can be applied to the private jet market to provide a cost and time effective
solution to busy business travellers.
New technologies can enable changes to business models. For example, Software as a Service (SAAS), has allowed many software and software service companies to radically change their business models.
marketing messages may be supported, and constrained, by group level marketing campaigns or policies. This applies, especially to agents and distributors.
It may be worthwhile considering what has been done elsewhere by associated companies or business unit.
While we often think of communication purely in terms of advertising and public relations, there are a host of other means of creating marketing messages. For example, a showroom with a particular look and feel and in a specific
Communication
location sends a message to customers and prospects.
Communication can be used to make a specific product or products more compelling by making consumers aware of their own peculiarities. For example, reminding certain consumers of their own health issues may give specific
product or company an advantage over its competitors.

LEVERS – ACTIONS
Segment the market and Cross subsidise finance Bundle after-sales support
provide a range of price points costs from purchase price to service or extended warranty
Price
for different product and compete more effectively with with used-products to compete
service offerings to capture compromising the value of the more effectively with competitors’
marginal revenue. perceived value of the product/ new products.
service offering.
Bundle sets of synergistic Develop a derivative of Develop new functionality to Research products and services Use a change in the economic
products in instances where an existing product that close product gaps, match in parallel industries in order environment to update an
competitors only have access satisfies the tastes, attitudes competitors’ functionality and to develop an improved existing product or develop a
to part of those product sets to and price elasticity of a new fend off rivals. market offering. new one.
raise competitive barriers. consumer segment.
Product
Expand into parallel industries’ Segment the market and Discontinue a particular product Customise products for specific Carry out regular and extensive
that target the same market provide variations of product or products to focus on another, market requirements in response consumer surveys and update
segments by altering existing or service offerings to capture remaining product or products. to local consumer behaviour, or replace products in response
products or introducing marginal revenue. tastes and perceptions of value. to evolving consumer tastes
Actions new ones. or attitudes.
Seek out another territory with Distribute existing products in Establish new distribution Establish subsidiaries in
similar market dynamics and new markets on the basis of channels and promotion new but similar territories to
Place
consumer tastes for geographic consumer behaviour, tastes, mechanisms, such as market existing products in
expansion when an existing elasticity of demand and product showrooms for order to reduce geographic
market for a particular product competitive environments to greater penetration of an concentration
is saturated. optimise sales. existing market.
Communication Business model
Bundle products together to Use a change in regulation Use existing technology to Acquire businesses with Use new technologies that allow
increase competitive barriers and to update or to abandon an develop a new product or complimentary products or faster and cheaper processing,
improve competitive position. existing business model or to service offering exploiting services in order to strengthen cheaper data storage and
develop a new business. partnership with, for example, customer relationships and open improved connectivity to
retailers and local government. up cross-selling opportunities. develop new business models,
such as SaaS.
Communicate the factors that Develop a marketing Use new technologies for Devise a communication
make a product or service campaign to communicate omni-channel distribution of campaign to reset product/
proposition compelling to product changes that result in information previously distributed service price perceptions
prospective customers that may competitive advantage that through print. without compromising the
not be aware of them. consumers may not be aware. perceived value of the product/
service offering.

REFINEMENT
The research leading to the development of the guide found that competitive actions are more effective
when carried out as an iterative process and when their formulation involves a range of functions across
the organisation. In other words, the efficacy of the action can be improved by involving managers with
different skills and experiences and by integrating the learning of past actions into new ones.

competitors
1.
Stimulus triggers
competitive
action
Managers take 2.
5.
decisions about Resources are
Competitive
actions that need to assembled to
action is
be taken in order to equip the
executed
attain the ideal or manager
their brands or
competitors 4.
3.
Competitive
Objectives
action is
are set
formulated


Resources for competitive actions
CONTENTS
Stimuli – Resources........................................................................................................................................................................................................................................................................................................................10
Resources........................................................................................................................................................................................................................................................................................................................................................... 11
Data........................................................................................................................................................................................................................................................................................................................................................................ 11
Customer surveys............................................................................................................................................................................................................................................................................................................... 11
Focus Groups and interviews..................................................................................................................................................................................................................................................................... 11
Ethnographic studies.................................................................................................................................................................................................................................................................................................. 12
Informal channels............................................................................................................................................................................................................................................................................................................... 12
Tools...................................................................................................................................................................................................................................................................................................................................................................... 13
Customer matrix................................................................................................................................................................................................................................................................................................................... 13
Primary benefit map...................................................................................................................................................................................................................................................................................................... 15
Ansoff’s growth matrix.............................................................................................................................................................................................................................................................................................. 15
Porter’s 5-forces..................................................................................................................................................................................................................................................................................................................... 16
Core competency............................................................................................................................................................................................................................................................................................................... 17
New value curve.................................................................................................................................................................................................................................................................................................................... 18
Competitors.......................................................................................................................................................................................................................................................................................................................................... 18
Competitors’ products and services............................................................................................................................................................................................................................................ 18
Competitors’ pricing models...................................................................................................................................................................................................................................................................... 19
Intensity of rivalry................................................................................................................................................................................................................................................................................................................ 19
Relative company size....................................................................................................................................................................................................................................................................................................... 19
Useful in objective setting and in deciding on which of the 5 levers to use.............................................................................................. 19
Relative profitability...................................................................................................................................................................................................................................................................................................... 20
Resource based view...................................................................................................................................................................................................................................................................................................21
Benchmarks........................................................................................................................................................................................................................................................................................................................................... 22
Competitive actions in parallel industries and other territories......................................................................................................................................... 22
Evolution of industries in other territories...................................................................................................................................................................................................................... 23
Team.................................................................................................................................................................................................................................................................................................................................................................... 23
Education & training................................................................................................................................................................................................................................................................................................... 23
Level of experience of managers.......................................................................................................................................................................................................................................................24
Functional biases............................................................................................................................................................................................................................................................................................................... 25
National & cultural backgrounds....................................................................................................................................................................................................................................................... 25
Relevant experience in other territories and parallel industries..........................................................................................................................................26
Industry...........................................................................................................................................................................................................................................................................................................................................................26
Industry maturity..................................................................................................................................................................................................................................................................................................................26
Fragmentation......................................................................................................................................................................................................................................................................................................................... 27
Strategic groups & cognitive communities................................................................................................................................................................................................................... 28
Degree of turbulence................................................................................................................................................................................................................................................................................................ 29
Formulating competitive actions | Richard Shaw – October 2016


model
• Core competency
• New value curve

parallel industries

STIMULI – RESOURCES
The stimuli are the factors that trigger the competitive action and have been clustered into the three
categories listed below. The inputs needed to set objectives and formulate competitive actions have been
listed in this section.
Inferior performance Waning or

compared with stagnant sales
competitors
STIMULUS
Unsuitable product Declining profitability
Declining or
mix or pricing for a due to increased
compromised
particular market competition
performance
Figure 2: Stimuli and objectives related to declining or compromised performance
Changes in a
competitor’s product
mix, pricing or
marketing approach
Customer request for a

Introduction of
specific functionality
new technology
or a new product
Changing or evolving Change in economic

customer requirements conditions (e.g. interest
or tastes rates, growth)
STIMULUS
Threat from new External or Regulatory change
market entrant environemtal
change
Figure 3: Stimuli and objectives related to external or environmental changes

Use retained earnings
or new capital to start
a new business or
Expand geographically develop a new product/
to improve profitability service offering
Diversify business Extend existing

geographically to reduce product/service
risk or concentration offering
Review markets, STIMULUS Change customer perceptions

product portfolio Shareholder or about product/service
and pricing to management attributes or price
optimise profits plans
Figure 4: Stimuli and objectives related to shareholder or management plans
RESOURCES
This section describes some of the resources available to managers in formulating the competitive actions
covered in the previous sections of this guide. These resources are also referred to in the ‘Stimuli’ section
of the guide, where different resources have been associated with different stimuli. It is intended that,
based on the stimulus, managers will select a number of resources that can be used as a tool kit to support
their formulation of an action.
Data
Customer surveys
the respondents.

the interview.

Informal channels

ensure its success.
Tools
Customer matrix
‘Measuring Product Advantage Using Competitive Benchmarking and Customer Perceptions’ published in
the Long Range Planning journal (Vol. 27, No. 1, p 110-132). The matrix was measures product advantage,
the firm, the market or the industry. The matrix comprises ‘Perceived Use Value’ along the one axis and
‘Perceived Price’ along the other.

Perceived* High
use value
B C
D A
Low
Low High Perceived

price
Figure 5: The customer matrix

*Perceived use value (PUV): how valuable the product or service is perceived in use by the customer
The most desirable quadrant is the one with the highest perceived use value and the lowest perceived
price, while the least desirable is the one with the highest perceived price and the lowest perceived
use value. The matrix was designed to help managers better understand a product or brand positions
in relation to their competitors through the lens of the individual customer. Constructing the matrix is
an iterative process that starts with the application of hard information that is then supplemented by
experience and perceptions and refined further as more data is gathered.
Innovation High
Low
Low High Costs
Figure 6: The producer matrix

Primary benefit map

Price
Actual 1997
Primo
Projected 1999
Samur-Ion
Neutryno Actual 1999
Tokyo Tech
Primary benefit: Performance


Increasing risk
Product
Existing products New products
Market
Increasing risk
Existing markets Market penetration Product development
New markets Market development Diversification
service offerings.
is required.
Porter’s 5-forces
actions
Threat of new
entrants
Bargaining power of Bargaining power

suppliers Industry rivalry of buyers
Threat of substitute
products or services

the adoption of one of three generic strategies based on the uniqueness perceived by customers of the
product offering and the firms cost position.
Core competency
End products
1 2 3 4 5 6 7 8 9 10 11 12

1 2 3 4
Core
product 2
Core
product 1

1 2 3 4

New value curve

Useful in objective setting and when pursuing an ‘Innovate’ objective
of competition.
Competitors
competitors

sources, including:
competitors

In analysing competitors and in trying to anticipate rivalry following a competitive action, it is worthwhile
mapping the relative sizes of the various competitors, the markets serve and the customer requirements
they fulfil. Once this is understood, the effects of the competitive action can be better anticipated.
figure below.

It was observed that managers at large companies make a mental assumption that their companies should
be able to compete more effectively than their smaller competitors because of their more comprehensive
and more developed resource bases. For example, the manager at a large IT company stated that
by combining their resources, including both internal resources and those made available to them by
partners at preferential rates because of their size, they would have a competitive advantage over smaller
competitors in price and in the functional breadth of their solution offerings. A manager at another large IT
company was surprised that a small competitor could enter their competitive set because he thought they
would not be able to fulfil their customers rigorous procurement requirements.

Resource based view
Scarcity
Value creation zone
than their rivals. The article lists five key characteristics that valuable resources should have, including:
• The company, not its employees, suppliers, or customers, control its value
• They’re superior to similar resources that competitors own

Resource Competitive advantage
in Great Britain
Freehold 1% occupancy costs versus

Tangible 3% to 9% industry average
locations
Customer recognition
Brand with minimal advertising
reputation
No promotional sales
Intangible
Lower labor turnover

Employee
loyalty 8.7% labor costs versus
10% to 20% industry average
Supplier Lower costs and higher

chain quality of goods sold
Capabilities
Managerial Few layers of hierarchy

judgment
Amongst a number of other companies, the article by Collis and Montgomery (1995) analysed the retailer
Marks & Spencer’s to illustrate the application of the RBV using practical examples. The figure above
summarises the RBV of Marks & Spencer’s.
Benchmarks

implementing it.

Team




be managed.

Functional biases
Johnson, 1994).

positive results.


possible relevance.
Industry
Industry maturity


Industry maturity

these volumes.
Fragmentation
the 5 levers to use

still evolving.

the 5 levers to use

competitive actions. Kelly (1995) noted “Shared belief systems enable coordinated activity by providing
a common framework”. These structures are associated with industry maturity. In other words, as an
industry matures so the structures become more and more engrained. My research confirms this insofar
as managers in the mature industries, including the automotive, financial services, FMCG and fashion
industries, were far more aware of their competitors and, therefore, the structures of their industries,
than the managers operating in nascent (emerging and growth) industries, including the information
technology, smart cards and new media industries. Wiley (1988) asserts that supra-individual level
frameworks emerge as interactions take place among different individuals within a given social grouping
and the commonly shared ideas begin to take on an existence of their own, independent of the individuals
that created them.

of stability.

Automatic mode Controlled mode
Controlled
Elicited through construct naming and
multidimensional competitor ratings
Automatic
Elicited through similarity
judgements in triadic comparisons
Pure automatic processing Pure controlled processing

(unobserved theoretical construct) (unobserved theoretical construct)
Figure 12: Continuum of processing modes
issue diagnosis.
Controlled mode
Re-interpretation
of environmental
events
Controlled mode
Automatic mode
Inertia
Automatic mode
Stable environment produces strong Changing environment produces weaker

correspondence between cognitive correspondence between cognitive
processing modes and accurate processing modes and less accurate
interpretation of environment in interpretation of environment in
both modes automatic mode
Figure 13: Cognitive interpretations in stable and changing environments

Palmer 1996).
My research found that the intensity of competition is also a function of cultural and national norms, as well
as regulation. For example, the anti-corruption laws introduced in Mainland China caused considerable
competitive upheaval in the fashion industry and the procurement regulations imposed on state-owned
entities in Kazakhstan guided the way in which other state-owned entities marketed and sold their
products and services. D’Aveni (1994) noted that the airline, banking, and telecom industries in the United
States had been hypercompetitive for some time but yet in Japan, and to a lesser extent continental
Europe, social and cultural norms imposed constraints on adapting such rapid and discontinuous
change frameworks.
business models.

Page 176

Appendix 4: Competitive actions guide version 4

Page 177


for managers

October 2016
A practical guide to the formulation of competitive actions for managers
Richard Shaw
October 2016
Cover image
An image of the Bombardier CS-100 was selected for the cover of this guide as it is a highly innovative
product developed to compete in a dynamic and highly competitive segment of the aircraft industry. Its
competitive set includes the Embraer E-jet family and the Sukhoi SU-jet family. Collectively, they fill an
evolving and hotly-contest segment in the passenger jet market for aircraft smaller than the Airbus A320
family and the Boeing 737 family, with around 100 seats.
The guide was developed to assist managers in the formulation of competitive actions and aims to be a
thought provoker that provides managers with a framework for formulating competitive actions. It can be
used by individuals but should ideally be used in group settings, as the research has found that individuals
rarely have all the skills and experience required to effectively formulate competitive actions, while groups,
comprised of managers with a range of experiences and different skills sets are in a much stronger position
to do so. The guide provides managers with ideas and recommendations that can be used to support the
formulation of competitive actions and follows a framework, abbreviated as SOLAR, which based on the
process managers followed in the research that succeeded the guide. The SOLAR framework is described
in the table below.
Key Step Description

S Stimulus The competitive action process is triggered by a stimulus or stimuli. These can either be external stimuli,
such as the emergence of a new rival or a change in the competitive landscape, or internal stimuli, such as
a long-term business plan introduced by the top management team.
O Objectives Before formulating appropriate actions in response to the stimuli, the research has shown that managers
used the data available to them to envisage the desired outcomes to the actions and to set objectives.
L Levers The levers that can be used in formulating actions are explored.
A Actions Using the selected levers, specific competitive actions are formulated.
R Refinement The outcomes are fed into follow up or repeat actions, thereby refining actions on an iterative basis.
The guide is not designed to be exhaustive, in terms of covering every possible permutation in the
formulation of competitive action. Rather, as the diagram below indicates, it deals with a significant number of
competitive actions and seeks to help managers distill their options into a few that are the most appropriate,
giver the stimulus, their objectives, the environment in which they operate and the levers available to them.

A contingency approach was taken in developing the guide. Meaning, the ideas and recommendations
offered are based on variables, such as stimuli, the managers’ objectives, the environmental context and
the parameters in which the manager is operating. For example, a manager at a company that distributes
products developed and owned by a separate entity, have no control, and probably very limited influence,
over product development initiatives and, therefore, the ‘product’ lever would be unavailable to them. The
guide is split in two sections:
1. A short guide based on the SOLAR framework, which makes use of diagrams and tables as far as
possible

SOLAR FRAMEWORK
marketing approach
• Customer request for a service offering
specific functionality or a
• Inferior performance new product
• Introduction of or concentration
• Waning or stagnant sales new technology
• Extend existing
• Unsuitable product mix or • Changing or evolving product/service offering
pricing for a particular market customer requirements
or tastes
• Declining profitability due to portfolio and pricing to
increased competition • Change in economic optimise profits
conditions (e.g. interest
• Product or service offering not • Change customer perceptions
rates, growth)
cost or priced correctly about product/ service
• Threat from new attributes or price
• Brand, product or service not
market entrant
clearly defined in the product • Expand by moving into a new
or brand statement • Regulatory change competitive set
EMERGENT
PLANNED
Stimulus Shareholder or
Objective Restore performance Maintain performance Increase market share

(RESTORE/RECOVER) (MAINTAIN) (GROW)
Levers Price Product Place Business model Communication
Action Action
Refine Refine the action


STIMULI
Stimulus Points for consideration Resources
Inferior sales performance or profitability Has your competitive set changed and has your decline in sales or profitability been the result of new market entrants?
when benchmarked against competitors How have competitors’ products, service or brands evolved in relation to yours?
Waning or stagnant sales Are you aware of the possible reasons for waning or stagnant sales and has data, such as customer surveys, as well as data gathered through informal channels, been use to validate this?
PERFORMANCE
Declines in profitability due to increased Have you considered the recent evolution of your industry and are you able to identify the stage of its life cycle? Specifically, has it matured and stabilised, resulting in lower profit margins?
competition Instead of constantly fighting rivals through cost cutting and imitation, have you considered creating a new market space, as Kim and Mauborgne (1999) postulate in their article ‘Creating New Market Space’ and their
book, ‘Blue Ocean strategy’?
Product mix, product attributes or Do you have sufficient data to reposition or update your product mix, product attributes or pricing structures? This data can be collected from informal channels, such as managers speaking with shop floor staff and
pricing have become, or are becoming, directly with customers, as well as formal channels.
unsuitable for a specific market Have you assembled, or do you have access to, the right mix of marketing, commercial, financial and product specialists to find solutions to optimally repositioning or updating your product mix, product attributes or
pricing structures?
Have you looked to similar businesses to yours with similar products or services in other countries or markets that have regulations and regulatory environments similar to those that you will have once the change has been
implemented?
Have you looked at to other countries or markets where the technology has already been deployed to see how its deployment has resulted in success or failure?
Changes in economic conditions (e.g. Are you able to develop new products or services or update existing ones by pre-empting the change in economic conditions?
interest rates, growth) Have you considered the impact the economic change will have on your competitors and their products and services relative to your business and your products and services?
Changes in a competitor’s product mix, Have you considered using tools such as the Customer Matrix (Bowman and Faulkner, 1994) and the Primary Benefit Map (D’Aveni, 2007) to understand how the competitor’s changes impact the positioning of your brand,
pricing or marketing approach product or service?
Have you used the Resource Based View (Penrose, 1959) and considered your core competencies (Prahalad and Hamel, 1990) to establish how best to compete with the relevant competitor following the implementation
of their changes?
Threat from a new market entrant Do you know in detail what the new market entrant is offering as a product or service and what their unique selling points are? This data can be collected through informal channels, such as speaking with customers that
have been in contact with the new market entrant.
requirements or tastes Are you using tools such as the Customer Matrix (Bowman and Faulkner, 1994) or the Primary Benefit Map (D’Aveni, 2007) to map the changing or evolving customer requirements or tastes and how they relate to yours and
your competitor’s product or service?
Use retained earnings or new capital to Have you thoroughly mapped your resources and competencies to those of your competitors and considered your relative advantages?
start a new business or develop a new Have you considered how you may be able to use your existing resources, processes and intellectual property to develop a new business or product or service offering in an efficient and cost-effective manner?
product or service offering

Extend the existing product or service Are you aware of the market requirements in relation to your existing product or service offering and how you could more accurately and comprehensively meet them?
offering Have you gathered sufficient market data using surveys, focus groups and informal channels to make informed decisions regarding product or service offering extensions?
Change customer perceptions about Do you have sufficient data to really know how customers perceive the respective product or service attributes of prices? Apart from data collected through formal channels, such as surveys, has data collected through
product or service attributes or prices informal channels, such as sales people speaking with customers and employees perceptions, been taken into account?
Diversify geographically to reduce risk or Which market or markets offer the greatest diversification effect (i.e. which markets, in terms of performance and risk, are least correlated with your home market)?
concentration Are you certain that your products or services will be accepted in the target markets and what data has been collected to support this?
Have you thoroughly considered the competitors in the target markets and have you properly evaluated the effects of possible rivalry when you launch in the new markets?
Expand geographically to improve Are you certain that businesses in new markets will be more profitable than your business in your home market and, if so, have you considered multiple markets and compared them against each other?
profitability Has your product or service offering been developed to its fully potential in your home market to the point you have a ‘tried and tested’ solution to take to new markets?
Have you properly considered your competitors in the new markets and have you properly evaluated the effects of possible rivalry when you launch in the new markets?

OBEJCTIVE SETTING
Resources
Try to set objectives and decide on which levers to use based on what the market actually needs or desires, rather than what managers think the market needs or desires.
Customer surveys are an effective way of gathering large amounts of quantitative data for objective setting
Restore performance
(RECOVER)
The Customer Matrix is a tool that could be considered for use in setting objectives
Ansoff’s Growth Matrix could be used to set objectives
Michael Porter’s 5-Forces tool could be used to set objectives as well as to decide on which of the levers to use
SELECT RESOURCES BEFORE SETTING OBJECTIVES
The New Value Curve could be useful in setting objectives
The intensity of rivalry should be properly considered before setting objectives
Maintain performance
The relative company size should be properly considered before setting objectives
(MAINTAIN)
SET OBJECTIVES
The company’s relative profitability should be properly considered before setting objectives
Teamwork is useful where many different skill sets and collaboration between different departments within the organisation are needed
The teams education & training should be considered when creating teams to formulate competitive actions, preferably when the stimulus emerges
It is useful to assimilate the level of experience of managers, including their experiences in other territories and parallel industries, when creating teams to formulate competitive actions at the point of the stimulus
It is useful to assimilate the functional biases, as well as the national and cultural backgrounds, of managers when creating teams to formulate competitive actions at the point of the stimulus

Industry maturity and the level of fragmentation in the industry is useful to consider in objective setting and in deciding on which of the 5 levers to use
(GROW)
Understanding the strategic group and the cognitive communities that the company is part of is useful in understanding the relevant industry structure for the purposes of setting objectives, as well as deciding on which of the 5 levers to use
Understanding the degree of turbulence in the industry is useful in anticipating the effect turbulent environments might have on competitive actions throughout the formulation process
Discontinuing a product is as much a competitive actions as changing its price points or product features.
Managers might want to ask themselves and their colleagues ‘what business do we want and what don’t we want’ as part of the objective setting process.
HOW TO SELECT LEVERS

Resources
The ‘Core Competency’ could be useful in deciding which of the five levers to use and in formulating competitive actions once a lever or a combination of levers have been selected
The relative company size should be properly considered before selecting levers to use
The company’s relative profitability should be properly considered before selecting levers to use
The ‘Resource Based View’ could be useful in deciding which of the five levers to use and in formulating competitive actions once a lever, or a combination of levers, have been selected
Considering competitive actions that have been applied in parallel industries and other territories could be useful in deciding which of the 5 levers to use and how to use them in formulating competitive actions
The evolution of industries in other territories could be useful in deciding which of the 5 levers to use and how to use them in formulating competitive actions

LEVERS
Price has proved to be the easiest lever to use with the most direct effect. It can also be applied in every situation, i.e. no matter what the stimulus to the action is, its objective or its contextual setting
Revenue is always limited by what consumers are prepared to pay for products and services. However, not all consumers are willing to pay the same and additional revenue can often be realised by segmenting the market according to price sensitivity. Product or
service attributes are often used to distinguish the different sectors from one another.
Price Price changes can be obscured to become opaque to consumers by, for example, cross subsidising financing plans or including extended warranties with a product.
Focus groups, interviews and ethnographic studies, as well as collecting data through informal channels, will produce richer data than customer surveys, which should allow managers to better understand the issues relevant to their competitive actions
The Customer Matrix will assist managers in developing actions using the price and product levers
Competitors’ pricing models should be properly considered when formulating actions using the Price lever
Agents, distributors as well as subsidiaries and divisions within businesses are often unable to alter or influence the functional and technical attributes of the products they market and, therefore, cannot use the product lever, except to bundle different product
together or pre-configure products for specific markets.
Product or service attributes can take time to change or update, due to R&D production and distribution routines and stock that may need to be depleted before new products can be introduced.
Competitive barriers can be raised by bundling a combination of products together than no other single competitors has.
Regulation and economic constraints may govern what is possible. Likewise, changes in regulation or economic conditions may provide opportunities for product innovation.
Changes in consumer behaviour and tastes, as well as social issues, such as environmental impact, may present opportunities for product development.
Maintaining a broad range of competing products may make a company’s market presence more pervasive but it is also expensive to do so and there is a trade-off with the benefits of focusing on fewer products
Product The segmentation of markets and understanding different segments’ requirements and tastes enables company’s to tailor product variants to different segments. Each segments’ offering can also be mapped to competitors’ offerings to differentiate them.
New technologies can often be used to create competitive advantage. Early adopters may also benefit from first mover advantages.
Products can be bundled in combinations exclusive to the company.
The Primary Benefit map could be used to decide on which product benefits to focus on in current and future scenarios
Competitors’ products and services should be properly considered when formulating actions using the Product lever
While we normally think of innovation in product terms and, to a lesser extend, in terms of business models, innovation can also apply to new territories. Specifically, new territories can be sought where the success of a product or service in a particular market can
be replicated. This may mean adapting the product or service for the new market or it may be maintaining its originality in order to increase the chance of success through replication. As examples, consider products such as motor vehicles, that are usually adapted
for new markets, versus a product such as Coca-Cola, where deviating from the original product will compromise the chance of success.
The company’s distribution channels often inhibit market share. Changing, updating or adding additional channels can be a cost effective and expeditious way of increasing market share.
Place Where the marginal cost and effort of increasing market share in a particular market is high, new markets where the cost and effort of expanding is likely to be relatively lower could be considered.
Concentration of a specific offering in a single, or few, markets can be risky, particularly when the company has a large share of the market. The risks relate to the performance of the market as well as the actions of competitors and, in such a scenario, expanding
into other markets would be worth considering.
Business models are often moulded to suit environmental factors, such as competition and regulation. For example, many investment banking business models have been developed in response to taxes. Changes in external factors can threaten business models
but can also present opportunities to adjust or rethink business models.
Applying existing products to meet new requirements, often in new markets, can develop new business models. For example, the low-cost carrier model can be applied to the private jet market to provide a cost and time effective solution to busy business
Business travellers.
model
Focus groups and interviews, as well as collecting data through informal channels, will produce richer data than customer surveys, which should allow managers to better understand the issues relevant to their competitive actions
Marketing messages may be supported, and constrained, by group level marketing campaigns or policies. This applies, especially to agents and distributors.
It may be worthwhile considering what has been done elsewhere by associated companies or business unit.
While we often think of communication purely in terms of advertising and public relations, there are a host of other means of creating marketing messages. For example, a showroom with a particular look and feel and in a specific location sends a message to
Communi- customers and prospects.
cation
Communication can be used to make a specific product or products more compelling by making consumers aware of their own peculiarities. For example, reminding certain consumers of their own health issues may give specific product or company an advantage
over its competitors.
Communications can be used to properly define a brand or a product or service offering to the prospective market through a product or brand statement

LEVERS f ACTIONS
Segment the market and Cross subsidise finance costs Bundle after-sales support service
provide a range of price points from the purchase price to or extended warranty terms with
Price
for different product and compete more effectively used-products to compete more
service offerings to capture without compromising the effectively with competitors’
marginal revenue. value of the perceived product/ new products.
service offering.
Bundle sets of synergistic Develop a derivative of Develop new functionality to Research products and services Use a change in the economic
products in instances where an existing product that close product gaps, match in parallel industries in order environment to update an
competitors only have access satisfies the tastes, attitudes competitors’ functionality and to develop an improved existing product or develop a
to part of those product sets to and price elasticity of a new fend off rivals. market offering. new one.
Product
Expand into parallel industries Segment the market and Discontinue a particular product Customise products for specific Carry out regular and extensive
Place
market for a particular product competitive environments to greater penetration in an concentration
Bundle products together Use a change in regulation Use existing technology to Acquire businesses with Use new technologies that allow
to increase competitive to update or to abandon an develop a new product or complimentary products or faster and cheaper processing,
barriers and improve their existing business model or to service offering exploiting services in order to strengthen cheaper data storage and
competitive position. develop a new business. partnership with, for example, customer relationships and open improved connectivity to
such as SaaS.
Communicate the factors that Develop a marketing Use new technologies for Devise a communication
make a product or service campaign to communicate omni-channel distribution of campaign to reset product/
proposition compelling to product changes that result in information previously distributed service price perceptions
not be aware of them. consumers may not be aware. perceived value of the product/
service offering.

REFINEMENT
The research leading to the development of the guide found that competitive actions are more effective
when carried out as an iterative process and when their formulation involves a range of functions across
the organisation. In other words, the efficacy of the action can be improved by involving managers with
different skills and experiences and by integrating the learning of past actions into new ones.

competitors
1.
Stimulus triggers
competitive
action
Managers take 2.
5.
decisions about Resources are
Competitive
actions that need to assembled to
action is
be taken in order to equip the
executed
attain the ideal or manager
their brands or
competitors 4.
3.
Competitive
Objectives
action is
are set
formulated

The managers interviewed in the research regard iterating and refining competitive actions as important
because it allows them to develop and test results quickly, particularly when working closely with suppliers
and customers to prototype them.

Page 178

Appendix 5: Resources manual version 4

Page 179

Resources manual for competitive actions

October 2016
CONTENTS
Data............................................................................................................................................................................................................................................................................................................................................................................ 1
Customer surveys................................................................................................................................................................................................................................................................................................................... 1
Focus Groups and interviews......................................................................................................................................................................................................................................................................... 2
Ethnographic studies...................................................................................................................................................................................................................................................................................................... 2
Informal channels................................................................................................................................................................................................................................................................................................................... 3
Tools.......................................................................................................................................................................................................................................................................................................................................................................... 3
Customer matrix....................................................................................................................................................................................................................................................................................................................... 3
Primary benefit map.......................................................................................................................................................................................................................................................................................................... 4
Ansoff’s growth matrix.................................................................................................................................................................................................................................................................................................. 4
Porter’s 5-forces......................................................................................................................................................................................................................................................................................................................... 4
Core competency................................................................................................................................................................................................................................................................................................................... 5
New value curve........................................................................................................................................................................................................................................................................................................................ 6
Competitors.............................................................................................................................................................................................................................................................................................................................................. 7
Competitors’ products and services................................................................................................................................................................................................................................................ 7
Competitors’ pricing models.......................................................................................................................................................................................................................................................................... 7
Intensity of rivalry.................................................................................................................................................................................................................................................................................................................... 8
Relative company size........................................................................................................................................................................................................................................................................................................... 8
Useful in objective setting and in deciding on which of the 5 levers to use.................................................................................................. 8
Relative profitability........................................................................................................................................................................................................................................................................................................... 9
Resource based view....................................................................................................................................................................................................................................................................................................... 9
Benchmarks............................................................................................................................................................................................................................................................................................................................................10
Competitive actions in parallel industries and other territories..........................................................................................................................................10
Evolution of industries in other territories.......................................................................................................................................................................................................................10
Team..................................................................................................................................................................................................................................................................................................................................................................... 11
Teamwork............................................................................................................................................................................................................................................................................................................................................ 11
Education & training.................................................................................................................................................................................................................................................................................................... 11
Level of experience of managers....................................................................................................................................................................................................................................................... 12
Functional biases................................................................................................................................................................................................................................................................................................................ 13
National & cultural backgrounds........................................................................................................................................................................................................................................................ 13
Relevant experience in other territories and parallel industries.......................................................................................................................................... 14
Industry........................................................................................................................................................................................................................................................................................................................................................... 14
Industry maturity.................................................................................................................................................................................................................................................................................................................. 14
Fragmentation.......................................................................................................................................................................................................................................................................................................................... 16
Strategic groups & cognitive communities.................................................................................................................................................................................................................... 16
Degree of turbulence................................................................................................................................................................................................................................................................................................. 18
References...................................................................................................................................................................................................................................................................................................................................................... 20


model
• Core competency
• New value curve

parallel industries
Some of the resources available to managers in formulating the competitive actions covered in the
Competitive actions guide are described in this Resources manual. These resources are also referred to in
the ‘Stimuli’ section of the guide, where different resources have been associated with different stimuli. It
is intended that, based on the stimulus, managers will select a number of resources that can be used as a
tool kit to support their formulation of an action.
Data
Customer surveys
the respondents.


the interview.

Informal channels
ensure its success.
Tools
Customer matrix
‘Measuring Product Advantage Using Competitive Benchmarking and Customer Perceptions’ published
in the Long Range Planning journal (Vol. 27, No. 1, p 110-132). The matrix measures product advantage,

the firm, the market or the industry.
The matrix comprises ‘Perceived Use Value’ along the one axis and ‘Perceived Price’ along the other. The
most desirable quadrant is the one with the highest perceived use value and the lowest perceived price,
while the least desirable is the one with the highest perceived price and the lowest perceived use value.
The matrix was designed to help managers better understand a product or brand positions in relation
to their competitors through the lens of the individual customer. Constructing the matrix is an iterative
process that starts with the application of hard information that is then supplemented by experience and
perceptions and refined further as more data is gathered.
Primary benefit map


service offerings.
is required.
Porter’s 5-forces
actions

Core competency

End products
1 2 3 4 5 6 7 8 9 10 11 12

1 2 3 4
Core
product 2
Core
product 1

1 2 3 4
Figure 2: Mapping core competencies
New value curve

of competition.

Competitors
competitors

sources, including:
competitors


In analysing competitors and in trying to anticipate rivalry following a competitive action, it is
worthwhile mapping the relative sizes of the various competitors, the markets they serve and the
customer requirements they fulfil. Once this is understood, the effects of the competitive action can be
better anticipated.
figure below.

It was observed in the research leading to the development of this guide that managers at large
companies make a mental assumption that their companies should be able to compete more effectively
than their smaller competitors because of their more comprehensive and more developed resource bases.
For example, the manager at a large IT company stated that by combining their resources, including both
internal resources and those made available to them by partners at preferential rates because of their size,
they would have a competitive advantage over smaller competitors in price and in the functional breadth

of their solution offerings. A manager at another large IT company was surprised that a small competitor
could enter their competitive set because he thought they would not be able to fulfil their customers
rigorous procurement requirements.
Resource based view


Scarcity
Value creation zone
Figure 4: Value creation zone
than their rivals.
Benchmarks
implementing it.


Team
Teamwork
Useful where many different skill sets and collaboration between different departments within the
organisation are needed
Where co-operation or collaboration between different departments or units in an organisation is required

for the effective execution of a competitive action, it may be a good idea to involve the relevant managers
and other personnel in its formulation as early on as possible. This involvement could take the form of
cross-departmental workshops and communications regarding the competitive action.






be managed.
Functional biases
Johnson, 1994).

positive results.


possible relevance.
Industry
Industry maturity


Industry maturity
these volumes.

Fragmentation
the 5 levers to use
still evolving.

the 5 levers to use

competitive actions. Kelly (1995) noted “Shared belief systems enable coordinated activity by providing a
common framework”. These structures are associated with industry maturity. In other words, as an industry
matures so the structures become more and more engrained. The research leading to the development
of this guide confirms this insofar as managers in the mature industries, including the automotive, financial
services, FMCG and fashion industries, were far more aware of their competitors and, therefore, the
structures of their industries, than the managers operating in nascent (emerging and growth) industries,

including the information technology, smart cards and new media industries. Wiley (1988) asserts that
supra-individual level frameworks emerge as interactions take place among different individuals within
a given social grouping and the commonly shared ideas begin to take on an existence of their own,
independent of the individuals that created them.
of stability.

issue diagnosis.
Palmer 1996).
The research leading to the development of this guide found that the intensity of competition is also
a function of cultural and national norms, as well as regulation. For example, the anti-corruption laws
introduced in Mainland China caused considerable competitive upheaval in the fashion industry and the
procurement regulations imposed on state-owned entities in Kazakhstan guided the way in which other
state-owned entities marketed and sold their products and services. D’Aveni (1994) noted that the airline,
banking, and telecom industries in the United States had been hypercompetitive for some time but yet
in Japan, and to a lesser extent continental Europe, social and cultural norms imposed constraints on
adapting such rapid and discontinuous change frameworks.
business models.

REFERENCES
pp. 113-124

March-April 2000

1, p 110-132

August 2008, p 140-150

No. 1, p546-47

9. D’Aveni, R. (2007), M
110-120




18. Kelly, M.L. (1955), A


February, p 83-93

February, p 83-93
21. Penrose, E. T. (1959), T

22. Penrose, E.T. (1960), G



Vol. 48 Issue 3, p646-664.
25. Porter, M.E. (1980), C

Free Press, 1980

Review (v. 68, no. 3) pp. 79–91.

Journal, 1993, Vol. 14, p103-124



1977, pg 127-190

December, p 844-847

33. Uleman (1989)
34. Whitley, R. (1987), T



Page 180

Appendix 6: Competitive actions guide version 5

Page 181


for managers

October 2016
A practical guide to the formulation of competitive actions for managers
Richard Shaw
October 2016
Cover image
An image of the Bombardier CS-100 was selected for the cover of this guide as it is a highly innovative
product developed to compete in a dynamic and fiercly competitive segment of the aircraft industry.
Its competitive rivals include the Embraer E-jet and the Sukhoi SU-jet families. Collectively, they fill an
evolving and hotly-contest segment in the passenger jet market for aircraft smaller than the Airbus A320
and the Boeing 737 families, with around 100 seats.
This guide was developed to assist managers in the formulation of competitive actions, and aims to
provide them with a framework to do so. It can be used by individuals but should ideally be used in group
settings, as the research has found that individuals rarely have all the skills and experience required to
effectively formulate competitive actions, while groups, comprising managers with a range of experiences
and different skills sets are in a much stronger position. The guide provides managers with ideas and
recommendations that can be used to support the formulation of competitive actions and follows a
process, described in the table below and abbreviated as SOLAR, which is based on the research that
preceded the guide. The SOLAR process is summarised in the figure below.
S
A stimulus
triggers the
competitive
R
action O
Desired
The actions
outcomes are
are refined in
envisaged and
an iterative
objectives
process
are set
A L
Actions are
Levers for
developed
executing the
using the
action are
selected
selected
levers
The managers interviewed in the research regard iterating and refining competitive actions as important
because it allows them to develop and test results forthwith, particularly when working closely with
suppliers and customers to prototype them.
The guide is not designed to be exhaustive, in terms of covering every possible permutation in the
formulation of competitive action. Rather, as the diagram below indicates, it deals with a significant number of
competitive actions and seeks to help managers distill their options into a few that are the most appropriate,
given the stimulus, their objectives, the environment in which they operate and the levers available to them.


The ideas and recommendations offered in the guide are based on variables, such as stimuli, the
managers’ objectives, the environmental context and the parameters in which the manager is operating.
For example, a manager at a company that distributes products developed and owned by a separate
entity, probably has no control, and very limited influence, over product development initiatives and,
therefore, the ‘product’ lever would be unavailable to them. The guide is split in two sections:
1. A short guide based on the SOLAR framework, which makes use of diagrams and tables as far as possible
SOLAR process.
Resources key
The elements listed below represent suggested inputs to the formulation of competitive actions. There are
six sets of inputs and their application is dependant upon the stimulus, objectives and levers of the action.
References are provided to the use of the various resources in the guide through the application of the
appropriate icons.
Data Benchmarks Industry

• Customer surveys • Competitive actions in • Industry maturity
• Focus groups parallel industries • Fragmentation
• Ethnographic studies • Competitive actions in • Strategic groups &
other territories cognitive communities
• Informal channels
• Evolution of industries in • Degree of turbulence
other territories
Team Tools Competitors

• Education & training • Customer matrix • Competitors’ products/
• Level of experience of • Primary benefit map services
managers • Ansoff’s growth matrix • Competitors’ pricing
• Functional biases model
• Porter’s 5-forces
• National & cultural • Intensity of rivalry
• Core competency
backgrounds • Relative company size
• New value curve
• Relevant experiences • Relative profitability
in other territories and • Resource based view
parallel industries
It is intended that, based on the stimulus, managers will select a number of resources that can be used as a
tool kit to support their formulation of an action.

SOLAR FRAMEWORK
marketing approach
service offering
• Customer request for specific
• Inferior performance functionality or a new product
• Introduction of or concentration
• Waning or stagnant sales new technology
• Extend existing
• Unsuitable product mix or • Changing or evolving product/service offering
pricing for a particular market customer requirements
or tastes
• Declining profitability due to portfolio and pricing to
STIMULUS
increased competition • Change in economic optimise profits

conditions (e.g. interest
• Product or service offering not • Change customer perceptions
rates, growth)
costed or priced correctly about product/ service
• Threat from new attributes or price
• Brand, product or service not
market entrant
clearly defined in the product • Expand by moving into a new
or brand statement • Regulatory change competitive set
PROACTIVE
REACTIVE
compromised environmental Shareholder or
OBJECTIVE

(RESTORE/RECOVER) (MAINTAIN) (GROW)
LEVERS
Price Product Place Business model Communication

ACTION
Action
REFINE
Refine the action


STIMULI
Stimulus Points for consideration Resources
Inferior sales performance or profitability Has your competitive set changed and has your decline in sales or profitability been the result of new market entrants?
when benchmarked against competitors How have competitors’ products, service or brands evolved in relation to yours?
Waning or stagnant sales Are you aware of the possible reasons for waning or stagnant sales and has data, from sources such as customer surveys, as well as data gathered through informal channels, been use to validate this?
PERFORMANCE
Declines in profitability due to increased Have you considered the recent evolution of your industry and are you able to identify the stage of its life cycle? Specifically, has it matured and stabilised, resulting in lower profit margins?
competition Instead of constantly fighting rivals through cost cutting and imitation, have you considered creating a new market space, as Kim and Mauborgne (1999) postulate in their article ‘Creating New Market Space’ and their
book, ‘Blue Ocean strategy’?
Product mix, product attributes or Do you have sufficient data to reposition or update your product mix, product attributes or pricing structures? This data can be collected through informal channels, such as managers speaking with shop floor staff and
pricing have become, or are becoming, directly with customers, as well as through formal channels.
unsuitable for a specific market Have you assembled, or do you have access to, the right mix of marketing, commercial, financial and product specialists to find solutions to optimally reposition or update your product mix, product attributes or pricing
structures?
Have you looked at similar businesses to yours with similar products or services in other countries or markets that have regulations and regulatory environments similar to those that you will have once the change has been
implemented?
Have you looked at other countries or markets where the technology has already been deployed to gauge the results of its deployment?
Changes in economic conditions (e.g. Are you able to develop new products or services or update existing ones by pre-empting the change in economic conditions?
interest rates, growth) Have you considered the impact the economic change will have on your competitors and their products and services relative to your business and your products and services?
Changes in a competitor’s product mix, Have you considered using tools such as the Customer Matrix (Bowman and Faulkner, 1994) and the Primary Benefit Map (D’Aveni, 2007) to understand how your competitor’s changes could impact the positioning of your
pricing or marketing approach brand, product or service?
Have you used the Resource Based View (Penrose, 1959) and considered your core competencies (Prahalad and Hamel, 1990) to establish how best to compete with the relevant competitor following the implementation
of their changes?
Threat from a new market entrant Do you know in detail what the new market entrant is offering as a product or service and what their unique selling points are? This data can be collected through informal channels, such as speaking with customers that
have been in contact with the new market entrant.
requirements or tastes Are you using tools such as the Customer Matrix (Bowman and Faulkner, 1994) or the Primary Benefit Map (D’Aveni, 2007) to map the changing or evolving customer requirements or tastes and how they relate to yours and
your competitor’s product or service?
Use retained earnings or new capital to Have you thoroughly mapped your resources and competencies to those of your competitors and considered your relative advantages?
start a new business or develop a new Have you considered how you may be able to use your existing resources, processes and intellectual property to develop a new business, product or service offering in an efficient and cost-effective manner?
product or service offering

Extend the existing product or service Are you aware of the market requirements in relation to your existing product or service offering and how you could more accurately and comprehensively meet them?
offering Have you gathered sufficient market data using surveys, focus groups and informal channels to make informed decisions regarding product or service offering extensions?
Change customer perceptions about Do you have sufficient data to really know how customers perceive the respective product or service attributes or prices? Apart from data collected through formal channels, such as surveys, has data collected through
product or service attributes or prices informal channels, such as sales people speaking with customers and employees perceptions, been taken into account?
Diversify geographically to reduce risk or Which market or markets offer the greatest diversification effect (i.e. which markets, in terms of performance and risk, are least correlated with your home market)?
concentration Are you certain that your products or services will be accepted in the target markets and what data has been collected to support this?
Have you thoroughly considered the competitors in the target markets and have you properly evaluated the effects of possible rivalry when you launch them there?
Expand geographically to improve Are you certain that businesses in new markets will be more profitable than your business in your home market and, if so, have you considered multiple markets and compared them against each other?
profitability Has your product or service offering been developed to its full potential in your home market to the point you have a ‘tried and tested’ solution to take to new markets?
Have you properly considered your competitors in the new markets and have you properly evaluated the effects of possible rivalry when you launch there?

OBEJCTIVE SETTING
Resources
Customer surveys are an effective way of gathering large amounts of quantitative data for objective setting
Restore performance
(RECOVER)
The Customer Matrix is a tool that could be considered for use in setting objectives
Ansoff’s Growth Matrix could be used to set objectives
SELECT RESOURCES BEFORE SETTING OBJECTIVES
The New Value Curve could be useful in setting objectives
The intensity of rivalry should be properly considered before setting objectives
Maintain performance
The relative company size should be properly considered before setting objectives
(MAINTAIN)
SET OBJECTIVES
The company’s relative profitability should be properly considered before setting objectives
Teamwork is useful where many different skill sets and collaboration between different departments within the organisation are needed
The teams education & training should be considered when creating teams to formulate competitive actions, preferably when the stimulus emerges
It is useful to assimilate the level of experience of managers, including their experiences in other territories and parallel industries, when creating teams to formulate competitive actions at the point of the stimulus
It is useful to assimilate the functional biases, as well as the national and cultural backgrounds, of managers when creating teams to formulate competitive actions at the point of the stimulus

(GROW)
Discontinuing a product is as much a competitive action as changing its price points or product features.
Managers might want to ask themselves and their colleagues ‘what business do we want and what don’t we want’ as part of the objective setting process.
HOW TO SELECT LEVERS

Resources
The ‘Core Competency’ could be useful in deciding which of the five levers to use and in formulating competitive actions once a lever or a combination of levers have been selected
The relative company size should be properly considered before selecting the appropriate levers to use
The company’s relative profitability should be properly considered before selecting the appropriate levers to use
The ‘Resource Based View’ could be useful in deciding which of the five levers to use and in formulating competitive actions once a lever, or a combination of levers, have been selected
Considering competitive actions that have been applied in parallel industries and other territories could be useful in deciding which of the 5 levers to use and how to use them in formulating competitive actions
The evolution of industries in other territories could be useful in deciding which of the 5 levers to use and how to use them in formulating competitive actions

LEVERS
Price has proved to be the easiest lever to use with the most direct effect. It can also be applied in every situation, i.e. no matter what the stimulus to the action is, its objective or its contextual setting
Revenue is always limited by what consumers are prepared to pay for products and services. However, not all consumers are willing to pay the same and additional revenue can often be realised by segmenting the market according to price sensitivities. Product or
service attributes are often used to distinguish the different sectors from one another.
Price
Competitors’ pricing models should be properly considered when formulating actions using the Price lever
Agents, distributors as well as subsidiaries and divisions within businesses are often unable to alter or influence the functional and technical attributes of the products they market and, therefore, cannot use the product lever, except to bundle different products
together or pre-configure products for specific markets.
Product or service attributes can take time to change or update, due to R&D, production and distribution routines and stock that may need to be depleted before new products can be introduced.
Competitive barriers can be raised by bundling a combination of products together that no other competitors have.
Regulation and economic constraints may govern what is possible. Likewise, changes in regulation or economic conditions may provide opportunities for product innovation.
Changes in consumer behaviour and tastes, as well as social issues, such as environmental impact, may present opportunities for product development or enhancement.
Product Maintaining a broad range of competing products may make a company’s market presence more pervasive but it is also expensive to do so and there is a trade-off with the benefits of focusing on fewer products
The segmentation of markets and understanding different segments’ requirements and tastes enables company’s to tailor product variants to different segments. Each segments’ offering can also be mapped to competitors’ offerings to differentiate them.
New technologies can often be used to create competitive advantage. Early adopters may also benefit from first mover advantages.
The Primary Benefit map could be used to decide on which product benefits to focus on in current and future scenarios
Competitors’ products and services should be properly considered when formulating actions using the Product lever
While we normally think of innovation in product terms and, to a lesser extend, in terms of business models, innovation can also apply to new territories. Specifically, new territories can be sought where the success of a product or service in a particular market
can be replicated. This may mean adapting the product or service for the new market or it may mean maintaining its originality in order to increase the chance of success through replication. As examples, consider products such as motor vehicles, that are usually
adapted for new markets, versus a product such as Coca-Cola, where deviating from the original product will compromise its chance of success.
The company’s distribution channels often inhibit market share. Changing, updating or adding additional channels can be a cost effective and expeditious way of increasing market share.
Place Where the marginal cost and effort of increasing market share in a particular market is high, new markets, where the cost and effort of expanding is likely to be relatively lower, could be considered.
Concentration of a specific offering in a single, or few, markets can be risky, particularly when the company has a large share of the market. The risks relate to the performance of the market as well as the actions of competitors and, in such a scenario, expanding
into other markets would be worth considering.
Business models are often moulded to suit environmental factors, such as competition and regulation. For example, many investment banking business models have been developed in response to taxes. Changes in external factors can threaten business models
but can also present opportunities to adjust or rethink business models.
Applying existing products to meet new requirements, often in new markets, can develop new business models. For example, the low-cost carrier model can be applied to the private jet market to provide a cost and time effective solution to busy business
Business travellers.
model
Focus groups and interviews, as well as collecting data through informal channels, will produce richer data than customer surveys, which should allow managers to better understand the issues relevant to their competitive actions
Marketing messages may be supported, and constrained, by group level marketing campaigns or policies. This applies, especially to agents and distributors.
It may be worthwhile considering what has been done elsewhere by associated companies or business units.
While we often think of communication purely in terms of advertising and public relations, there are a host of other means of creating marketing messages. For example, a showroom with a particular look and feel, and in a specific location, sends a message to
Communi- customers and prospects about its position in the market relative to its competitors.
cation
Communication can be used to make a specific product or products more compelling by making consumers aware of their own peculiarities. For example, reminding certain consumers of their own health issues may give a specific product or company an
advantage over its competitors.
Communications can be used to properly define a brand or a product or service offering to the prospective market through a product or brand statement

LEVERS f ACTIONS
Segment the market and Cross subsidise finance costs Bundle after-sales support
provide a range of price points from the purchase price to services or extended warranty
Price
for different product and compete more effectively terms with used-products to
service offerings to capture without compromising the compete more effectively with
marginal revenue. value of the perceived product/ competitors’ new products.
service offering.
Bundle sets of synergistic Develop a derivative of an Develop new functionality to Research products and services Use a change in the economic
products in instances where existing product that satisfies close product gaps, match in parallel industries in order environment to update an
competitors only have access the tastes, attitudes and price competitors’ functionality and to develop an improved existing product or develop a
to part of those product sets to elasticity of demand of a new fend off rivals. market offering. new one.
Product
Expand into parallel industries Segment the market and Discontinue a particular product Customise products for specific Carry out regular and extensive
Place
market for a particular product competitive environments to greater penetration in an concentration
Bundle products together Use a change in regulation Use existing technology to Acquire businesses with Use new technologies that allow
to increase competitive to update or to abandon an develop a new product or complimentary products or faster and cheaper processing,
barriers and improve their existing business model or to service offering exploiting services in order to strengthen cheaper data storage and
competitive position. develop a new business. partnership with, for example, customer relationships and open improved connectivity to
such as SaaS.
Communicate the factors that Develop a marketing campaign Use new technologies for Devise a communication
make a product or service to communicate product omni-channel distribution of campaign to reset product/
proposition compelling to changes that result in a information previously distributed service price perceptions
not be aware of them. consumers may not be aware of. perceived value of the product/
service offering.

Page 182

Appendix 7: Resources manual version 5

Page 183

Resources manual for competitive actions

October 2016
CONTENTS
Data................................................................................................................................................................................................................................................................................................................................................................................... 1
Customer surveys........................................................................................................................................................................................................................................................................................................................... 1
Focus Groups and interviews................................................................................................................................................................................................................................................................................. 1
Ethnographic studies.............................................................................................................................................................................................................................................................................................................. 1
Informal channels........................................................................................................................................................................................................................................................................................................................... 2
Tools.................................................................................................................................................................................................................................................................................................................................................................................. 3
Customer matrix............................................................................................................................................................................................................................................................................................................................... 3
Primary benefit map.................................................................................................................................................................................................................................................................................................................. 3
Ansoff’s growth matrix.......................................................................................................................................................................................................................................................................................................... 3
Porter’s 5-forces................................................................................................................................................................................................................................................................................................................................. 4
Core competency.......................................................................................................................................................................................................................................................................................................................... 4
New value curve................................................................................................................................................................................................................................................................................................................................ 4
Competitors...................................................................................................................................................................................................................................................................................................................................................... 6
Competitors’ products and services........................................................................................................................................................................................................................................................ 6
Competitors’ pricing models................................................................................................................................................................................................................................................................................. 6
Intensity of rivalry............................................................................................................................................................................................................................................................................................................................ 6
Relative company size........................................................................................................................................................................................................................................................................................................... 7
Relative profitability................................................................................................................................................................................................................................................................................................................... 7
Resource based view............................................................................................................................................................................................................................................................................................................... 8
Benchmarks....................................................................................................................................................................................................................................................................................................................................................... 9
Competitive actions in parallel industries and other territories...................................................................................................................................................... 9
Evolution of industries in other territories................................................................................................................................................................................................................................... 9
Team.............................................................................................................................................................................................................................................................................................................................................................................10
Teamwork...................................................................................................................................................................................................................................................................................................................................................10
Education & training............................................................................................................................................................................................................................................................................................................10
Level of experience of managers............................................................................................................................................................................................................................................................... 11
Functional biases........................................................................................................................................................................................................................................................................................................................ 12
National & cultural backgrounds................................................................................................................................................................................................................................................................ 12
Relevant experience in other territories and parallel industries................................................................................................................................................. 13
Industry................................................................................................................................................................................................................................................................................................................................................................... 14
Industry maturity.......................................................................................................................................................................................................................................................................................................................... 14
Fragmentation.................................................................................................................................................................................................................................................................................................................................. 15
Strategic groups & cognitive communities........................................................................................................................................................................................................................... 16
Degree of turbulence......................................................................................................................................................................................................................................................................................................... 17
References...................................................................................................................................................................................................................................................................................................................................................... 20

DATA
Customer surveys
relatively small set of questions and answers, and fails to capture the emergent issues, or the opinions of
the respondents.
The advantages of customer surveys, and the data that is gathered is that, provided the sample set is large

the interview.
process than customer surveys and are more effective after some data has already been gathered through
data could then be analysed to affirm what the airline is doing well and could be used as a competitive

Informal channels
1. Discussions with customer-facing employees, such as the sales staff and call centre operators, about
to the issues customers were confronted with and that were important to them. In cases where data was
ensure its success.

TOOLS
Customer matrix
‘Measuring Product Advantage Using Competitive Benchmarking and Customer Perceptions’ published
in the Long Range Planning journal (Vol. 27, No. 1, p 110-132). The matrix measures product advantage,
the firm, the market or the industry.
The matrix comprises ‘Perceived Use Value’ along the one axis and ‘Perceived Price’ along the other. The
most desirable quadrant is the one with the highest perceived use value and the lowest perceived price,
while the least desirable is the one with the highest perceived price and the lowest perceived use value.
The matrix was designed to help managers better understand a product or brand positions in relation
to their competitors through the lens of the individual customer. Constructing the matrix is an iterative
process that starts with the application of hard information that is then supplemented by experience and
perceptions and refined further as more data is gathered.
Primary benefit map


service offerings.

is required.
Porter’s 5-forces
Useful in objective setting and determining which of the 5 levers to use in formulating competitive actions
Core competency
New value curve

The new value curve provides a fresh approach to competitive positioning that is premised on establishing
of competition.


COMPETITORS
how it is likely to evolve, would also be useful, particularly for use in conjunction with the Primary benefit
competitors
• Marketing agencies, consultants and market research agencies, such as the agency GfK, that either
gather industry data or work with competitors

As with the ‘Competitors’ products and services’, information about competitors’ pricing models will be
sources, including:
competitors
• Marketing agencies, consultants and market research agencies, such as the agency GfK, that either
gather industry data or work with competitors
or objectives set for an action and, as a consequence, the actions themselves. For example, where
rivalry is intense, managers may consider innovating by developing a new product or a new business
model in order to avoid further competitive pressure, as proposed by Kim and Mauborgne in their article


In analysing competitors and in trying to anticipate rivalry following a competitive action, it is
worthwhile mapping the relative sizes of the various competitors, the markets they serve and the
customer requirements they fulfil. Once this is understood, the effects of the competitive action can be
better anticipated.
mean ending up in the ‘gap in the middle’, as described by Michael Porter (1980).
It was observed in the research leading to the development of this guide that managers at large
companies make a mental assumption that their companies should be able to compete more effectively
than their smaller competitors because of their more comprehensive and more developed resource bases.
For example, the manager at a large IT company stated that by combining their resources, including both
internal resources and those made available to them by partners at preferential rates because of their size,
they would have a competitive advantage over smaller competitors in price and in the functional breadth
of their solution offerings. A manager at another large IT company was surprised that a small competitor
could enter their competitive set because he thought they would not be able to fulfil their customers
rigorous procurement requirements.
used to acquire companies that own complimentary services that could be bundled with the acquirer’s

Resource based view

than their rivals.

BENCHMARKS
Replicating or learning from competitive actions in other territories or parallel industries can be applied to
any of the five leavers. For example, the business model of ride-hailing service Uber has been used in of
a number of other business applications, including food delivery services, corporate jet rentals and home
appliance rentals. In the research I also came across competitors pricing policies and communication
implementing it.

them for ideas and input in deciding which of the 5 levers to use and how to use them in formulating

TEAM
Teamwork
Useful where many different skill sets and collaboration between different departments within the
organisation are needed
Where co-operation or collaboration between different departments or units in an organisation is required

for the effective execution of a competitive action, it may be a good idea to involve the relevant managers
and other personnel in its formulation as early on as possible. This involvement could take the form of
cross-departmental workshops and communications regarding the competitive action.
deciding this would make the impact they needed, based on interactions with the marketing department
the Strategy & planning department, the banks’ economists and the Asset & Liability committee (ALCO)


When team members are selected to formulate and execute competitive actions, managers should be
probably be better served using staff with formal educational qualifications in business or marketing
disciplines. Should the formulation of the action require a more entrepreneurial approach, for example
combining products in new and innovative ways where no data is available to predict how the market
would respond or in addressing to sagging sales due to evolving customer tastes, a more experienced
manager should probably be sought and less emphasis could be placed on his or her education and
formal training.
evolving and responding to these changes, the skills of an anthropologist or industrial psychologist could
prove to be useful.




more experienced ones, provided possible conflicts and clashes between the different approaches can
be managed.
Functional biases
Johnson, 1994).

an advantage insofar as they bring the learned experiences of competitive actions successfully executed
in their home markets with them and were able to apply learning’s and tacit knowledge gained in their
home markets to the new ones. However, in every instance of managers from foreign markets successfully
formulating and executing competitive actions, they did so with the support of local managers. It’s
noteworthy that when a local manager was also involved in the formulation and execution of competitive
actions led by foreign managers in my research, the competitive action appeared to have been executed
with relatively positive results.
My research showed that a mix of different national and cultural backgrounds could be advantageous in
the formulation of competitive actions, particularly when the frames of reference of a manager that has
successfully responded to a particular stimulus in a foreign territory is combined with those of a local

manager who understands local national and cultural nuances. It’s worth considering the national and

was less competitive pressure and, therefore, higher profit margins.
possible relevance.

INDUSTRY
Industry maturity


Industry maturity
managers’ frames of reference tended to be more aware of who their competitors were and what their
competitors were doing in the context of competitive actions. The managers who were interviewed at IT
companies, whose industrial structures were still evolving and, therefore, their competitive sets were not
these volumes.

It is useful to be aware of how mature the industry you operate in is, and how well developed it’s structures
are. This has an impact on the data that is available to you and your competitors and it’s sources, as well as
the rivalry you are likely to experience, which in turn affects the objectives you can set for yourself and the
type of actions that are likely to be successful. It is also worth reading the section that follow, particularly
those about ‘Fragmentation’ and ‘Strategic groups & cognitive communities’.
as marketing agencies, to use in formulating competitive actions. You could try to augment this data with
data obtained through informal sources, such as employees that used to work for competitors and shared
Fragmentation
the 5 levers to use
In my research, I analysed the way in which a smart card producer that uses the cards as mechanisms to
develop and launch products that fill specific market needs, views and relates to competitors and potential
competitors. The company sought to avoid competing with other smart card producers’ head on by
finding customer needs that haven’t been satisfied and that they could respond to with solutions that
used the smart card as a delivery mechanism. These customer needs where synonymous with nascent and
fragmented markets and their focus was on satisfying customer needs with little or no consideration for the
Kim and Mauborgne in their 1999 article ‘Creating New Market Space’ published in the Harvard Business
Review. They describe the approach as seeking ‘new value curves’.
still evolving.


the 5 levers to use

competitive actions. Kelly (1995) noted “Shared belief systems enable coordinated activity by providing a
common framework”. These structures are associated with industry maturity. In other words, as an industry
matures so the structures become more and more engrained. The research leading to the development
of this guide confirms this insofar as managers in the mature industries, including the automotive, financial
services, FMCG and fashion industries, were far more aware of their competitors and, therefore, the
structures of their industries, than the managers operating in nascent (emerging and growth) industries,
including the information technology, smart cards and new media industries. Wiley (1988) asserts that
supra-individual level frameworks emerge as interactions take place among different individuals within
a given social grouping and the commonly shared ideas begin to take on an existence of their own,
independent of the individuals that created them.
industry norms. Managers may also prefer to take comfort in not deviating from industry norms for fear of
possibly compromising their profits.
and as shared recipes within industries, which in turn perpetuates hyper-turbulent conditions. Thus,
of stability.

issue diagnosis.
made categories occur (Reger and Palmer 1996, Dutton 1993). This results in a strong convergence
Palmer 1996).
The research leading to the development of this guide found that the intensity of competition is also
a function of cultural and national norms, as well as regulation. For example, the anti-corruption laws
introduced in Mainland China caused considerable competitive upheaval in the fashion industry and the
procurement regulations imposed on state-owned entities in Kazakhstan guided the way in which other
state-owned entities marketed and sold their products and services. D’Aveni (1994) noted that the airline,

banking, and telecom industries in the United States had been hypercompetitive for some time but yet
in Japan, and to a lesser extent continental Europe, social and cultural norms imposed constraints on
adapting such rapid and discontinuous change frameworks.
business models.
Resources’, which both provide frameworks that companies can use to differentiate themselves from rivals.
These are premised on the Resource Based View (RBV) concept described by Edith Penrose in her 1959
article ‘The theory of the growth of the firm’.

REFERENCES
pp. 113-124

March-April 2000

1, p 110-132

August 2008, p 140-150

No. 1, p546-47

9. D’Aveni, R. (2007), M
110-120




18. Kelly, M.L. (1955), A


February, p 83-93

February, p 83-93
21. Penrose, E. T. (1959), T

22. Penrose, E.T. (1960), G



Vol. 48 Issue 3, p646-664.
25. Porter, M.E. (1980), C

Free Press, 1980

Review (v. 68, no. 3) pp. 79–91.

Journal, 1993, Vol. 14, p103-124



1977, pg 127-190

December, p 844-847

33. Uleman (1989)
34. Whitley, R. (1987), T



Page 184

Appendix 8: Previous consulting assignments &

businesses

• Ecomarine – Corporate restructuring and strategy development for a distressed
port operator and shipping business in Nigeria.
• Constelor – Research and development of a business strategy for Constelor, a
start-up West African asset management and corporate finance boutique in a
highly competitive market.
• Re-Action Group - Restructuring assignment for a multi-national health care
company with businesses in the United Kingdom, South Africa and Tanzania to
position the business for growth, both organically and through acquisitions.
• BGL Limited - Internationalisation strategy research and development
assignment for a prominent Nigerian investment bank considering new markets
and their competitive environments.
• Investec Bank - Internationalisation feasibility study and strategy development
assignment for a division of Investec to ascertain the viability of expanding into
the Australian market, with a particular focus on the Australian competitive
environment.
• Paul Smith franchise and Loom – South African fashion retailer that I co-
founded in 2007 and that owned the Paul Smith franchise, with stores in
Johannesburg and Cape Town, as well as its own brand, Loom, that comprise a
store in Johannesburg and an on-line store.
• Ensemble Technology – A technology company in South Africa that developed,
implemented and supported financial technology solutions for investment
managers and banks I co-founded in 1998.
• Millennium Financial – A futures broker and hedge fund in South Africa that I
co-founded in 1994.

Page 185

Appendix 9: Quality appraisal criteria applied to articles

Quality appraisal criteria (Likert scale) 1 2 3 4 5
Theories and assumptions
How important are the basic arguments presented in the
paper in relation to management cognition in the context of
competition and competitive strategy?
How thoroughly are important premises and assumptions
identified?
Description and evaluation methods
How well is the data collection methods described?
How well are the sampling strategy and sample set explained?
How well are questionnaires or other instrument items
identified and described?
Results
How accurately are the findings described?
How well are the results related back to original propositions,
hypothesis, research questions and data analysis?
How well has the author considered alternative explanations
for the results?

Table 1: Likert quality appraisal criteria

Quality appraisal criteria (binary scoring) Yes No

Theories and assumptions
Does the study have a proper theoretical framework?
Does the study present a clear hypothesis or hypotheses?
Are the key terms defined?
Description and evaluation methods
Is the methodology used in the paper clearly defined?
Is the operationalisation of the constructs plausible?
Have adequate steps been taken to avoid data collection
errors?
Results
Does the presentation of results provide sufficient and accurate
data to allow the reader to reach independent conclusions?
Is implied causality always justified?

Table 2: Binary quality appraisal criteria

Page 186

Appendix 10: Data extraction form

Citation/Description
Title
Author/s
Journal
Year
Keywords
Research objective/question
Methodology
Sample selection, size and characteristics
Data sources and data collection methods
Methods of analysis
Theme
Context
Intervention/strategy
Mechanism implied by theory
Outcome
Results
Key findings
Limitations and suggestions for future
research
Contribution to review question
Positive performance/negative
performance/no impact
Policy influence success/failure

Table 1: Data extraction form

Page 187

Appendix 11: Summary of Key Findings from Literature

The table below lists the significant findings from the key studies found in the SLR.

Article Key findings
Abell, D. (1978), Abell asserts that, short of entry into and exit from new
“Strategic Windows”, and existing markets, investments in markets should be
Journal of Marketing, timed to coincide with the period when the fit between
July, p 21-26 the firm and the market is at its optimum.
Bailey, Johnson, Daniels Six discrete dimensions of strategy development are
(2000), Validation of a identified in this study and are labelled: Command,
Multi-Dimensional Planning, Incrementalism, Political, Cultural and Enforced
Measure of Strategy Choice. A large number of managers were given
Development questionnaires to answer, with several questions related
Processes”, British to each dimension. It was found that the Command and
Journal of the Planning dimensions were most prolific, being the
Management, Vol. 11, dimensions in which an individual or small group of
p151-162 individuals have a large amount of institutional control
and influence and the dimension in which formal strategy
planning processes are employed respectively.

Bigné, J.E, and López, The competitive group concept was tested in this
N.V. (2002), framework and it was found that the way managers
“Competitive groups in defined their industries was not the classical economic
the automobile definition based on competitors with similar technological
industry: a compared production characteristics or easily substitutable products
supply–demand or materials but are, instead, grouped according to market
approach”, Journal of trends. It was also found that there is far great
Strategic Marketing, homogeneity between managers’ mental maps of
March 2002, Vol. 10 competitors than there is between consumers’ mental
Issue 1, p21-45 maps of competitors.
Bloodgood, Turnley and The results of this study suggests that deviations from
Bauerschmidt (2007), shared cognitions within industry groups can negatively
“Intra-industry shared impact firm performance, while conformity to shared
cognitions and cognitions can positively impact it.
organizational
competitiveness”, John
Wiley & Sons, Strategic
Change, Sept-Oct 2007

Page 188


Bogner, W.C. and The authors argue that conventional cognitive frameworks
Barr, P.S. (2000), employed to make sense of industrial competitive
“Making Sense in environments don’t work in hypercompetitive industries.
Hypercompetitive They describe the cognitive frameworks employed in
Environments: A hypercompetitive industries as "adaptive sense-making"
Cognitive Explanation and refer to the practices established in the literature for
for the Persistence of dealing with temporary turbulence. They suggest that in
High Velocity hypercompetition those processes continue indefinitely as
Competition”, members of the industry continually seek to disrupt it.
Organization Science, Further, they argue that these processes can become
Vol. 11, No. 2, March- institutionalised as standard operating procedures within
April 2000 firms and as shared recipes within industries, which in tum
perpetuates hyper-turbulent conditions.

Bowman, C. and The study concludes that there appear to be slight
Daniels, K. (1995), functional biases in the strategic priorities that managers
“The Influence of set, which may indicate that managerial perceptions of
Functional Experience strategic priorities are most strongly influenced by the
on Perceptions of organisations’ strategy or that other variables, such as
Strategic Priorities”, national, industry or strategic group influences. The study
British Journal of also suggests that when managers are faced with an
Management, unfamiliar case situation they tend to perceive problems
September 1995, Vol. that cannot be simplistically associated with their functional
6 Issue 3, p157 backgrounds.
Bowman, C. and The article proposes the use of a ‘Customer Matrix’ to
Faulkner, D. (1994) measure product advantage, which is premised on the
“Measuring Product notion that “competition is acted out through the
Advantage”, Long purchasing behaviour of individual customers” and,
Range Planning, Vol. therefore, the basic unit of analysis should be the individual
27, No. 1, p 110-132 customer, not the company or industry. The matrix
comprises ‘Perceived Use Value’ along the one axis and
‘Perceived Price’ along the other. The most desirable
quadrant is the one with the highest perceived use value
and the lowest perceived price. The matrix is designed to be
used as a tool to understand a product’s or brand’s position
in relation to its competitors through the lens of the
individual customer. Constructing the matrix is an iterative
process that starts with the application of hard information
that is then supplemented by experience and perceptions
and refined further as more data is gathered. The authors
have also applied their matrix to the producer view and the
relationship between ‘innovation’ and ‘cost’, which allows
producers to marry their internal dynamics with their
customers’ perceptions regarding price and use value.
Page 189


Calori, R.; Johnson, G. The study explores the mental frames of reference of 33
and Sarnin, P. (1992) managers in the U.K. and France and concludes that:
“French and British

• Cognitive analysis models and techniques can be

Top Managers' usefully applied to gain a managerial understanding
Understanding of the of industries
Structure and the • Industry structure is an important contributor to
Dynamics of Their managerial thinking
Industries: a Cognitive
• Political and macro-economic environments
Analysis and
influence managerial thinking
Comparison”, British
Journal of National culture plays a significant role in the formation of

Management. Jun92, managers’ mental models and the formulation of business
Vol. 3 Issue 2, p61 strategy.
Carlsson, C. and The authors provide a strategic management system called
Walden (1997), ‘Woodstrat’ that aims to support strategic actions at the
“Cognitive Maps and corporate, divisional and business unit levels and covers
a Hyperknowledge market position, competitive position, production position,
Support System in profitability, investment and financing positions. The system
Strategic was tested on two corporations in the Finnish forestry
Management”, Group industry with positive results.
Decision &
Negotiation, January
1997, Vol. 6 Issue 1,
p7-36
Collis, D.J. and The article provides a framework that firms can use to
Montgomery, C. differentiate themselves from rivals, which is premised on
(2008) “Competing on the Resource Based View (RBV) concept. Accordingly, the
Resources”, Harvard framework combines the internal analysis of phenomena
Business Review, July- within the firm and the external analysis of the industry and
August 2008, p 140- the competitive environment. Specifically, to develop
150 competitive strategies the framework suggests firms’ focus
on defining their strategically valuable resources that
enable them to perform activities better or more cheaply
than their rivals. The article lists five key characteristics that
strategically valuable resources should have, including:


• The company, not its employees, suppliers, or
customers, control its value
• They’re superior to similar competitors’ resources

Page 190


Collis, D.J. and The study provides a methodology for competitive
Rukstad, M.G. (2008), positioning, which is termed ‘finding the firms strategic
“Can you say what sweet spot’. Considerable emphasis is placed on
your strategy is?”, competitive advantage, which is the third step in Collis’ and
Harvard Business Rukstad’s three step strategy statement, which
Review, April 2008, p encompasses objective, scope and advantage. The notion of
82-90 the ‘strategic sweet spot’ is very valuable in the
conceptualisation of the competitive position and largely
consistent with the Resource Based View of the firm.

Daniels, Johnson, de Managers have a tendency towards mental models similar

Chernatony (2002), to others at the same management level across the
“Task and industry. This is particularly true for middle-managers.
Institutional There is greater homogeneity amongst the mental maps of
Influences on divisional level managers than amongst the mental maps of
Managers' Mental senior managers. The authors argue that this is because
Models of senior managers are more concerned with strategy and,
Competition”, therefore, differentiating their product or brand offerings,
Organization Studies, while divisional managers are more function oriented and,
Vol. 23 Issue 1, 2002 p therefore, influenced by the task environment to a greater
31-62 extent.

The study shows that there is no evidence that the strategic

group of large national firms influences the cognitive
similarity of managers within such firms.
There is greater similarity between the mental maps of
managers within the same organisation than between
managers of different organisations, reflecting the influence
of the task environment.

There is no evidence of functional foci – influences of

functional focus on mental models are subordinate to
institutional influences.

D’Aveni, R. (2007), A tool is proposed to predict future competitive

“Mapping Your environments by focusing on how customers determine the
Competitive value of perceived benefits. This involves using a technique
Position”, Harvard to pre-empt rivals’ competitive actions through the use of
Business Review, price-benefit maps that are extrapolated to predict
November 2007, p competitors’ strategic intent. Regression analysis is used to
110-120 examine the relationship between a dependent variable
(price in this case) and several independent variables
(product benefits) and to create a price-benefit model.

Page 191


D’Aveni, R.A. (1995), The ‘New 7Ss’ tool was developed to account for “companies
“Coping with that actively work to disrupt their own advantages and the
hypercompetition advantages of their competitors”. D’Aveni’s research reveals
utilizing the new seven key elements of a dynamic approach to strategy.
7S’s framework”, Unlike the original 7Ss, the new tool is based on finding and
Academy of building temporary advantages through market disruption,
Management rather than sustaining advantage and perpetuating
Executive, Vol. 9, equilibrium. The new 7Ss are:
No. 3, p 45-57

• Superior stakeholder satisfaction

• Strategic soothsaying
• Positioning for speed
• Positioning for surprise
• Shifting the rules of the game
• Signalling strategic intent
• Simultaneous and sequential strategic thrusts

De Chernatony, The study found that managers don’t view their industries in
L. ; Daniels, the classical economic sense, based on firms with similar
K.; Johnson, G. technological production characteristics or easily
(1993), “A Cognitive substitutable products or material processes. They are not
Perspective on attentive to these details and, instead, to cope with their
Managers' finite cognitive capabilities, they only mentally map a small
Perceptions of number of competitors. Furthermore, managers tend to have
Competition”, differing perspectives regarding the competitive structures of
Journal of Marketing their industries
Management,
October 1993, Vol. 9
Issue 4, p373-381
Dohyeon, K. (2013), The study suggests industrial organisations or strategic
“Cognitive groups are cognitive communities formed by strong outside
communities and authority (legitimacy-based groups) in which managers share
legitimacy based similar mental models of their competitive environments.
groups: the role of The study also suggests that managers of relatively new
external entrants show an apparent cognitive similarity to managers
categorisation on of firms within their legitimacy-based group and that
cognitive similarity”, legitimacy providers exert a strong influence of on the
Academy of formation of competitive cognition. The authors suggest that
Strategic the number of legitimacy-based groups may predict the
Management number of cognitive communities.
Journal, 2013, Vol.
12 Issue 2, p1-29

Page 192


González, J.M.H.; The study shows that individual manager’s mental models are
Calderón, M.Á.; strongly correlated with the mental models associated with
González, J.L.G. Kaplan & Norton’s balanced scorecard strategy map. Thus,
(2012), “The the balanced scorecard’s strategy map can be used as a
alignment of reference point for the convergence of mental models. The
managers' mental study concludes that implementing the balanced scorecard
models with the strategy map can help reduce managers’ causal ambiguity
balanced scorecard with regard to the objectives they need to pursue in order to
strategy map”, Total improve a firm's competitive position.
Quality
Management &
Business Excellence,
June 2012 Vol. 23
Issue 5/6, p 613-623
Giaglis, G.M.; The study explores the relationship between management
Fouskas, K.G. (2011), perceptions of their competitive environments and their
“The impact of responses to rivalry and finds management perceptions of
managerial the intensity of competition, substitution threats and
perceptions on increased buyer power are correlated with broader and more
competitive innovative competitive reactions
response variety”,
Management
Decision, Vol. 49 No.
8, 2011, p1257-1275
Hodgkinson, G.P., The study explores the nature of individual differences and
Johnson, G. similarities in managers' mental models of competitive
(1994),“Exploiting structures, how they might be explained and how such
the mental models differences in perception are resolved. It revealed
of competitive considerable diversity amongst the research participants'
strategists: the case organisations in terms of the overall structure and contents
for a processual of their mental models of competitive environments. The
approach”, Journal study also revealed considerable intra-organisational
of Management Stu agreement regarding the categories that describe the self-
dies, July 1994, Vol. identity of the research participants' organisations and their
31 Issue 4, p525-551 major competitors. The study demonstrates that there is
considerable variation in the contents and structural
complexity of the cognitive taxonomies of individual
managers, both within and between organisations, in the
same industry sector.

Page 193


Hodgkinson, G.P. The article provides a critical assessment of Daniels, Johnson,
(2002), “Comparing de Chernatony (2002) article, “Task and Institutional
Managers' Mental Influences on Managers' Mental Models of Competition” and
Models of identifies a number of methodological limitations with their
Competition: Why study. Hodgkinson asserts that the elicitation procedures
Self-report employed, namely a card naming exercise and a repertory
Measures of Belief grid, necessitate extensive interactions between researcher
Similarity Won't and participant and that, during the course of these
Do”, Organization interactions, there is ample opportunity for a range of factors
Studies, 2002 Vol. 23 associated with the dynamics of the interview to influence
Issue 1, p63-72 the extent to which more or less cognitive maps are elicited.
Hodgkinson suggests that, taking account of the limitations of
the nomothetic approaches to cognitive mapping employed
by Daniels et al., hybrid approaches that capitalize on the
strengths of ideographic and nomothetic procedures, whilst
minimizing the limitations of each, should be used.

Hopkins, W.E.; The authors propose a framework to facilitate strategic

Mallette, P. and inertia and strategic renewal in organisations. They suggest
Hopkins, S.A. (2013), there are several factors that influence strategic
“Proposed factors inertia/strategic renewal, including the top management
influencing strategic mind-set, middle management empowerment, middle
inertia/strategic management commitment and competitive intensity. They
renewal in suggest middle management’s commitment plays a role in
organisations”, overcoming strategic inertia and promoting strategic renewal
Academy of and that this depends on the perceived balance of reward
Strategic utilities over input utilities. Self-determination is argued to
Management form the theoretical foundation for empowerment. The
Journal, Volume 12, authors postulate that an entrepreneurial mind-set is
Number 2, p77-94 required by top-management, rather than a management
mind-set. They argue that competitive intensity is a primary
driving force behind successful strategic renewal and
diminished strategic inertia.

Krieger, A.M. and The authors describe their tool for competitive positioning,
Green, P.E. (2001), named VOICE, that they have created to provide an approach
“A decision support to developing message bundles and targeting potential-buyer
model for selecting segments. The tool is based on the use of a quadrant chart to
product/service map the relative performance and the relative importance of
benefit various product attributes. The tool’s inputs include survey
positioning’s”, data on respondents’ judged attribute importance ratings
European Journal of and perceived performance levels of the different
Operational competitors for each attribute.
Research, Vol. 142,
p187-202

Page 194


Kim, W.C. and The article provides a fresh approach to competitive
Mauborgne, R. positioning that is premised on establishing what they refer
(1999), “Creating to as ‘new value curves’. The authors promote a ‘systematic
New Market Space”, approach to value innovation’ as a way of avoiding head-to-
Harvard Business head competition, which they state “can be cutthroat,
Review, January- especially when markets are flat or growing slowly”. The
February, p 83-93 pretext of their research is that most companies focus on
matching and beating their rivals and, as a result, their
strategies tend to converge along the same basic dimensions
of competition. The authors contend that firms can position
their products or brands in new market spaces by employing
different patterns of strategic thinking. This approach to
competitive positioning is premised primarily on considering
substitute industries to establish new value curves. The key
to discovering a new value curve lies in four basic questions:

1. What factors should be reduced well below the

industry standard?
2. What factors should be eliminated that the industry
has taken for granted?
3. What factors should be created that the industry has
never been offered before?
4. What factors should be raised well beyond the
industry standard?

New value curves attempt to transform enormous latent

demand into real demand. Strategic groups can generally be
ranked in a rough hierarchical order built on two dimensions;
price and performance. The key to creating new market
space across existing strategic groups is to understand what
factors determine buyers’ decisions to trade up or down from
one group to another. This requires that firms’ challenge the
functional-emotional orientation of their industries.

McGrath, R.G. and The article identifies two antecedents to competence, which,
MacMillan, I.C. the article asserts, results in competitive advantage. These
(1995), “Defining include the ‘comprehension’ of the management team and
and developing the ‘deftness’ of their task execution. A dynamic, process-
competence: A oriented framework is provided. that takes ‘comprehension’
strategic process and ‘deftness’ as inputs to ‘emerging competence’, which is
paradigm” Strategic used to develop ‘competitive advantage’ that results in rent,
Management or abnormal profits.
Journal. May 1995,
Vol. 16 Issue 4,
p251-275

Page 195


Lamberg, J-A. and The authors provide a framework that integrates the
Tikkanen, H. (2006), potential analytical levels, being society, technology,
“Changing sources firm/industry and individuals, offered by management
of competitive researched concerned with how and why firms and industries
advantage: cognition change and how strategies evolve over time. The framework
and path regards ‘structure’, ‘technical and systematic properties’ and
dependence in ‘ideology’ and the key factors that inform management
Finnish retail cognition and then lead to firm level actions, which are
industry 1945- dependent on outcomes of the paths of previous outcomes.
1995”, Industrial &
Corporate Change,
October 2006, Vol.
15 Issue 5, p811-846
Mintzberg, H. and The study is the review of 10 different schools of business
Lampel, J. (1999), strategy that concludes that, while the 10 different schools to
“Reflecting on the represent different perspectives, they are also all part of the
Strategy Process”, same strategy formulation process. The authors assert that
Sloan Management each of these approaches represents neither a discrete set of
Review, Spring 1999 processes or different parts of the same process but that,
instead, some schools clearly are at different stages or
aspects of the strategy formation process.
Specifically, the 10 schools reviewed include:

1. Design School: A process of conception. Strategy is

viewed as achieving the essential fit between internal
strengths and weaknesses and external threats and
opportunities. Senior management is tasked with
formulating clear, simple and unique strategies in a
deliberate process of conscious thought.
2. Planning school: A formal process. The authors claim
that this process is cerebral and formal, decomposable
into distinct steps, delineated by checklists and
supported by techniques, with regard to objectives,
budgets, programmes and operating plans. This means
that staff planners replaced senior managers as the
key players in the process.
3. Positioning school: an analytical process. In this view
strategy reduces to generic positions selected through
formalised analyses of industry situations. Hence,
planners become analysts. This literature grew in all
directions to include strategic groups, value chains,
game theories and other ideas.
4. Entrepreneurial school: A visionary process. This
school roots process in the mysteries of intuition. That
Page 196

shifted strategies from precise designs, plans or

positions to vague visions or broad perspectives.
5. Cognitive school: A mental process.
6. Learning School: An emergent process. Strategies are
viewed as being emergent and strategists can be found
throughout the organisation and that formulation and
implementation of strategy intertwine.
7. Power School: A process of negotiation. Two separate
orientations seem to exist in this literature. Firstly,
micro power sees the development of strategies within
the organisation as essentially political – a process
involving bargaining, persuasion and confrontation
among actors who divide the power. Macro power
views the organisation as an entity that uses its power
over others and among its partners in alliances, joint
ventures and other network relationships to negotiate
collective strategies in its interest.
8. Cultural school: A social process. Mintzberg and
Lampel (1999) describe the Cultural school and the
mirror image of the Power school. While the Power
school focuses on self-interest and fragmentation, the
Cultural school focuses on common interest and
integration.
9. Environmental school: A reactive process. The
Environmental school includes the ‘contingent theory’
that considers which responses are expected of
organisations facing particular environmental
conditions and ‘population ecology’ writings that claim
severe limits to strategic choice. Mintzberg and Lampel
(1999) postulate hat Institutional theory, which is
concerned with the institutional pressures faced by
organisations, is perhaps a hybrid of the Power and
Cognitive schools.
10. Configuration school: A process of transformation. The
Configuration school sees organisations as
configurations – coherent clusters of characteristics
and behaviour. Planning prevails in machine-type
organisations while entrepreneurship can be found in
more dynamic configurations, such as start-ups or
turnarounds. Mintzberg and Lampel (1999) postulate
that, if organisations can be described as ‘states’,
change must be described as rather dramatic
‘transformation’ – a leap from state to another.

Page 197


Porac, J.F., Thomas, The study found that managers focus on a narrow band of
H. (1994), “Cognitive rival firms that they regard as being similar to their own
Categorization and organisations and use the term ‘cognitive oligopolies’ to
Subjective Rivalry define these groupings. It suggests manager’s focus on
Among Retailers in a competitors that pose the most serious competition for
Small City”, Journal scarce resources and that focusing on a small number of very
of Applied similar organisations. It also suggests that the perceived
Psychology, Vol. 79, competitive space is structured by the geographical
No.1, p 54-66, 1994 placement of competitors throughout the local community.
Porac, J.F., Thomas, Managers view their firms as belonging to strategic groups, or
H. and Baden-Fuller, ‘primary competitive groups’, that comprise groups of close
C. (1989), competitors that are protected from competitors outside
“Competitive their strategic group. Using the Scottish knitwear industry as
Groups as Cognitive an example, the Porac et al. establish that oligopolists are
Communities: The competitors because they have defined each other as such.
Case of Scottish
Knitwear
Manufacturers
Revisited”, Journal
of Management
Studies, Vol. 48
Issue 3, p646-664
Porter, M.E. (1980), A number of models for competitive positioning within the
“Competitive industrial organisation are provided and the assertion is
Strategy: Techniques made that industry structure shifts over time and, therefore,
for Analysing understanding it must be the starting point for strategic
Industries and analysis. The ‘Five Forces’ model is provided for assessing a
Competitors”, The number of important economic and technical characteristics
Free Press, 1980 of an industrial organisation and the book suggests that, once
the industry structure has been analysed, offensive or
defensive actions can be taken to reposition the brand or
product to compete optimally.

Porter, M.E. (1981), The study debates the applicability of Industrial Organisation
“The Contributions (IO) theory versus Business Policy (BP) theory and suggests
of Industrial that IO theory views the firm as a single decision-making unit
Organisation to that makes choices based on economic objectives while BP
Strategic theory places great emphasis on the personality of the leader
Management”, and the political processes of the firm. Performance loops
Academy of back to influence firm conduct, which loops back to influence
Management the structure of the industry.
Review, Vol. 6., No.
4, p 609-620

Page 198


Reger, R.K. and Huff, The study shows that perceptions about strategic
A.S. (1993) commonalities are common amongst managers at firms
“Strategic Groups: A within strategic groups and they map their competitors in
Cognitive subtle ways that are often not based on economical or other
Perspective”, material measurements. It also shows that strategic groups
Strategic are the way that strategists organise and make sense of their
Management competitive environments and that they only consider a sub-
Journal, 1993, Vol. set of their universe of competitors from a cognitive
14, p103-124 perspective. Participant firms in strategic groups are broken
in ‘core’, ‘secondary’ and ‘transient’ firms and this
categorisation approach provides an explanation for the way
in which strategists view competitors and provides a basis
from which to analyse the competitive actions of strategists.

Reger, R.K. and The authors seek to understand how cognitive

Palmer, T.B. (1996), interpretations of competitive environments differ between
“Managerial stable and turbulent environments. The study shows that as
Categorization of competitive environments become more dynamic or
Competitors: Using turbulent, managers rely more on existing mental maps and
Old Maps to that their cognitions shift from ‘controlled’ to ‘automatic’
Navigate New processing. In other words, cognitive inertia sets in as the
Environments”, environment becomes unfamiliar or unpredictable.
Organization
Science, Jan/Feb,
Vol. 7 Issue 1, p22-
39
Rigby, D. (2001), The study found no consistent correlation between
“Management Tools satisfactions with financial results and the number or type of
and Techniques”, management tools and techniques being used. For many
California tools, however, user satisfaction was found to be significantly
Management higher at successful companies than at less-successful ones. It
Review, Vol. 43, No. concludes by stating that:
2, Winter 2001

• Their successful implementation required that the

tools selected be used in a major effort and not in a
limited initiative
• For every single tool surveyed, satisfaction scores
were higher when the tool was used as part of a
major initiative

Management tools require top-down support to succeed. In

other words, their use needs to be sanctioned and motivated
by top management.

Page 199


Schwenk, A model is provided to explain the role of heuristics and
C.R. (1988), “The biases in the development of strategic assumptions and
Cognitive cognitive maps that affect the development of strategic
Perspective on schemas. The model also includes the application of ‘analogy
Strategic Decision and metaphor’, which represents previously developed
Making”, The schemas, to new strategic schemas. Lastly, the assumptions
Journal of and cognitive maps developed through the application of
Management ‘heuristics and biases’ and ‘analogy and metaphor’ are
Studies, Vol. 25 applied to strategic problems.
Issue 1, January
1988 p41-55
Sanchez and Heene The authors integrate the strategic management theories of
(1997), “Reinventing industrial organisation economics with general management
Strategic and game theories to offer a framework for strategy
Management - New development that integrates several theories provided by
theory and practice researchers with the logic employed by managers.
for competence
based competition”,
European
Management
Journal Vol. 15, No.
3, pp. 303-331
Wiggins, R., Ruefli, T. The authors assert that no one except the innovator makes a
(2005), genuine ‘profit’ and that the innovator’s profit is always quite
“Schumpeter’s short-lived. The study finds that:
Ghost: Is

• Periods of persistent superior economic performance

hypercompetition have decreased in duration over time
making the best of
• Hypercompetition is not limited to high-technology
times shorter?”, industries, but occurs throughout most industries but
Strategic that superior economic performance decreases in
Management duration over time in both ‘high-tech’ and ‘low-tech’
Journal, Vol. 26, p
industries but at a slower rate in ‘low-tech’ industries
887–911
Over time firms increasingly have sought to sustain

competitive advantage by concatenating a series of short-
term competitive advantages.

Table 1: Summary of literature review

Page 200

Appendix 12: CIMO Maps

Page 201

Competitive action 1 - Luxury car 'It's closer than you think' campaign
Context

• There is a misalignment between the market perception of the cars' prices and what they actually cost. The market perceives them to
be a lot more expensive than they actually are.
• The manager defines his competition as “any reward for business success, which could include an expensive holiday, a yacht, an
investment or a luxury motorcar”. He was trying to think beyond the conventional definition of competitors but is probably
broadening the definition too much.
• The company interviewed are cost sensitive when it comes to market research and, therefore, don’t use survey and rely primarily on
feedback received directly from their customers through their salesmen and through a Customer Relationship Management (CRM)
system, in which all customer interactions are logged, to gather market intelligence.
• The manager interviewed is the General Manager of the national distributor and is self-trained, doesn’t have a formal marketing
qualification and worked his way up from being a salesman.


• The manager acted on feedback • They wanted to let their target market
received from customers Mechanism know that their cars are more affordable
• The manager doesn’t use any
than they are perceived to be but
They came up with the tag line
frameworks or techniques to without detracted from the value of the
‘It’s closer than you think’,
formulate their competitive actions. brand.
which encapsulates the
• They respond directly to interactions • The manager had very direct and short-
message they were trying to
with customers and prospective term expectations (i.e. execute a
send prospective customers
customers so the relationship campaign and achieve an immediate
regarding the actual price of
between their knowledge of the performance in sales) and was
their cars without saying 'they
market and the competitive actions disappointed by the outcome of the
are actually cheaper than the
they take are very direct. campaign using the tag line because less
market perceives them to be'
• The feedback from customers led additional cars were sold after the
me to embark on a campaign to campaign.
change that price perception.
Page 202

Competitive action 2 - 'It's closer than you think' media selection and placement
Context

According to the manager interviewed, the brands they compete with directly include C1, C2, C3, C4, C5’s top products the top end C6 and
C7 products. The manager is, therefore, aware of his immediate group of competitors, which would be referred to us a 'strategic group' in
Industrial Organisation literature.
Outcomes
Intervention Mechanism

• The selection and placement of
• The tag line, ‘It’s closer than you think’,

A campaign that used multiple media was highly focused in

which tells customers that owning one of types of media and bombarded reaching the target audience and
the cars is more attainable than is the target audience with messages the manager wanted to achieve
generally perceived while, at the same was used, including a direct e-mail direct sales results from the
time, not diminishing the value of the shot targeting existing and campaign.
brand by using words such as ‘affordable’ prospective customers, printed • The selection of media was
or ‘cheaper’ was used. adverts, billboards placed in areas effective insofar as it was highly
• The manager was very aware of the with target market demographics, visible to anyone considering one
lifestyle habits of his target audience, as including shopping malls and A1- of the two main competitors’
well as who his closest competitors were sized billboards placed along dual products and insofar as multiple
and the media selection and placement carriageway islands on posts in channels were used to ensure
was developed around this knowledge. close proximity to the distributors the message was received by the
two closest competitors target audience, often on
multiple occasions.
Page 203

Competitive action 3 - Used car warranty programme
Context

• The manager believed that simply sending a message to prospective customers that their cars are more affordable than they might
have though was not enough, and the cars had to be made more affordable too.
• The manager had the idea of combining the advertising campaign with competitive actions that actually made the cars more
affordable and combined it with a cost-effective finance plan and a warranty on used cars.
Intervention
Outcomes
• The manager had the idea that used
The used car

cars could compete with other new
warranty
cars, such as C7’s convertible sports
Mechanism programme
car, but this would mean making the
All used cars were sold made the

purchase of one of their used cars
with a 12-month purchase of a
more comparable to the purchase of
warranty package that used car more
a competing new car.
mimicked the warranty comparable
• The warranty is the most important
package that new with the
variable distinguishing a new car
motorcars were sold purchase of a
from a used one and if the same
with. The warranty on new car, of
warranty provided with a new car
new cars had a 36- either the same
could be extended to a used one,
months term. or other brands,
the used one would be perceived to
in the minds of
be a more comparable offering to a
prospective
new car by prospective customers.
customers.

Page 204

Competitive action 4 - Product development by a UK IT services company

Context

• The business is an IT company that, amongst other things, produces loyalty cards with very specific business applications
• The manager uses a tool called the Competitive Compass. According to the tool, the business is in the middle with higher perceived value
but higher than average perceived prices, rather than a total niche, which would have high prices, higher perceived value and, potentially,
low volume.
• The manager associates high-volume, low-margin businesses with relatively small budgets for R&D, which results in them not being as
innovative as their low-volume, high-margin industry peers.
• The business has to focus on a 'low volume, high value' niche in order to compete effectively because its cost base is higher. Applying the
Resource Based View, they employ comparatively talented people, which result in relatively high costs
• The manager’s approach has been to look beyond what is currently being done, to focus on issues and challenges their clients are faced
with and to develop solutions to satisfy them.
Outcomes

• The new loyalty card was
• Part of the business produces smart cards, which is highly commoditised A new loyalty used as a vehicle to deliver
market to be in. According to the manager, if that was all the business card was a unique and innovative
did, and if it operated solely in the smart card producing environment, it launched that service with high margins.
would be challenging, as they would be under pressure to act rewards users • The manager intends to
responsively to changes in market conditions. for using public develop ‘You Can Do It’ as
• The development life cycles for such service offerings are long. However, services such as a business in its own right
a number of development-related processes were run in parallel, schools and and to get it to a point
resulting in reduced lifecycle time. public transport where it has sufficient
• To develop the intervention, the manager read white papers regarding with points that traction, in terms of the
developments in the transport sector and developments in government, can be number of businesses
as well as looking at businesses and why they’re going out business. redeemed at participating in the
• To gather market-data the company surveyed people telling them what supermarket programme, and then sell
they were thinking of doing and asked “what do you think about it?” partners. it as a stand-alone business
Page 205

Competitive action 5 – Action to fend off threat from smaller competitor

Context

• The company develops software for the institutional asset management industry, which is a very stable one. Therefore, buyer bargaining
power is high and opportunities exist to decrease operating costs through outsourcing, shared services, ‘software as a service’ etc.
• A new, small competitor, C1 with slightly disruptive compliance technology appeared and the manager didn’t see them as a threat at first
but began to when they introduced a new product to the market.
• C1 sold their software on a one-year service contract basis to get around the customers’ procurement policies, which allowed them to
compete with the larger incumbent players by selling to large blue chip organisations that they would not otherwise have been able to.
• Internal development is an alternative option to buying software for investment managers and, therefore, the product offering had to be
compelling enough for prospective customers not to want to go the internal development route.
• The company did quite a bit of work to understand C1 pricing model and it became apparent that they didn’t really follow a model because
they were so small and, therefore, priced the software on a deal by deal basis.

Mechanism

• The incumbent’s software can be run as a service (SaaS), which

The company thought
C1 can’t do and they have a much border product set than C1. • A new product was launched to they had better
They are a listed firm with over 1,000 employees, whereas C1 compete with C1’s system. respond to the threat
employs 10. Development of the new product had of the new rival in
• The incumbent had spoken with a few clients who told them started around two years prior to this. order to maintain an
they were performing the processes that the new system would • The company started developing the investment
automated manually and it wasn’t worth the trouble automating functionality and selling it at the same management system
it on their own. time. They piloted it with two clients with a comprehensive
• Given the incumbent’s clients’ interest in automating the that are about to start paying for it. The set of functionality
process, they formed a partnership with a large law firm and product is in a semi-finished state. The and to minimise the
they started specifying the functionality of the new product. early adopter clients have the advantage impact the new rival
• The company mocked up a few web pages to show what the new of being able to influence the direction could have on their
functionality would look like and their clients were enthusiastic. of the product. business.

Page 206

Competitive action 6 - New mortgage product developed by a bank

Context

• The company operates in an oligopolistic industry in which it is very hard for participants to differentiate themselves from each other or
to create barriers to entry.
• A customer satisfaction survey is carried out every year but the results don’t seem to change much. The company also uses mystery
shoppers who ask randomly selected customers questions to understand their needs as a way of gathering data about the appeal and the
suitability of its products to customers and prospective customers.
• Before the intervention the company had a relatively small share of the mortgage market and the interest rate cycle was changing.


• The process started at the ALCO (Asset/Liability Mechanism
• Increasing the
Committee). The market was liquid, particularly at • The existing mortgage loan product mortgage loan
the short end, and rates were coming down. was updated. All banks in the market book has been a
• The company initially thought of offering a rate of offer mortgage loan products with goal since the
5.5% for the first two years but thought this would interest rates of around 8% per annum. company’s last
incite retaliation from competitors. Their The company’s new product only costs annual planning
Asset/Liability committee went for 4.5% because 4.5% for the first two years. The terms cycle.
they thought they would have first mover of the product include not being able • The product has
advantage. to cancel it within 5 years. This period been a huge
• Goals are discussed in the product development allows the product to become success and we
forum, which is a multi-functional meeting in which profitable for the company. have moved from
all goals are discussed across various functions in the • Billboards and posters in the branches the no. 2 to the
bank. were used, as well as radio advertising, no. 1 spot for
• The market is analysed and priorities are set where to promote the updated mortgage mortgage lending
the bank wants to focus its growth and targets are product. in our market.
set. This is done annually.
Page 207

Competitive action 7 – Market segmentation by flooring business

Context

• The company operates in an industry that distributes and retails carpets and textiles in a developing market
• Information on competitors is hard to gather. Most of it is obtained from customers who speak about the company’s competitors, as well
as from employees that used to work for their competitors, who tell them about their competitors’ prices and their sales volumes.
• The company is the largest player in their industry in the country they operate in. They have four or five competitors and the second
largest is only around 50-60% of their size.
• This business has incredible economies of scale and a strong supplier bargaining position relative to the other flooring businesses in their
country.
• The company are the sole agents for all carpets manufactured in a particular country that is the only carpet-manufacturing nation in the
Outcomes
two countries shared economic bloc. This represents a barrier to competitors, as there aren’t any duties on goods traded within the
Intervention

• The actions
• The manager observed Mechanism helped the
and copied the number
company fend off

• BCF was identified for the price sensitive consumer and to compete with the
two telco’s strategy and competitive
cheap carpets, as well as PVC flooring, being sold by competitors. BCF is scrap
dropped his rates to pressure from C1.
carpets that have been recycled and used to make cheap ones
below theirs. • The 4G launch
• A product set was identified for the 'Style aware' consumer group that included a
• The company measures was a great
variety of styles, quality and designs, including shag pile and dense pile carpets.
churn rate. That is, how success and the
many users switch • Based on his findings, the manager decided to re-price the BCF product - because
customers in this country feel they have to haggle the company introduced a company
mobile networks every experienced
month. 'base' price, which is the lowest price at which the sales team can sell products,
and a 'list' price, which is the starting price that is adjusted downwards so as not strong sales
• Most of the company’s increases but the
to scare away price sensitive customers.
competitive actions are number of units
copied from their • Different media were used to target the two different segments.
• Every week the company updates their pricelists based on how their sold were slightly
counterparts in other below their
countries. competitors' are pricing their products
expectations.
Page 208

Competitive action 8 – 4G service with voice & data in an emerging market

Context

• The company has a mobile business that has an LTE license.

• Only one competitor, C2, also has an LTE license too.
• The advantage the company has is their scale. They're able to implement countrywide projects, across all 16 regions, which no
other competitors can.
• C1, the number two telco has much better voice coverage than the company does.

Outcomes

• The company wanted to change its strategy to
• The manager spent a month in the store observing • The company being in the flooring business, rather than the
customer interactions and customer comments. introduced a 4G carpeting business. They wanted to include
• Once we had decided what they wanted to do, service with both other forms of flooring in their product
they set about categorising the carpets their voice and data. offering, including wooden floors, PVC and
competitors sell and split them into two • They dropped their tiled flooring.
categories, including 'price sensitive' and 'style rates to below C1’s • They wanted to widen range of competitors
aware'. • The company used we have.
• To determine the 'list' prices they gathered data a billboard • The businesses turnover has more than
on competitors’ price lists. campaign and doubled since the manager over in June 2013,
• Porter's 5 forces was used to map substitutes, placed the from around $3.5M/annum to around
customers, rivals and suppliers. There are a few billboards in the $9M/annum. Part of the increase is due to the
suppliers in the industry and a lot of customers. vicinities of C1's market segmentation strategy and part of it is
Therefore, the power is vested with the suppliers. existing billboards due to the introduction of curtain materials.
• Every week they review their competitors' price and made • Before the competitive action we used to
lists and adjust their own prices to ensure they are reference to their import 1 container of BCF product every
below their competitors lower priced and month. Thereafter this increased to 1 1/2
faster data containers every month.

Page 209

Competitive action 9 – Sales to fellow state institutions in the last fiscal quarter
Context

• The company’s systems integration business has a number of competitors, who are sometimes partners (e.g. a large ERP supplier,
‘ERP1’).
• There are two to three companies included in the company’s competitive set that can implement large-scale projects in the tens of
millions of US Dollars, including the company itself.
• In terms of competitors that are purely IT companies, the company has between 5 and 10. The uncertainty with respect to the exact
number indicates that the manager doesn't pay that much attention to the definition of their competitor set.
• National companies must consider other national companies before private sector companies for the products and services they
procure.
• Competitors are able to offer irregular payments to customers and, therefore, many customers are shut out to the incumbent.
• National companies that have unspent budget and don't have the time for tender processes, are able to buy directly from other
national companies without going through tender processes.
Outcomes
• The competitive advantage that the manager's • The company decided
The company positioned itself
company had over private sector competitors to target state-owned
to capture the business of
becomes increasingly relevant as the year end companies with
state institutions that could
approaches and state-owned companies have unused budgets at the
only use their remaining
unused budget. end of the fiscal year
budget in the last quarter of a
• The company’s management understand that yielded a result.
fiscal year because of the
they are inefficient and will have to transform • One of the other state-
tender process required of
the business in the next 3-5 years, which is owned companies
them if they wanted to
their grand strategy that overarches both the signed a deal with us in
procure products or services
revenue and the expense side of the income 2013. The deal was
from the private sector.
statement. signed right at the end
of the year.
Page 210

Competitive action 10 – Bundling of mobile and fixed-line services
Context

• The company is the only mobile telephony company that also has a fixed-line business and this is a competitive advantage
• The businesses closest competitor, C1, is at a disadvantage in not being to offer a landline service or 4G/LTE data.
• The manager has defined his three closest mobile telephony competitors and they include C1, C2 and C3
• Customer usage of the company’s services is below the industry benchmark and there is, therefore, room to improve this metric.
Average Revenue per User (ARU) is the specific metric used for this purpose in this industry.

Intervention

Mechanism
• The company used consultants to help to draft
The company
the marketing strategy for the wireless and fixed
used the Outcomes
line business. Many of them have international
competitive ]
experience but they are local. The action assisted the

advantage it
• Speaking to customers was the second or third company in fending off
has in being
wave of intelligence gathering and they are only competitive threats
able to offer
used to measure the quality of service presented by their closest
both fixed-line
• Beeline has a fibre optics business and can, competitor.
and mobile
therefore, offer VOIP.
numbers on
• Direct relationships between specific product
single SIMs to
features and their value to customers aren't
compete more
measured. However, only sales volume and value
effectively.
are measured.
Page 211

Competitive action 11 – Bundling of services by large financial software vendor

Context

• Customers are continually evaluating the total cost of ownership and looking for ways to reduce it.
• The company competes with different competitors in different areas but none of them are able to offer the same turnkey solutions.
• Traditional competitors \ were cheaper and offer rental arrangements. They also offer broking services bundled with their software
• The company was perceived to be expensive and, therefore, targeted larger customers, incl. large corporations and government agencies.
• The manager stated “As you move down to the smaller customers, they are less sophisticated and don’t have their own IT departments.
They use simple software packages, often provided by their banks. As they grow, they become multi-banked and out-grow the software
packages provided by their banks. The market was moving up to where the company was positioned and they starting seeing their
emerging competitors in bidding processes.”
• The company had to compete but didn’t want to cannibalise their existing clients.
• Bundling services is a way of segmenting the market. Managed services allow the company to add more functionality very easily and to
circumvent the bidding process in doing so. It also makes control over the technical environment easier.

• The company looked at parallel industries for ideas Mechanism • The action allowed

• Questionnaires were sent to targeted customers with 5 key • Started providing managed services, the company to target
questions to assimilate customer perceptions and whereby it hosted the software. This smaller customers
requirements. resulted in customers being able to that didn’t have the
• To test the market, low-level noise about possible new solutions account for the software as an expense, budgets to buy their
was created through product presentations, sales calls, and not on-balance sheet software
proposals etc. • Multiple customers were managed using • The company were
• Due to its expansive customer base it has an extended breadth the same technical infrastructure, reducing first to market with
of products and services relative to competitors, and is able to costs. their managed
bundle them in a standardised manner. • The customer proposition was ‘spend services and have
• The offering included all upgrades, which can have a very large more with us and the overall cost will be since always had a
impact of customers’ operations. reduced’. dominant position.
• Managed services
Page 212

Competitive action 12 – Product repricing by credit default swaps underwriter

Context

• The company issued credit default swaps (CDSs) using ISDA agreements and insuring against the default of baskets of corporations.
• The company was capitalised with US$350M and, at its height, had issued CDSs with a total exposure of US$12B.
• The company started trading in July 2007. The CDS market crises started in mid-2007 and resulted in a dramatic re-pricing of risk.
• In 2008 regulators became involved and the view was that CDSs were the problem and their policies changed.
• Banks started saying “we can’t deal at these levels”. This started happening more and more and led to the defining moment when the
company’s management realised they could not continue with ‘business as usual’.
• At this point there was an inflexibility of the company to evolve due to the rigidity of the rating agencies.
Intervention
Outcome
• To start with the company had 8 direct competitors spread across New York, London and Paris.
Mechanism The company

Most of them stopped trading in 2007 but two continued a little beyond 2007. The company was
needed to
the last to continue trading and was able to do so because of the quality of their portfolio. During The entire
either re-price
this period different opinions within the team about pricing theories and where to price their CDSs portfolio was
or sell its
were offered and applied. The differences in opinions were due to experiences and the range of sold to one of
portfolio of
long-term views (i.e. those that had been in the market for a long time had different expectations the
CDSs and had
of what the market and CDS prices would do than those who had only been in the market for a prospective
to find the
short period). buyers and
right method
• The company monitored what competitors were doing and were they were pricing their CDSs. This the
to either
was done through hiring from competitors, being friendly with competitors and being able to talk investment
continue
with them about their pricing strategies, as well as talking to the banks that also bought was thereby
trading or to
competitors’ products about how they were being priced. monetised
change the
• An insurance specialist was brought in to consider restructuring the company to become an with a decent
scope and
insurance company. The conclusion was that it would be easier to start an insurance company from return to
structure of
scratch. Another option that was considered was to sell the entire portfolio and two possible shareholders.
the business
buyers were identified in July 2013.
and its
Page 213

Competitive action 13 – Re-launch of a luxury motorcar brand

Context

• The size of the new car market for their flagship saloon in this emerging market is only around 300-350 vehicles/annum, whereas it’s
around 1,000 vehicles/annum for the entry-level priced saloon.
• The manager states that C1 and C2 have greater margins but it doesn’t really make a difference because “people buy brands”. He says,
“I can’t go and shout value, I have to shout brand”.
• They will also be launching an SUV (Sports Utility Vehicle) that will compete with the C1’s very popular SUV and C2’s very popular SUV
and will be priced in line with these two competitive models. C3, which is one of the closest competitors, will also be launching an SUV
at around the same time.

Intervention
Mechanism Outcomes

• They decided to try to emulate what C4, one of their
closest competitors, had done in this emerging • The company invested • The company plans
market, but on a smaller scale. in a large flagship to capture 10% of
• The distributor will start by focusing exclusively on showroom in the main the total market for
retail and developing the brand through their own commercial city of this their new entry-level
showrooms. They’ve hired a Distribution Manager emerging market. priced saloon (i.e.
but he will be used in the retail business to start • They embarked on an 100 vehicles/annum)
with. above-the-line • Once all their new
• The client they’re targeting is global and well- advertising campaign vehicles have been
travelled and is familiar with the brand. Therefore, using different media launched, their aim
marketing campaigns are consistent across the globe to appeal to they’re will be to sell 250-
and they will use the same creative content that is target markets, 350 vehicles/annum.
used globally for their advertising campaign. including TV, print,
social media and radio.

Page 214

Competitive action 14 – Strategic acquisition by media group
Context

• The company’s closest competitor is C1, who have four daily titles, while the company has a single national newspaper that is very
similar in reach and in readership numbers to all four.
• The company was acutely aware of the competitive threat posed by C1 particularly and was keen to distinguish its product set form
theirs as a way of competing more effectively and becoming relatively more profitable.

Intervention

• The company considered strategic acquisitions and Mechanism Outcomes

identified a marketing and events management
A company with two • The action allowed the

business that could be acquired and their newspaper
businesses was acquired, company to move beyond
and other media could be used as a marketing
a marketing business just packaging and selling
platform for the new business, as well as an events
and an events content as way of
company that could host events for the newspapers
management business, becoming more
client base.
to provide value added competitive.
• Management thought that by making the acquisition
services and to extend • Adding complimentary
they would be able to make events more profitable by
relationships that make services to their existing
exposing them to a wider prospective customer base
advertising spend offering allows the
and providing a cost effective advertising platform.
stickier while creating company to deepen
• The company have given the business they acquired
opportunities to further relationships with their
the benefit of working with big brands and the ability
monetise existing existing client base and
to lever the benefits of working within a large media
advertising relationships distinguish themselves
group.
from their competitors

Page 215

Competitive action 15 – Bundling of value added services by a media group

Context

• The manager defines his competitive set by including four competitors in total, including C1, C2, C3 and C4.
• Through ownership structures, the company has sales rights to two television stations and two radio stations


• The manager and the Mechanism • They action

company’s management allowed the

• The company started selling

researched international company to
integrated advertising campaigns
trends to develop their provide integrating
comprised of print media, TV, radio
competitive strategy. marketing solutions
• The company entered into a
• They set about finding • The action allowed
partnership with a business that
ways in which advertising the company to
owns a number of different FMCG
campaigns could be move beyond just
brands, which almost immediately
developed that packaging and
gave them ownership of FMCG silo
comprised the use of selling content as
in terms of advertising media, as
different media in an way of becoming
well as the opportunity to generate
integrated manner, such more competitive.
additional revenue.
as print combined with
radio.
Page 216

Competitive action 16 – Product discontinuation by drinks manufacturer

Context

• The company had two brands: Brand A, a carbonated fruit juice brand, and Brand B, a non-carbonated fruit juice brand.
• Brand A had a market share of around 2% and Brand B had a similar market share.
• The company didn’t have adequate funds to compete in the market place with two competing brands and needed to find a
solution to the problem of supporting two competing brands while their market share for both was diminishing.
• The fruit juice market was saturated (there were too many brands relative to the size of the market)
• For the non-carbonated drink there were two main competitors, including Competitor 1 (100% fruit juice) and Competitor 2
(fruit nectar drink) and for the carbonated drink there is one main competitor, Competitor 3
Outcomes
Intervention
• By
• The trigger to this competitive action was the company’s low Mechanism
discontinuing
market share in both segments, as well as their respective shares • The management decided to Brand B, the
of the overall fruit juice market focus on just one market on company was
• Analysing income and costs, the company’s management the basis of them not able to commit
questioned the business rationale for supporting two brands and generating the income to more
reached the conclusion that there was little point in doing so. justify being able to dedicate investment
• A survey was used to gather data concerning market perception sufficient budget to be able to focused on
of Brand A and Brand B and the market research tool was used to compete effectively in two. Brand A
predict uplift of each brand assuming investments in • Brand B was discontinued • The company
redeveloping the brands as well as the uplift in the event of the • They kept Brand A but was able to
two brands being collapsed into one. decided to promote it to regain market
• The company considered merging the two existing products into make up for year of under- share and
one, with the names ‘Brand A Still’ and ‘Brand A Sparkling’ but, investment in the brand. improve their
after the seeing the outcome of the research, abandoned this profitability in
idea. this market.

Page 217

Competitive action 17 – Product line expansion by a confectionary manufacturer
Context

• Sales at this confectionary manufacturer were flattening out. Growth prospects in confectionary goods were limited.
• The market was consolidating and there was a lot of M&A activity at the time. Specifically, strategic acquisitions with the
objective of acquiring new products to extend product lines were taking place.
• The company had been growing but growth had stagnated and they were looking to reposition the business for growth.

Outcomes
Intervention

• As a result of the
Research was carried Mechanism expanded snacking
out to establish why
The product line product line, the

people bought company was able to
was expanded
confectionary
to include other improve its revenue
products and it was and profitability
snacking
established that the
products, • The company was
number one reason
including acquired soon
was for snacking in
savoury snacks thereafter by a larger
between meals.
and drinks foods company.

Page 218

Competitive action 18 – Product development by FMCG manufacturer

Context

• The manager interviewed was responsible for managing under-arm deodorant products at a large FMCG manufacturer
• The trend in the industry was away from aerosol cans and towards deodorant sticks
• The company were experiencing a sagging market share in their under-arm deodorant products and wanted to regain market
share.

Intervention

One million consumers were Mechanism

surveyed to establish how the A new stick deodorant Outcomes

company could make an impact in product was launched to
changing their personal hygiene The company’s aim was

replace the aerosol can
products. An agency was used to to have a market share
product and the survey
survey people randomly in public of 10% in year 1 of the
was used to promote the
spaces. Apart from gathering new product’s life cycle
forthcoming product, as
consumer data, this process was and they achieved
well as gathering
also used to create brand around 15%.
information about
awareness and to change people’s consumer perceptions
personal hygiene habits.

Page 219

Competitive action 19 – Product development by drinks manufacturer

Context

An existing global soft drinks manufacturer with success in the manager’s market. They wanted to extend their product line.

Intervention

• They started by evaluating the

Mechanism
market needs and then looking
internally within the group to see • A new kids drink that was sold Outcome
in a pouch and sold at single-

had to satisfy the need. The company was

• Through surveys they established coin denomination prices was able to grow
that there was unsatisfied launched. revenue by
demand for drinks for toddlers • The brand activation producing and
and were able to adopt key programme involved marketing new
learning’s for this product form distributing samples at many products
the Latin American market. different venues using 7 life-
• Seven different flavours were sized characters (Jack Orange,
introduced and each flavour was Pete Pineapple etc.)
associated with a particular
animal.

Page 220

Competitive action 20 – Product line extension by a FMCG manufacturer

Context

• The manufacturer has produced fabric softener for many years

• Brand stickiness is dependent on quality and quantity of interactions with the brand

Intervention

• They started by considering how they

Mechanism
could grow the business by responding to
consumer needs and attitudes. • Refills were launched.

Outcomes
• Researched carried out by a marketing They were sold in the
agency showed that their consumers form of sachets that • The company was able
were very price sensitive. each produces two litres to grow the category
• Given the price sensitive nature of their of fabric softener. and gain a larger share
consumers, the company’s management • The refills were of the fabric softener
thought that if they introduced refills that launched through market.
had lower packaging requirements and, awareness clinics, in • The introduction of
therefore, costs, they’d be able to offer which use of the new refills was a great
this new product category at a reduced product was success.
cost to any comparable ‘full-packaged’ demonstrated.
fabric softener.

Page 221

Competitive action 21 – Product development by brake pad manufacturer

Context

• The company and its competitors have been developing and manufacturing brake pads for large mining tracks, which was the application
behind this competitive action.
• Traditionally, brake pads are made using formaldehyde resin, which is toxic and bad for the environment.
• Two trucks recently caught fire at a mine in an emerging market, caused by their brake pads. This raised global awareness regarding the use of
sub-standard brakes that aren’t able to endure long periods of intense use, as those used by the mines are subjected to.
• Car brake pads margins are low (a few pence each). Mining truck brake pads sell for ca. GBP35 each and cost ca. GBP15 to manufacture.
• The big players are untouchable. M1, an Australian manufacturer, use steel for their brake pads and, because they buy it in such large
quantities, they buy it at a price that makes competing with them prohibitive to any other business. The big players also have very sophisticated
market intelligence.
• The company always tests all their competitors’ products to identify their flaws and focuses on beating them on their technical specifications.
Outcomes

Intervention • The company was able to produce

• A mine asked the company to develop a highly durable truck brake pad a brake pad for the mining
• The company looked at aircraft brakes that are subjected to very intense use and, industry that was unique and they
therefore, very high heat, to see how they were constructed and the materials that Mechanism could, therefore, realise good
were being used.

margins.
A brake
• The mine that the brakes were developed for use K1 trucks and K1 insist on using their • A product was developed that met
pad was
own brake pads, which are manufactured by C2 who also produce the callipers. C2 very high environmental
developed
bundle the pads with the callipers making it very hard for independent brake standards.
using
manufacturers to compete. The company thinks the mine will put enough pressure on carbon and • The new brake pad has been very
K1 for them to force C2 to separate the sale of callipers from the sale of brake pads. steel. well received by the market and
• Distributors weren’t keen to stock the new brake pad because it lasts four times as long the sponsoring customer plan to
as more traditional brake pads and they would, therefore, sell four times fewer. This fit this product to every one of
meant the company had to go after a ‘high-quality’ niche and sell directly to mines. their mining trucks
Page 222

Competitive action 22 – Geographical expansion of an auto-financing company

Context

• The company was a banking institution with a strong brand in its home market but not elsewhere.
• The company’s balance sheet was concentrated in long-term assets, and wanted to grow its book of shorter-term assets.
• The auto-finance market is incredibly price sensitive and customers tend to go with the cheapest financing deal, as it is an oligopolistic
industry and it’s very hard to distinguish one financing deal from another on metrics other than price.
• In credit scoring customers, the company could see which competitors they were competing with by viewing credit report requests.

Intervention

• The manager consulted with his colleagues who were more mature and Mechanism Outcomes

had more experience. They thought the company had to be consistent • A new subsidiary was • The company was able to
in new markets and provide a superior service if it wanted to compete established to provide grow its footprint in auto-
effectively auto-finance indirectly financing by expanding
• They commissioned surveys that showed their pricing was competitive. through auto-dealers, geographically.
• They knew that transacting quickly was an important differentiator. offering a consistent • The company had done
• Their approach was to setup subsidiaries in the state and hire locals service with fast turn- well in its home market
who understood local nuances. A local would to be hired as the around times but without and it was able to
manager’s number two with limits that allowed them to approve 50% discounting their pricing replicate the success in
of the deals. to ‘buy’ market share. other markets.
• They attended car shows at the weekends and when most of their • Banks were prohibited • By expanding
competitors left on Saturday afternoon they would stay on. from establishing geographically, the
• The subsidiaries books were at least as good as the parent’s, in terms branches in other states company was able to be
of losses. Apart from the high quality of the subsidiary’s book, having a so they had to establish a very selective in the deals
subsidiary also gave the parent a credit diversification benefit and subsidiary whenever they they originated and,
because the subsidiary’s region wasn’t correlated with the home expanded into a new thereby, maintain their
market there was a portfolio effect. state. existing quality of loans.
Page 223

Competitive action 23 – Re-positioning in the Chinese market by fashion brand

Context

• The products went into the Chinese market at the wrong price. Stores were opened in the best malls in China and the mall owners had set
their own standards in terms of how the price level of their tenants, and in few cases how the tenants should price their merchandise. These
pricing guidelines were stated in the lease agreements and, therefore, tenants had to follow them or they would be in breach of their lease
agreements and would risk having their agreements cancelled.
• A product that cost GBP79 on Jermyn Street would cost GBP189 in China and Hong Kong’s prices were around half of China’s. Competitor 1
had a much narrower price differential between Hong Kong and the Chinese mainland than the company. The reason for the price inflation
was that the brand needed to be in these particular malls and therefore had to be within the same price banding.
• When the Hong Kong market opened to the Mainland Chinese market, Hong Kong sales doubled and Chinese sales dropped by around 60%.
• The anti-corruption law also had an effect on Chinese sales. Watch brands’ sale’s dropped by around 80% as a result.
• British products are perceived to be superior to those manufactured in China, Hong Kong or elsewhere. Japanese consumers of this

Intervention

Outcomes
• As soon as the company’s CEO decided to Mechanism
address this issue, the manager that was

• The company was able to

• A new label was developed exclusively
interviewed went to China for a week and arrest the flow of consumers
for the Chinese market. It was
walked around looking at competitors from the Chinese Mainland
manufactured in Hong Kong and the
stores, their product mixes and the pricing to Hong Kong.
UK and prices were kept constant.
of their products. • The company was able to
Because the label was unique prices
• The company didn’t want to reduce their establish China as a market in
couldn’t be compared to the same
prices as that would imply having to break its own right with products
products being sold elsewhere.
their leases, leave the top malls and re- relative to its own
• The company started selling more UK
establish themselves in less premium consumer’s tastes and
manufactured products in China, which
locations through extensive marketing. requirements, rather than
are perceived to be superior with the
• No external or formal research was carried China being a subset of the
objective of establishing the brand as a
out and tools weren’t used to analyse the Hong Kong market.
premium British brand.
market or to come up with possible
interventions.
Page 224

Competitive action 24 – Geographic expansion of alcoholic drink

Context

• The product is produced by the company, one of the largest distillers in the world, and is seen by the London-based company as a
faster-growing addition in Nigeria to its flagship stout.
• Since its introduction in Nigeria in 2013, the new product has captured more than 50% of the non-beer bottled drinks with a similar
alcoholic strength.
• A 40% slump in oil prices is expected to curb growth of the Nigerian economy to 4.8% in 2015 from 6.3% in 2014, which has had an
impact on disposable incomes in the country.
• The drink competes primarily with locally produced beers, ciders and lagers. Competitors in Nigeria were starting to introduce their
own herbal drinks to compete with the drink’s popularity. These competitors included the local unit of a major European alcoholic
drinks manufacturer, who started selling Competitive product 1. Competitive product 2 followed later this year.


• The company spoke with the Mechanism • The company was able to replicate
management of its subsidiaries around
the drink’s success in Nigeria in
The Kenyan unit of the
Africa and, based on these discussions, business introduced the Kenya
shortlisted Ghana and Kenya as countries drink in March in • Apart from increasing revenue
in which it wanted to launch the new anticipation of the same across Africa, this also helped
drink. success it had diversify income from this
• Based on the local distiller’s readiness experienced with the particular drink away from
and willingness, it was decided that the drink in Nigeria. Nigeria, which has a vulnerable
drink would be launched in Kenya first. economy and where competitors
were starting to erode the success
of the drink.
Page 225

Competitive action 25 – Product customisation for USA market

Context

• The British fashion brand has had a presence in the U.S.A. since the 1990s, through both company-owned stores as well as prominent
retailers such as Department store 1 (‘DP1’).
• Sell-through figures (the portion of the collection sold in season and that doesn’t go on sale) at DP1 were initially averaging around
15%.
• Most designers were happy with 30%+ sell-through rates at DP1 because they valued being promoted there and saw the retailer as a
marketing tool that could be used to position them in the U.S.A. market along with other luxury fashion brands.


• The company started by interviewing the

Mechanism
management and the floor staff of DP1 to establish

• The company’s Commercial
The cuts and sizes of Director wanted to address the
why the sell-through rates for their collections was suits for the U.S.A. problem of low sell-through rates,
so low. The overwhelming response was that the market were starting with their men’s business
sizes and cuts weren’t right for the American increased to wear collection and wanted to see
consumer. accommodate the an increase in sell through rates.
• One of the collections, the men’s’ business wear American consumers,
collection, which is a good seller and a money Competitors had sell-through
who had larger thighs, rates of around 30% and the
spinner for the company, was redesigned for the arms and waists. This
U.S.A. market This intervention was driven by the manager wanted his men’s
moved the collection business wear collection, which
brand, rather than the retailer, as it was the brand from being
that questioned the low sell-through figures and sold in large quantities around the
fashionable but world and made the company
wanted come up with a solution to the problem. inaccessible to most
• The American market is susceptible to fads and, money, to exceed this.
Americans to being a • The intervention resulted in an
therefore, the company had to work fast to more accessible
implement changes to the collection before the increase in sell-through rates from
collection. around 15% to around 60%.
market gave up on them and moved on.

Page 226

Competitive action 26 – New fruit juice brand in an emerging market

Context

• There are four sectors within the fruit juice market. Including 100% fruit juice, nectars, carbonated fruit juices and juice drinks.
• The company was experiencing diminishing market share in its non-carbonated fruit juice sector.
• There were two main competitors, including Competitor 1 (100% fruit juice) and Competitor 2 (fruit nectar drink). For the carbonated
drinks, there was one main competitor, Competitor 3.
• Non-carbonated fruit juices represented the most attractive market with the least competition.


• The company’s local management looked to see what products the group had in the global The company
innovation pipeline that could be introduced to their market to compete more effectively in the launched a
segment. They found a suitable new product to introduce to the market. Had this product not new non- Outcome
been available, they would have had to invest R&D in developing one. They also looked to see carbonated

how the product was performing in other markets and found that it had become the no. 1 fruit The
product,
juice brand in the Middle-East. company
Brand 1,
• Quantitative research was carried out to ascertain market acceptability. Specifically, a survey expanded
which was in
was used and questions were asked concerning taste, packaging, the feel of drinking it etc. The its juice
the
quantitative research established whether or not the product would be priced correctly, if the portfolio
company’s
packaging was right for the market and if the branding resonated with the target audience. and its
global share of
• A research tool is used to predict uplift based on the results of the survey. The tool is also used innovation the
to establish what the marketing budget should be and what the market conditions (e.g. market pipeline at market
size and whether the market is growing or contracting) are. the time of
• The research is needed to sell new products to the bottlers/distributors. developing
• The new proposition will be to compete in the ‘fruit juice’ segment with a drink that has 5%- the
25% fruit juice content, as there weren’t any competitors in this segment and that meant the competitive
company would have a first mover advantage. action.
Page 227

Appendix 13: Internal & external factors relevant to competitive actions

The following table lists factors that may have had an influence on how each of the competitive actions being analysed were developed
and executed. They include factors relevant to both the external and the internal environments of each manager and each company
associated with the competitive actions that were taken.

Innovation
Type of &
competitive Size of dynamism Developed/ Methods used to Noteworthy
action (see Trigger for company score for emerging/ develop the manager's
Competitive key 'key' competitive Objective of (approx. Industry Industry sector (1- Managers' developing competitive statements/
action worksheet) action competitive action employees) sector structure 10) backgrounds market action perceptions
1 - Luxury Marketing Customer/ Change 40 Automotive Very distinct 4 No formal Emerging Intuition, no Defines his
car 'It's campaign prospective customer/prospect strategic business formal research, competitive set as
closer than customer ive customer groups with education. direct feedback any luxury purchase
you think' perception perceptions about high levels Father owned from customers but is very clear
campaign that the affordability of of rivalry a luxury car is relied on very about who his
products' are the products distributor and heavily and a competitors are
more without dealership and CRM system is when selecting
expensive compromising the the manager used. advertising media
than they value of the brand. started out as
actually are a salesman
and worked
his way up
2 - 'It's Marketing Communicat Effectively 40 Automotive Very distinct 4 No formal Emerging Tacit knowledge Multiple types of
closer than campaign e the 'It's communicate the strategic business about target media were used to
you think' closer than message to the groups with education. audiences ensure the target
media you think' target audience high levels Father owned lifestyle habits audience so the
selection message to and achieve direct of rivalry a luxury car and choices, use adverts at least once
and the target sales results. distributor and of an advertising and, in most cases,
placement audience. dealership and agency. several times.
the manager Billboards were
started out as placed directly
a salesman outside competitors'
and worked showrooms.
his way up
Page 228

Innovation
Type of &
action (see Trigger for organisation score for emerging/ develop the manager's
Competitive key 'key' competitive Objective of (approx. Industry Industry sector (1- Managers' developing competitive statements/
action worksheet) action competitive action employees) sector structure 10) backgrounds market action perceptions
3 - Used car Update or Make used Improve the quality 40 Automotive Very distinct 4 No formal Emerging Intuition, no Changing the
warranty repackaging vehicles perception and, strategic business formal research, product’s attributes
programme of an more therefore, the groups with education. direct feedback and/or packaging can
existing comparable prices of used high levels Father owned from customers alter the competitive
product or to other vehicles and sell of rivalry a luxury car is relied on very set of a specific
service manufacture more by taking distributor and heavily and a product.
offering rs new from other dealership and CRM system is
vehicles in manufacturers new the manager used.
the context vehicle sales. started out as
of customer a salesman
purchasing and worked
decisions. his way up
4 - 'You can Developme Use their Improve income 70 IT Evolving and 8 Entrepreneur Developed Industry specific The company
do it' nt/launch existing and profitability by loosely with no formal literature, produces smart cards
campaign of a new resources to introducing a niche organised business government/reg but the manager
launched by product extend the product with high industry qualification ulatory realises that the
a UK IT product margins. structure who attended communications, margins associated
services range. with a lot of the Business interviews, with simply
company scope for Growth surveys, R&D, producing smart
innovation Programme of beta testing cards are very low
the Cranfield because there are
Centre for many competitors.
Executive So, her approach was
Development to use the smart card
(CCED). as a vehicle to create
a service offering.

Page 229

Innovation
Type of &
competitive Size of dynamism Developed/ Methods used to
action (see Trigger for Objective of organisation score for emerging/ develop the Noteworthy manager's
Competitive key 'key' competitive competitive (approx. Industry Industry sector (1- Managers' developing competitive statements/
action worksheet) action action employees) sector structure 10) backgrounds market action perceptions
5 – Software Development/l A new, much To fend of the 1,000+ IT Distinct 6 Technology Developed Direct The manager regards
product aunch of a smaller competitive strategic background, interactions with the companies size and
development to new product competitor threat from group with completed a customers, its comprehensive set
fend off a threat appeared the new, small intense five year partnership with of resources as a
from a much offering new competitor rivalry and Master’s a law firm to providing a strong
smaller functionality. and to constant programme develop the competitive advantage
competitor maintain a jostling for that was both business rules. yet a much smaller
comprehensiv position a general competitor can come
e suite of within it engineering from nowhere and
software degree and an challenge them, using
products. MBA in one on innovative business
a scholarship methods, such as
from IBM and providing the service on
after a 1-year renewable
university he basis.
went to work
for an
investment
bank, Solomon
Brothers, in
their IT
department.
6 – Development Update or Relatively low Improve their 1,000+ Retail Oligopoly 2 BSc in Developing Macro-economic The company used their
of a new repackaging of mortgage loan share of the banking with distinct Economics analysis, anticipation of a
mortgage an existing market mortgage loan strategic from the LSE customer downward shift in
product by a product or penetration market groups, and an MSc in surveys, market interest rates to offer a
bank in an service stable Finance & analysis, ALCO reduced rate on
developing offering industry and Economics committee mortgage loans for the
market little room from the LSE. discussions first two years - they
to initially thought of
distinguish setting this at 5.5%
brand or (from 8%) by ended up
product setting it at 4.5%.
offerings

Page 230

Innovation
Type of &
7 – Market Market Manager new Increase 50 Retail – Industry 3 BSc in Developing Porter's 5-forces, The firm was
segmentation segmentation to business turnover by home-ware with few Accounting & ethnography repositioned from a
and re-pricing and looking at broadening competitors Finance from (observing 'carpet' supplier to a
products by a ways to the service , incl. one the LSE and an consumer 'flooring' supplier.
flooring business improve its offering and giant, one MBA from behaviour),
in Kenya profitability thereby semi-giant Warwick. The interviewing
competing and around manager says consumers and
with more 4 smaller he uses three employees who
companies. competitors of the MBA used to work for
modules have competitors
really helped
him, including
'Marketing',
'Service
Management'
and 'Supply
Chain
Management'.
8 – Introduction Development/ Acquisition of Fend off 1,000+ Telecoms Oligopoly 7 Studied Emerging Observed and Their nearest
of 4G service launch of a an LTE license intense rivalry with a few electrical copied competitor ('C1') has
with voice and new product - a new unique from their players and engineering in counterparts in much better voice
data by a mobile resource nearest fierce St Petersburg other countries. coverage but doesn't
telecoms competitor competition between 1988 They copied have an LTE license. The
company in an and 1994, their nearest company used a
emerging market attended Ohio rivals pricing billboard campaign and
State structure. placed the billboards in
university in the vicinities of C1's
1997 where he existing billboards and
completed a 2- made reference to their
year MBA lower prices for data
programme and faster.
specialising in
Finance and
Management
Information
Systems.

Page 231

Innovation
Type of &
9 – Sales to Marketing Flagging sales To make sales 1,000+ IT 5-10 6 Studied Emerging Discussions with The competitive
fellow state campaign to other state- competitors electrical other state- advantage that the
institutions in owned , depending engineering in owned manager's company
the last fiscal enterprises on how they St Petersburg enterprises had over private sector
quarter in an that had are defined, between 1988 competitors becomes
emerging market unspent with and 1994, increasingly relevant as
budget in their distinguishe attended Ohio the year end
last quarters d solution State approaches and state-
and couldn't offerings. university in owned companies have
buy from Procuremen 1997 where he unused budget.
privately held t normally completed a 2-
companies through year MBA
because of bidding/ten programme
time der specialising in
constraints processes. Finance and
and Management
bureaucratic Information
processes. Systems.
10 – Bundling of Update or Search for Fend off 1,000+ Telecoms Oligopoly 7 Studied Emerging Consultants The company used the
mobile and repackaging of innovative was competitive with a few electrical were used to competitive advantage
fixed-line an existing to fend off the threat from players and engineering in develop the it has in being able to
services in an product or threat from closest fierce St Petersburg marketing offer both fixed-line and
emerging market service their closest competitor. competition between 1988 strategy. mobile numbers on
offering rival. and 1994, Customers were single SIMs to compete
attended Ohio also interviewed more effectively.
State but only to
university in measure the
1997 where he company's
completed a 2- quality of
year MBA service.
programme
specialising in
Finance and
Management
Information
Systems.
Page 232

Innovation
Type of &
11 – Bundling of Update or Search for They wanted 1,000+ IT 5-10 7 Qualified Emerging Questionnaires The manager thought
software and repackaging of ways to to be able to competitors accountant were sent to that by combining
services by a an existing increase their target smaller , depending that then targeted resources, including
large financial product or prospective customers on how they moved into customers with 5 both internal resources
software vendor service customer that didn't are defined, financial key questions to and those made
offering base. have the with software sales assimilate available to them by
budgets to distinguishe and then customer partners at preferential
make large d solution management. perceptions and rates because of their
software offerings. requirements. size, they would have a
procurements. Procuremen Low-level noise competitive advantage
t normally was created over smaller
through about possible competitors in price
bidding/ten new solutions and in the functional
der through product breadth of their
processes. presentations, solution offerings.
sales calls,
proposals and
interviews
12 – Product re- Product re- Dramatic To be able to 15 Financial 8 9 MBA in Developed Monitored When the company
pricing by a pricing change in sell the credit services competitors finance and competitors very started they dealt with
credit default market default swap that were all currently busy closely by hiring the world's largest
swaps conditions agreements price takers with a from them, banks at very profitable
underwriter they had and were all Doctorate being friendly levels but there came a
underwritten very aware researching and talk with point where they
with a decent of what the corporate them and talking started saying "we can't
return to their others were governance with common deal with you at these
shareholders doing and issues. Always customers. Hired levels", leading the
how they worked in an insurance company to realise it
were pricing financial specialist to wasn't 'business as
their services, in evaluate the usual'.
products. many different businesses
Therefore, roles and, assets and make
this could therefore, has recommend
be regarded a very good options.
as an knowledge of
oligopoly. the industry.

Page 233

Innovation
Type of &
13 – Re-launch Update or Acquisition of Increase sales 35 Automotive Very clear 4 No formal Emerging Followed their The manager is focused
of a luxury repackaging of the business to between strategic business closest on promoting the
motorcar brand an existing by a new 250 and 350 group education. competitor, who visceral elements of the
in an emerging product or owner. units/annum within a Father owned are very brand to develop the
market service and capture a broader a luxury car successful and business. E.g. he stated,
offering larger slice of established distributor and much larger, as "I can’t go and shout
the total industry dealership and well as deploying value, I have to shout
market with well- the manager the brands brand”.
defined started out as global marketing
borders. a salesman campaigns and
and worked business
his way up strategies.
14 – Strategic Corporate Acquisition of Package 1,000+ Media Very clear 6 Worked in the Emerging Scanned the The company was trying
acquisition by a action the business complimentar sets of media industry market for to blur the lines
media group in by a private y service competitors for a long companies with between different
an emerging equity fund offerings for different time, as an complimentary product offerings and,
market looking to together to product entrepreneur products/service therefore, different
grow it raise mobility offerings. and executive s that could be competitor sets, by
through barriers by for around the bundled with packaging different
corporate providing last 20 years. their existing products with different
action. solutions that No formal, product competitors together.
competitors relevant post- offerings.
cant. graduate
education.
15 – Bundling of Update or Private equity Wanted to 1,000+ Media Very clear 6 Worked in the Emerging Researched The company formed a
value added repackaging of firm that owns started sets of media industry international partnership with a
services by a an existing the business providing competitors \ as an trends, looked at company that owns a
media group in product or wants to raise integrated for different entrepreneur what they had number of leading
an emerging service mobility marketing product and executive that they could FMCG brands in an
market offering barriers. solutions as a offerings. for around the bundle together attempt to 'own'
way of last 20 years. to create advertising in that
competing No formal, marketing industry.
more relevant post- campaigns using
effectively. graduate several different
education. types of media.
Page 234

Innovation
Type of &
action (see Trigger for Objective of organisation score for emerging/ develop the manager's
16 – Merging of Development Flagging sales Cost 1,000+ FMCG Very clear 5 BSc and an MBA. Emerging Analysed both The research is
two brands into /launch of a and low rationalisation strategic Strong formal products’ needed to motivate
one by a large new product market share and to regain group and very incomes and changes in product
drinks lost market within a extensive costs and used range and marketing
manufacturer share broader marketing surveys to strategies to
established management establish the distributors and
industry career history in market appeal of bottlers.
with well- the FMCG the existing
defined industry with products.
borders. multinational.
17 – Product line Development Flagging sales Reposition the 1,000+ FMCG Very clear 3 BSc and an MBA. Emerging Surveys to Through the surveys
expansion by a /launch of a in the industry business for strategic Strong formal establish why it was established
confectionary new product sector that the growth group and very consumers that people buy
manufacturer company within a extensive bought their confectionary
operated in. broader marketing products. products to snack
established management between meals and,
industry career history in as a result, the
with well- the FMCG company decided to
defined industry with expand its snacking
borders. major product line.
international
groups.
18 – New Development The existing Gain a market 1,000+ FMCG Very clear 5 BSc and an MBA. Emerging One million A new stick
product /launch of a product was share of at strategic Strong formal consumers were deodorant product
development new product being replaced least 10% in group and very surveyed to was launched,
and launch by an by new one year by within a extensive establish how replacing the aerosol
FMCG product with introducing a broader marketing they could make can product. The
manufacturer the same new substitute established management an impact in survey was used to
application. product. industry career history in changing promote the
with well- the FMCG personal hygiene forthcoming product,
defined industry with products. and to understand
borders. major consumer
international perceptions
groups.
Page 235

Innovation
Type of &
19 – New Development Global group Grow revenue 1,000+ FMCG Very clear 5 BSc and an Emerging Surveys were Through surveys they
product /launch of a looking to by introducing strategic MBA. Strong used to established that
development new product grow their a new group formal and understand the there was unsatisfied
and launch by a business in product. within a very extensive market needs demand for drinks for
drinks this territory. broader marketing and what was toddlers and were
manufacturer established management available within able to adopt key
industry career history the global group learning’s for this
with well- in the FMCG to satisfy the product form the
defined industry with needs. Latin American
borders. major market.
international
groups.
20 – Product line Development Group wanted To gain a 1,000+ FMCG Very clear 5 BSc and an Emerging Marketing Given consumer price
extension by a /launch of a to grow their larger share of strategic MBA. Strong agency was used sensitivity, refills that
FMCG new product business in the fabric group formal and to establish had lower packaging
manufacturer this category. softener within a very extensive consumer needs requirements were
market. broader marketing and attitudes. introduced at a lower
established management price to any
industry career history comparable ‘full-
with well- in the FMCG packaged’ fabric
defined industry with softener.
borders. multinationals.
21 – Development Looking for Produce a 15 Automotive Industry 7 Worked in the Emerging No formal Produced a high-
Development of /launch of a opportunities highly with few brake pad marketing quality product for a
a competitive new product to develop specialised competitors industry as an methods or tools very specific market
product by a niche product that , incl. giants entrepreneur were used. The segment, competing
niche brake pad products. would that are part and an new product was with much larger
manufacturer produce good of executive for development manufacturers that
margins for integrated around the was driven by a bundle brake pads
the business. automotive last 20 years. customer with callipers.
businesses No formal, requirement.
and small, relevant post- Borrowed from
niche graduate other industries
competitors education. to develop the
. product itself.
Page 236

Innovation
Type of &
22 – Geographical Too many Maintain the 1,000+ Financial Oligopoly 4 MBA in Developed Survey's to The auto-finance
Geographical expansion long-term quality of services with a few finance and establish the market is incredibly
expansion of an assets on the loans they had players and currently busy suitability of their price sensitive and
auto-financing bank's balance on their books fierce with a pricing strategy. customers tend to
company in the sheet and they in new competition Doctorate go with the cheapest
U.S.A. wanted to territories researching financing deal, as it
grow their corporate is an oligopolistic
short-term governance industry and it’s very
assets, issues. Always hard to distinguish
therefore, worked in one financing deal
they wanted financial from another on
to expand services, in metrics other than
their auto many different price. Auto-finance
financing roles and, was sold indirectly
business. therefore, has through auto-
a very good dealers, offering a
knowledge of consistent service
the industry. with fast turn-
around times but
without discounting
their pricing to ‘buy’
market share.
23 – Product re- Update or Hong Kong Arrest the flow 500 Fashion Very clear 5 Worked in the Emerging The manager A new label was
positioning in repackaging of market of customers strategic fashion spent around a developed
the Chinese an existing opened up to from mainland group industry for a week looking at exclusively for the
market by a product or Chinese China to Hong within a long time, as competitors Chinese market.
British luxury- service visitors, Kong broader salesman and product mixes, Because the label
clothing brand offering causing a established an executive their pricing and was unique prices
sharp drop in industry. for around the the products couldn’t be
sales due to last 30 years. they were compared with
relatively high No formal, offering in China. prices elsewhere.
prices. relevant post- Introduced more UK
graduate manufactured
education. products, which are
perceived to be
superior.
Page 237

Innovation
Type of &
24 – Geographic Geographical Diversification Successfully 1,000+ Alcoholic Very clear 4 BSc and an Developing Discussions with The drink is in a new
expansion of a expansion away from the launch the beverages strategic MBA. Strong managers of category but
new product by first market product in group formal and subsidiaries competes primarily
an international for the another within a very extensive around Africa with locally
alcoholic drinks product, African market broader marketing produced beers,
company where sales and emulate established management ciders and lagers.
had stagnated. the success industry career history The group was
they had with well- in the hoping to use its
achieved in defined alcoholic 'first mover'
Nigeria. borders. beverages advantage to attack
industry. existing markets.
25 – Product re- Update or Low sell- Improve sell- 1,000+ Fashion Very clear 6 Worked in the Developed Interviewed the The men’s’ business
pricing in the repackaging of through through rates strategic fashion management and collection was
U.S.A. market by an existing figures in the for their group industry for a floor staff at the redesigned for the
a British luxury- product or U.S.A. men’s' within a long time, as retailer. U.S.A. market. The
clothing brand service business line broader salesman and brand, rather than
offering at a major established an executive the retailer drove
retailer in the industry. for around the this intervention, as
U.S.A. last 30 years. it was the brand that
No formal, questioned the low
relevant post- sell-through figures.
graduate
education.
26 – Launch of a Development Flagging sales Regain lost 1,000+ FMCG Very clear 5 BSc and an Emerging Analysed the The company
new fruit juice /launch of a and low market share strategic MBA. Strong performance of created a new
drink by a large new product market share group formal and potential new segment by
drinks in a particular within a very extensive products in other introducing the new
manufacturer sector of the broader marketing markets and product to the
market established management used surveys to market and,
industry career history establish their therefore, didn't
with well- in the FMCG market appeal have any
defined industry with and a tool to competitors and
borders. major estimate sales would have a 'first
international volumes. mover' advantage.
groups.
Page 238

Page 239

Appendix 14: Points to be covered in the semi-

structured interviews

The following points were used as a checklist of factors to be captured and questions
to be asked when carrying out interviews with each of the managers.

Company and environmental factors

• Industry sector
• Territory (region or sub-continent) where the competitive action was
formulated and where it was executed
• Size of company, defined in terms of annual revenue and the number of
employees
• The organisational structure of the manager’s company
• The structure of the industry in which the manager’s company operates
• The maturity of the industry in which the manager’s company operates
• The rate of change and the rate of innovation in the industry in which the
manager’s company operates

Factors concerning the background of the manager

• Nationality and cultural background
• Education
• Age
• Current and previous function/s within the company
• Exposure to, and training in the use of, specific tools and techniques for
formulating and executing competitive strategy

Execution of the competitive action

• Please describe the competitive action that was taken?
• Why did your organisation choose this particular action?
• Please describe the process followed in executing the competitive action?
• Please identify and describe the genesis of this action (e.g. one of the actions
listed in our competitive strategy, a competitive action by a rival company, a
drop in sales of a particular product line)?
Page 240

• Please list and describe the internal inputs to deciding on the details related to
the execution of this particular action (e.g., the findings of an industry report,
research by consultants, research by employees, a survey or scan of the
market)?
• What was achieved through this action?
• Did the outcome of this action meet your personal expectations, as well as the
performance targets set at an organisational level?

Setting performance targets

• Are performance targets and measurement mechanisms attached to strategies
formulated by your organisation and, if so, please describe them?
• Was a performance target, as well as a method for measuring its achievement,
set for this action and, if so, please describe it?


• Was a formal process followed in formulating the competitive strategy that
gave rise to this action and, if so, please describe it?
• Who were the role players in the formulation of the competitive strategy, both
internal (e.g. managers and analysts employed by your organisation) as well as
external (e.g. consultants)?
• What external inputs (e.g. reports, business plans, surveys) were used to
formulate the competitive action?
• Were any tools or techniques (e.g. Michael Porter’s five force, Igor Ansoff’s
matrix) used in formulating the competitive action and, if so, which ones and
how are they used?
• Were any academic theories used in formulating the competitive action and, if
so, which ones?

Mental maps of competitors and the industrial structure

• List your competitors?
• Describe the structure of the industry you operate in?
• Describe the intensity of rivalry from your competitors, both existing and that
anticipated in the future?
• Describe the competitive dynamics of the market in which you operate?
• Describe the rate of change and the level and rate of innovation in your
industry?
Page 241

Competitive intelligence

• Is a formal competitive intelligence gathering process in place?
• Is there a dedicated function within the organisation for the gathering of
competitive intelligence?
• What are the sources of competitive intelligence?
• How is competitive intelligence collated and disseminated within the
organisation, both formally and informally?

Page 242

Appendix 15: Example of CIMO-based coding system

Following is an example of the coding of an interview using the CIMO (Context,
Intervention, Mechanism and Outcome) framework (Danyer et al. 2008).

Action 4 - 'You can do it'
Themes campaign launched by a UK Action 4 - Action 4 -
(CIMO) IT services company Action 4 - subtext codes level 1 codes level 2
A1 and A2 have been with us Two smaller competitors New market Competition
in this country for a long time disrupted the established entrants,
but they’ve just quietly come industrial organisation Market
along and made the big boys disruption
hop.
While those big boys [A3, A4, Same as above Manager's Competition
A5, et al.] where fighting views of
among themselves in a cage competitors
protecting what they had,
they'd forgotten about the
smaller competitors.
We tend to think differently Changes in the external Environmental Competition
about competitiveness in that environment can impact the changes,
not only when you’re competitiveness of a Changes in
competing in a race, but business and result in a competitive
competitiveness can also be niche (low-volume, high- forces
changes of circumstances, value) player having to
which would see us losing the become a high-volume-low-
competitive race if you like, in value player to compete.
that we wouldn’t fare very
well in selling high volume,
Context
low price.
A3 grew so massively before Very successful market Environmental Performance
the economy burst. Now, players can be unseated by changes,
some years later, they’re in a much smaller rivals that Adaption to
very bad position. Here we come out of the leftfield market
see A1 and A2 who really when there is a change in conditions
were nowhere in the UK and the external environment.
all of a sudden they’re
motoring like Billy to the top.
They’re becoming likeable.
[A1 and A2] have a great Smaller competitors are Product Pricing
product range – the biggest able to compete with larger differentiation,
range in the country and ones if they are able to offer Pricing,
they’re selling it cheaply products of the same Customer
while still demonstrating that quality but cheaper. perceptions
it’s good quality.
A3 has just changed its Tesco have made changes Company Resource
management and said to their management in image, management
they’ve got champions. It’ll order to be more appealing Customer
take a while though. to their target market. perceptions
Page 243

Action 4 - 'You can do it' campaign Action 4 -

Themes launched by a UK IT services Action 4 - codes level
(CIMO) company Action 4 - subtext codes level 1 2
[A1 and A2] are not arrogant and It is important for a Company Market
don’t come across like egotistical company's target image, positioning
maniacs as potentially the way market to be able to Customer
Tesco does. relate to the company's perceptions
values
A1 and A2 are doing ‘A5’ type The manager thinks it's Advertising, Pricing
advertising. They have the same possible to take on the Brand
kind of feel to them but then they go incumbent operators in positioning,
‘but it’s A2’ These products are a market through a Product
really nice but just cheaper. combination of positioning,
imitation and Pricing
differentiation.
From the outset it was reading Using published data Identifying Regulation
things like white papers. A lot of and information to market trends,
Context reading things like what’s happened identify market trends Business
in terms of transport. What will and business opportunities
happen in government – so I flew opportunities. in changes in
through the party material. So legislation
looking at businesses and why
they’re going out business.
[To gather market data] we went A good way to test the Gauging the Market
out and started speaking with market is to engage market, Public intelligence
people and saying “this is what people and ask them perceptions,
we’re thinking of doing and what do what they think. Validating
you think about it?” business
concepts
You want it as cheap as possible, The company is Response to Innovation

you’re paying this much to that involved in developing customer
much, let’s look at what we can do innovative solutions needs,
for you to make that more valuable using smart cards that Product
to your organisation to be a revenue seek to provide value innovation,
Intervention
generator. added services, Value added
customer stickiness and services
revenue opportunities
in order to sell their
services.
My personal focus is headlights on The development of the Management Innovation
the future and I’ve been working on programme was a focus,
a programme called ‘You can do it’. response to economic Changing
It was developed in response to a conditions and the environmental
sagging economy and public sector effect they were having circumstances,
cost pressures and it encourages the on the public sector. Economic
use of public transport and hospital conditions
beds.
Page 244


Themes campaign launched by a UK IT Action 4 - Action 4 -
(CIMO) services company Action 4 - subtext codes level 1 codes level 2
I would say [conceptualisation] While the development Product Innovation
was about three months and the life-cycle is long, a development,
research is still on-going but I number of processes Development
would say 18 months to two years where run in parallel to life cycle
but, while we were doing that, we reduce the lifecycle time.
had also started developing our
remote loading device. So, there
was something that we continued
doing as part of the research
while we started producing the
prototype etc.
We’re about to acquire a They are interested in Company Investment,
company that has a product that acquiring a company acquisition, Regulation
will satisfy a change in legislation. because of a product Product
We’re working with P1 and that it and, because of acquisition,
bringing together different that product, such an Expanding
Intervention
products and markets to support acquisition would be product
them. value-accretive. portfolio
What we have done in [the high- For specific Competitive Innovation,
volume, low-margin] environment opportunities where pressure, lean Competition
is looked at lean manufacturing so they had to compete in manufacturing,
we’ve learned everything up and, high-volume, low-margin Adapting
as a result of doing that, it’s a environments, they business
much simpler operation, much adapted their business models
more cost-effective and we have models accordingly.
been able to make our prices
more appropriate.
It wasn’t really a response to The genesis of the action Responding to Innovation
competitive pressure, it was a was a perceived gap in market
response to a gap in the market. the market, rather than opportunities,
anything any competitor latent demand
was doing.
If we’re looking for real talent you The business has to Cost of talent, Market
can’t really get it if you’re selling a focus on a 'low volume, Adapting positioning
‘high volume, low price’ product high value' niche in order business
because why do you need that to compete effectively models
talent if it’s mainly an automated because its cost base is
process that isn’t different from higher. Applying the
anything else. Resource Based View,
they recruit talent, which
results in relatively high
Mechanism costs
So, we’re looking to be not really They are trying to Brand Market
expensive but providing higher position themselves as a positioning, positioning
value at an above average price mid-priced brand with Value vs. price
so I would put us in the Samsung above-average value.
type environment, as opposed to
Phillips or Bang & Olufsen
televisions that are very
expensive, appeal to a certain
type of person.
Page 245

Action 4 - 'You can do it' Action 4 -

Themes campaign launched by a UK IT Action 4 - codes codes level
(CIMO) services company Action 4 - subtext level 1 2
[Philips and Bang & Olufsen are The manager thinks Product Innovation,
lovely products but are being left trying to appeal to a innovation, market
behind in a way to some people, broader market by Brand positioning
in terms of market coverage, proving innovative positioning,
whereas Samsung are putting a products to a mid-upper Product
lot into innovation and are market is more desirable positioning,
coming up with lots of new than trying to appeal to Market coverage
products. the very niche upper end
of the market.
We had a part of the business The manager seeks to Product Innovation
producing smart cards for avoid commoditised differentiation,
instance, which is commoditised if businesses because she Pricing, Value-
you’re only doing that, and the links them with having to add
challenge, if I only operated in respond to changing
that environment, would be that market dynamics
I’d have to act now and if you immediately, which she
have to act now to do something views as challenging.
it’s challenging.
If you operate on a very narrow The manager associates Product Investment

margin then you probably don’t high-volume, low-margin innovation,
have the luxury of being able to businesses with Research &
say let’s invest, invest, invest for relatively small budgets Development
the future because you need for R&D, which results in
those funds for now and I think them not being as
that’s another reason why I prefer innovative as their low-
Mechanism to keep away from ‘high volume, volume, high-margin
low cost’ type environments industry peers.
If I was doing the Competitive 1. The manager uses a Competitive Market

Compass for instance, we’re in tool called the positioning positioning
the middle. You’ve got perceived competitive compass. 2. tools, Brand
value and perceived price, in the She fears being in the positioning,
niche up here you see people like high-price, high- Product
Apple, and Blackberry were in perceived value positioning
there, and the danger to me if quadrant makes
you’re over there it’s very easy to businesses vulnerable to
fall down here and it’s suicide being disrupted and
because your prices drop off. unseated.
[using the Competitive Compass, Using the Competitive Product Market

we're] in the middle – higher Compass, the manager positioning, positioning
perceived value but higher than sees her business as Market niches
average perceived price, rather offering above avg
than a total niche, which is more perceived value at above
about high price and higher avg prices.
perceived value and, potentially,
low volume.
[In trying to forecast market The evolution of markets Business Forecasting
trends] what happens in the is cyclical and past projections
future is determined by what events can be used to
happened in our pasts extrapolate future
events.

Page 246


Themes campaign launched by a UK IT Action 4 - Action 4 -
(CIMO) services company Action 4 - subtext codes level 1 codes level 2
[In trying to forecast market The evolution of markets Business Forecasting
trends] what happens in the future is cyclical and past events projections
is determined by what happened can be used to extrapolate
in our pasts future events.
The brilliant thing about these Customer/stakeholder Discussions Market
exploratory discussions [with interactions spawn ideas with intelligence
stakeholders and prospective for new business stakeholders,
customers] is that you find out opportunities. Information
stuff and the clarity and education gathering,
Mechanism coming out of that are massive development
opportunities for us that we’ve of new
moved into, and are moving into business ideas
very quickly.
So everyone has been spec’ed up Once beta testing has Product Investment
and configured [for beta testing] been concluded, the new development,
and we’ll start to see the fruits of business will become Investment
that labour next year. profitable. pay-off
My approach has been to look The business development Looking Forecasting

beyond what is currently being focus is on responding to beyond current
done. So, we focus on issues and emerging customer offerings,
challenges that our clients have requirements. Satisfying
and on developing a suite of latent
product offerings to satisfy them. customer
requirements
You Can Do It’ is a business in its the goal was to use the Company Corporate
own right and my mission there manager's business to disposal plan, action
was to get it to a point where incubate this new business Company
Objective we’ve got traction, in terms of the idea and then to spin it off development
number of businesses working as a separate business.
with us, and then it’ll be an
attractive business to sell.
What we do know, of course, is The barriers to entry are Business Innovation

that we’re setting a path for other low and the ability for imitation,
people to follow and that’s fine. competitors to replicate barriers to
We have to keep moving, we have competitive actions is entry, Porduct
to be way up the track. high. innovation
Page 247

Appendix 16: Example of a manager interview

UK IT services company

Competitive action: Launched a new loyalty card

Introduction

The CEO of an Information Technology services company in the United Kingdom (the
‘interviewee’) was interviewed and asked specific questions about a new service they
developed for government that will be cost-neutral to them.

The interviewee is the founder and CEO of a company that provides IT services centred
on the provision of loyalty cards. Their clients include local governments, P1 and
national government agencies. They also provide services related to businesses
corporate social responsibility programmes.

Interview

Interviewer: To start with, could you tell me about the competitive environment you
operate in and how you think about competition?

Interviewee: When you think about competitors you tend to move away from looking
into the future. My approach has been to look beyond what is currently being done.
So, we focus on issues and challenges that our clients have and on developing a suite
of product offerings to satisfy them.

Interviewer: Could you give me an example?

Interviewee: We’re about to acquire a company that has a product that will satisfy a
change in legislation. We’re working with P1 and bringing together different products
and markets to support them. This is currently in due diligence. My personal focus is
headlights on the future and I’ve been working on a programme called ‘You can do it’.
It was developed in response to a sagging economy and public sector cost pressures
and it encourages the use of public transport and hospital beds.

Interviewer: You say the card is cost-neutral to government. I guess the rationale
behind the product then is to offer something where Novacroft are able to make
money but there’s a cost neutral business case to present to government?

Page 248

Interviewee: From our point of view it satisfies the needs of Public Transport because,
in the world we now live in, it’s really good to see that things such as Corporate Social
Responsibility, which were seen as a bit fluffy, are now starting to find their way into
tenders. So in Rail, for instance, there is an element of 5% in evaluation criteria for
meeting Corporate Social Responsibility needs and what they don’t have is
measurability. And in fact what I’ve learnt through the research we’ve been doing over
the last three years is that corporate social responsibility is a little bit like marketing
was, which is some stuff that you do and you have no idea of how effective it is where
now we can say actually, if you want to do these things, we can measure it. We can
provide meaningful information on behavioural change.

Interviewer: I guess in this case that would be the use of public transport. That would
be the yardstick?

Interviewee: Yes. It might be that you’ve got to demonstrate that people are using
public transport but you also have to demonstrate that you’re having a positive effect
on public community and that’s a big issue now. You need to demonstrate that you
care about the community so, rather than just buying a plot of land and plonking
something on it so no one else can buy it, you’re actually thinking about the needs of
the community because if you do that, actually leads to greater profitability. And it’s
the bit in the boardroom I think that people say yes, yes, yes to but it doesn’t really
matter because we’ve got to go to the city and produce the results but actually if they
think more about that, if a consumer likes you or respects you, they’re more likely to
shop with you.

Interviewer: If your values resonate with them that counts for something.

Interviewee: Yes, and you can see that with A4 and what’s happened to them. They
grew so massively before the economy burst. And now, some years later, they’re in a
very bad position. Here we see A2 and A1 who really were nowhere in the UK and all
of a sudden they’re motoring like Billy to the top. They’re becoming likeable. They
have a great product range – the biggest range in the country and they’re selling it
cheaply while still demonstrating that it’s good quality and they’re not arrogant and
don’t come across like egotistical maniacs as potentially the way A4 does. A4 has just
changed it and said they’ve got champions. It’ll take a while though.

Interviewer: So you’re talking about the public perception of the brand and the ethos
of the brand that customers relate to, which is what A1 and A2 have. Product for
product they probably are cheaper than A4.

Interviewee: They are. And what they’re doing is ‘A5’ type advertising. They have the
same kind of feel to them but then they go ‘but it’s A2’ These products are really nice
but just cheaper.

Interviewer: I think what they probably lack is the brashness that A4 have.
Page 249

Interviewee: Exactly. They’ve been with us in this country for a long time but they’ve
just quietly come along and made the big boys hop. While those big boys were fighting
among themselves in a cage protecting what they had, they’d forgotten about the
smaller competitors.

Interviewer: Going back to the programme for public transport, what do you call it?
Interviewee: You can do it.

Interviewer: It wasn’t really a response to competitive pressure; it was a response to a
gap in the market?

Interviewee: It’s interesting because how we tend to think differently about
competitiveness in that it’s not only when you’re competing in a race, whatever that is,
but competitiveness can also be changes of circumstances. So it’s a response to a
potential change in a circumstance, which would see us losing the competitive race if
you like, in that we wouldn’t fare very well in selling high volume, low price. Because
what we do is technology based and we pay upper-quartile for our salaries so we aim
to get what we call ‘super heros’. So, if we’re looking for real talent you can’t really get
it if you’re selling a ‘high volume, low price’ product because why do you need that
talent if it’s mainly an automated process that isn’t different from anything else.

Interviewer: Could you perhaps go into the thinking? You’d realised and
conceptualised the opportunity, what sort of processes, cognitive and material, to you
go through to conceptualise the product? In other words, how it should be priced,
what the product features should be, which retailers you should involve, how you
should approach government you should involve, right done to the hardware – the
card and the processes you needed internally to support this programme?

Interviewee: From the outset it was reading things like white papers. A lot of reading
things like what’s happened in terms of transport. What will happen in government –
so I flew through the party material. So looking at businesses and why they’re going
out business. Looking back, I do have thing – what happens in the future is determined
by what happened in our pasts. So, reflecting on 1980 something, one of the biggest
economic changes. Sir John Harvey Jones said that the businesses that were successful
were the ones that got fit for business. So, looking at things that worked then and
things that didn’t work and looking at completely different things like TV programmes,
looking at different markets, what have they done, how do they operate, what has
made them successful and then collaborating. We’ve had lots and lots of collaboration
sessions internally with statements about “what would you do if…” kind of scenarios,
coming up with ideas and then going out. So coming up with “these are the key areas
we want to focus on: people, UK GDP and collaborating with retailers”. From that sort
of analysis we went out and started speaking with people and saying “this is what
we’re thinking of doing and what do you think about it?”

Page 250

Interviewer: When you say “speaking to people”, do you mean prospective consumers
or do you mean stakeholders, such as government and the retailers?

Interviewee: Yes, stakeholders and also speaking to organisations like Business in the
community to understand their take on it and then, through them, to open up to the
consumers. And, actually found quite early on is that developing partnerships with
organisations like Business in the community has been phenomenally useful because
they’ve opened doors that potentially we wouldn’t have been able to open as easily or
at all. So, putting the ideas to Ministers, putting the ideas to retailers at CEO level, and
other organisations like BA Academies and getting their views on it and their views
have helped shape what it should like and then take their views back and
understanding what it means for the Novacroft business case and then going to the
Knowledge Transfer Partnership to get partial funding for the Remote loading device.

Interviewer: Sorry, who would provide the funding?

Interviewee: The Knowledge Transfer Partnership, which is part of the Business Skills
and Innovation Department.

Interviewer: I guess when all of that was in place and you knew what your proposition
would be and you had had all these discussions with government ministers, the CEO’s
of the retailers and so on, and you had funding for the loading devices you were able
to print the Metro cards and roll out the plan.

Interviewee: One thing we found in going through the research and going out and
talking to people is that we could impact on self-esteem, we could raise awareness and
individuals could have an impact on society, apart from these three things, what we
found through the research is that there are two tranches of opportunities that we
hadn’t seen until we started speaking with people. So, for instance, charities’ in the UK
spend quite a bit of money in the Pound on administration. So, if we can impact on
three things there, which is reducing the amount of money they spend on
administration outside of generating income for themselves, if we can increase
membership and if we can provide richer data for them to be able to get better
sponsorship then we’re doing them a great service. So we’ve adapted ‘You Can Do It’,
it’s the same thing but we’re also using ‘You Can Do It’ to do that and we’ve won
British Legion on the programme. So, but looking at the problem public transport faced
and coming up with ‘You Can Do It’, and through the discussions, has led us to new
market opportunities and that is something that our competitors in the market would
not be doing because of our thought processes and what we’re doing, or they’re not
doing.

Interviewer: I guess the barriers to entry are significantly high to deter anyone else
from trying to do what you’re doing. The next question I was going to ask you is about
timeframes but I imagine for someone else to introduce a scheme like this would
probably have a year lead time and you’d find the stakeholders would be saying “but
Page 251

we’re already doing this with Novacroft and why would we want a second Metro
card”.

Interviewee: Yes, exactly, exactly. So, the great thing is if you take this to British Legion
it’s such rich pickings for us because we can put in a card and they have a very archaic,
laminated thing at the moment. We can put the card in, we can recognise people
when they go to an event, which they can’t currently do. They say they can do it but
they have no idea of what their members are doing. We can make it easier for them to
join, that’s the easy peazy stuff, and then we can create profiles for everything they do
with data which means that when they go out to get sponsorship it makes it much
easier and that uses everything in our smorgasbord of products and services – we’re
just using it in a different way. But, it still fits into ‘You Can Do It’ because A3’s, who
are one of the sponsors of British Legion, benefit from members of British Legion using
their spanking new membership cards going into A3’s and spending their rewards
using their membership cards and that increases the value of the brand to individuals
and also increases foot-fall to A3’s.

Interviewer: And I’m sure in time you’ll probably come up with many more
applications for exactly the same concept.

Interviewee: ‘You Can Do It’ is a business in its own right and my mission there was to
get it to a point where we’ve got traction, in terms of the number of businesses
working with us, and then it’ll be an attractive business to sell.

Interviewer: As a stand-alone piece?

Interviewee: Yes

Interviewer: You’ll spin it out of Novacroft. It has all the hallmarks of a PPP, a Public
Private Partnership?

Interviewee: Yes, it has.

Interviewer: I was going to ask you about timeframes. So, you’ve got, very broadly, if
you were to compartmentalise this into a number of steps, the first one would be
‘conceptualisation’, a number of discussions and reading about changes to the
legislature that is about to take place. I would say the next step is ‘research’, so more
depth – what do people really think, what can really be done. I would think the third
step would then be ‘solution design’, then ‘prototyping’ and then ‘roll out’. What
would the timeframes for each step be?

Interviewee: I would say the first one was about three months and the research is still
on-going but I would say 18 months to two years but, while we were doing that, we
has also started developing our remote loading device. So, there was something that
we continued doing as part of the research while we started producing the prototype
Page 252

etc. The remote loading device has taken two and a half, nearly three years, to
develop, which is too long.

Interviewer: A lot longer than you would have liked. So where are you with the
programme now?

Interviewee: So the programme now is we have a number of organisations about to
start using it. So everyone has been spec’ed up and configured and we’ll start to see
the fruits of that labour next year.

Interviewer: But that’ll be for a prototype with beta testing customers for lack of a
better description?

Interviewee: Yes

Interviewer: And that’s probably a year away?

Interviewee: Yes, our mission for You Can Do It with British Rail has been to have it
fully functioning by 2017. In the meantime, in charity and education we can get it
moving a lot quicker.

Interviewer: I must really commend o your long-term vision. It’s often hard to see
beyond a year. It’s not like manufacturing, where everything is sequenced. Whereas
when you think of something like this where you know there is this much to do and the
pay-off is that far down the line it really is commendable.

Interviewee: It’s challenging because people say “It’s massive, it’s too big, you can’t do
this much with so many people” but actually we’re making it very specific really in
what it’s trying to achieve and part of the research shows that it’s going to take a long
time. The brilliant thing about these exploratory discussions is that you find out stuff
and the charity and education coming out of that are massive opportunities for us that
we’ve moved into, and are moving into very quickly. So I think it’s interesting because
when I look at, if you operate on a very narrow margin then you probably don’t have
the luxury of being able to say let’s invest, invest, invest for the future because you
need those funds for now and I think that’s another reason why I prefer to keep away
from ‘high volume, low cost’ type environments. If I operated in that environment, we
had a part of the business producing smart cards for instance, which is commoditised if
you’re only doing that, and the challenge if I only operated in that environment would
be that I’d have to act now and if you have to act now to do something it’s challenging.
What we have done in that environment is looked at lean manufacturing so we’ve
leaned everything up and, as a result of doing that, it’s a much simpler operation,
much more cost-effective and we have been able to make our prices more
appropriate. Once we’ve done that we’ve said “okay, let’s take you metros card, you
want it as cheap as possible” – not that we said that to them – “you want it as cheap as
possible, you’re paying this much to that much, let’s look at what we can do for you to
Page 253

make that more valuable to your organisation to be a revenue generator. What we do

know, of course, is that we’re setting a path for other people to follow and that’s fine.
We have to keep moving, we have to be way up the track because in tenders it will say
“this is a tender for X, demonstrate how you will generate us income”.

Interviewer: Have you come across Porter’s ‘gap in the middle theory”? He said you
can either be a big company, have critical scale and do things very cost-effectively and,
therefore, enjoy high margins, or you can be a small company that fills niches and is
highly specialised and, because it fills niches, it can charge more and, because it
charges more, it also enjoys high margins but in the middle there’s a gap because
companies that move beyond being specialists and expand face the prospect of having
to compete with large companies but without having the scale that the large
companies do. You’ve obviously made a conscious decision to remain a specialist.
What a lot of companies suffer from in their growth is moving towards the larger
companies and then, all of a sudden, they have to compete with them but they haven’t
got the scale to do so.

Interviewee: If I was doing the competitive compass for instance, we’re in the middle.
You’ve got perceived value and perceived price, in the niche up here you see people
like Apple, and Blackberry were in there, and the danger to me if you’re over there it’s
very easy to fall down here and its suicide because your prices drop off. So, we’re
looking to be not really expensive but providing higher value at an above average price
so I would put us in the Samsung type environment, as opposed to Phillips or Bang &
Olufsen televisions that are very expensive, appeal to a certain type of person, lovely
products but are being left behind in a way to some people, in terms of market
coverage, whereas Samsung are putting a lot into innovation and are coming up with
lots of new products. Some of them are gimmicky, their screens aren’t very good, but
they are there in terms of perceived value. So, it’s in the middle – higher perceived
value but higher than average perceived price, rather than a total niche, which is more
about high price and higher perceived value and, potentially, low volume.

Interviewer: Where I’ve come across a 2 x 2, like the one you’ve just spoken about, is
in Cliff Bowman’s, a Professor here at Cranfield, four quadrants and with price along
the one axis and perceived value along the other. Where would you sit?

Interviewee: High value but mid-price

Page 254

Appendix 17: Summary of iterations of the guide

Initial guide development – Version 1

The initial guide was developed by grouping actions or mechanisms into a number of
broad categories, including:

• Communication to change consumer perception or to create awareness
• Updating, re-packaging, extending or re-pricing an existing product or service
• Development or launch of a new product or service
• Discontinuation of a product or service
• Acquisition of a complimentary product or service
• Establishment of a presence in a new market

The initial approach to developing the guide was to treat stimuli to the competitive
actions and their context as variables in relation to actions that could be taken. The
guide was structured around how these variables shape the action and, therefore, what
managers should consider doing based on these variables. For examples, the actions
that managers formulate are likely to vary based on factors such as:

• The life cycle stage of the brand, product or service
• The user sector (e.g. consumer or industrial)
• The differentiability of the product or service

Therefore, the appropriateness of different types of actions was dependent on the
competitive settings of the business and its environment. Michael Porter (1980)
identified three crucial variables in this regard:

1. The degree of industry concentration
2. The stage of the product life cycle
3. Exposure to international competition

In the initial guide, approaches to the formulation of competitive actions, including the
use of tools and techniques, were recommending based on the conditions precedent,
the stimuli and the objectives. To achieve this the guide was initially organised according
to 21 different variables in five separate categories, including:

Page 255

Category 1 - Stimuli

• Consumer misperceptions
• Threats from new market entrants
• Changes in market conditions, including regulatory, economic or consumer
behaviour changes
• Shareholder pressure to improve performance
• The emergence of new technologies
• Poor sales performance
• Customer requests
• Top management pressure to diversify businesses

Category 2 - Objectives

• Increase share of existing market
• Maintain market position and profit levels
• Expand business through new unit, product or service
• Generate or increase sales in a new market

Category 3 - Competitive environment

• Industry maturity
• Degree of turbulence in the industry
• Industry fragmentation

Category 4 - Company-level variables

• Company size relative to competitors
• Company profitability relative to competitors

Category 5 - Manager-level variables

• Manager’s age
• Level of formal training of manager
• Manager’s location relative to home market
• Broadness of functional background of manager

Page 256

Second iteration – Version 2

All four research participants were interviewed. The table below lists the salient points
from their feedback, as well as the corresponding updates made to the guide.

Points raised by interviewees Updates made to the guide
The approach of using 21 variables to The variable approach was dismantled in
shape the relevant competitive action version 2 of the guide and replaced with
employed in version 1, was hard to a processual flow-chart and sections
understand and appeared to be relating to each step and each option in
cumbersome to use. the flow chart.
In relation to the guide, interviewee 2 The processual flow-chart implemented
noted it was important to be able to in version 2 was designed to prompt the
decide which services they should reader to think about the competitive
continue with and which services they environment and the relative relevance
should discard in the future and that the of the brands, products or services that
guide prompted her to think about they were formulating competitive
which services to re-hash or update, actions for. The discontinuation of
which services to throw out and which uncompetitive products or services is
ones to keep ‘as-is’. one possible competitive action
Interviewee 3 noted the guide would Version 2 of the guide was designed to
help them “look through the looking prompt as much thought about the
glass”. future state of competitive
environments as possible. References to
the D’Aveni (2007) tool for predicting
future product attributes were
maintained in version 2.
In relation to the guide, interviewee 2 It was ensured that the option of
commented that “whenever sales wane, evaluating new markets when sales
my approach is to find a new market that wane was included in version 2 of the
can act as a substitute for the loss of guide and Kim and Mauborgne’s (2005)
sales or market share.” ‘Blue ocean strategy’ approach was
maintained.
Interviewees 1,2 and 3 commented that To make the guide more useable and to
the diagram linking stimuli to objectives de-emphasise the dependence on
and to mechanisms was too complex and selecting variables in formulating
too hard to understand and that the competitive actions, the processual flow-
recommendations and ideas related to chart was developed to be used with
the icons in the diagram were too hard ideas listed in a table at every stage of
to find and required the reader to do a the formulation process. A graphic
lot of jumping around the guide. designer was hired to improve the visual
appeal and usability of the guide.

Table 1: Updates to version 2 of the guide
Page 257

Third iteration – Version 3

All four research participants were interviewed. The table below lists the salient points
from their feedback, as well as the corresponding updates made to the guide.

Interviewees 1 and 4 noted that they still The guide was split in two to simplify it.
found the guide too complex and too Firstly, a guide with three A4 and three
“academic”. A3 pages of content, consisting mainly of
diagrams and tables, was produced.
Secondly, a 22-pages resources manual
names ‘Resources for competitive
actions’ was produced with the intention
that a wide range of managers could use
the guide on a day-to-day basis while a
more focused group of managers would
use the resources manual as a reference
document on a less regular basis. More
colour was added to the guide to make it
easier to use.
Interviewee 1 mentioned that it still The ‘Introduction to the guide’ section
wasn’t clear how and by who the guide was renamed ‘How to use this guide’. It
should be used. was simplified through the use of a table
to describe the competitive action
formulation steps and expanded by
explaining the dichotomy between the
guide and the resources manual. In order
to make the guide easier to understand,
in terms of being able to remember and
pin-point each of the steps in the
competitive action formulation process,
and being able to navigating around the
guide and between the different steps,
they were renamed and abbreviated
‘SOLAR’, an acronym for:

• Stimulus
• Objectives
• Levers
• Actions
• Refinement

Page 258


Interviewee 1 commented that using the As much of the content for regular use as
guide still required to much “jumping possible was brought into the tables in
around” by the reader. the guide, resulting in the reader having
to follow references to other parts of the
guide a lot less than before.
Interviewee 1 distinguished actions that The stimuli related to ‘declining or
are borne out of a strategy and are, compromised performance’ or ‘external
therefore, planned from those that are of environmental change’ were labelled
stimulated by unplanned events and are, ‘Emergent’ and the stimuli related to
therefore, emergent. ‘shareholder of management plans’ were
labelled ‘Planned’.

The panel chair noted that the cover The cover image was replaced by one of
image of the Concord, which was chosen a Bombardier CS-100, as it is a highly
for its ‘high flying’ connotation, innovative product developed to
represented a heavily subsidised and compete in a dynamic and highly
uncompetitive product and was, competitive segment of the aircraft
therefore, not an appropriate image for industry. Its competitors include the
the guide. Embraer E-jet family and the Sukhoi SU-
jet family.


Fourth iteration – Version 4

Several meetings and a lot of time was spent with the CEO of the advertising agency in
South Africa between versions 3 and 4 of the guide. He made several points, which were
dealt with in version 4. The table below lists the salient points from their feedback, as
well as the corresponding updates made to the guide.

Interviewee 1 noted that companies, or A new planned stimulus, ‘expand by
divisions within companies, moving into moving into a new competitive set’, was
new competitive sets or groupings was introduced to the guide
discussed with an interviewee
Interviewee 1 noted that products or Two new emergent stimuli were added
services not being properly costed or to the guide including ‘Product or service
priced or brands, product or service offering not costed or priced correctly’
offerings that are not clearly defined and ’Brand, product or service not clearly
could also stimulate competitive actions. defined in the product or brand
statement’.

Page 259


Interviewees 1 and 4 commented that As much of the content for regular use as
using the guide still required to much possible was brought into the tables in
“jumping around” by the reader. the guide, resulting in the reader having
to follow references to other parts of the
guide a lot less than before.
It was noted in a discussion with The three objectives in the guide were
Interviewee 1 that managers seek to simplified as either ‘Recover’, ‘Maintain’
either recover their previous competitive or ‘Grow’.
positions, to maintain what they have or
to expand in the case of every
competitive action.
The refinement process was discussed The ‘Refinement’ section was further
with Interviewee 1 at length and several bolster by incorporating examples and
points were noted, including ‘fail quickly’ ideas that were discussed, including the
approaches, in which managers spend ‘fail quickly’ approaches.
relatively little time, money and effort on
new ideas before launching them and
then refining them based on market
acceptance and feedback.
The interviewee noted that working A recommendation of tighter working
closely with suppliers and customers to relationships with suppliers and
improve the process of prototyping new customers during prototyping of new
products or services can be highly products or services was incorporated
effective. into version 4 of the guide.
Interviewee 4 commented that the links Some of the resources manual’s content
between the guide and the resources was moved to the guide and two new
manual were often hard to see or follow. tables were created, including ‘Objective
Interviewee 4 also noted “I like the guide setting’ and ‘How to select levers’. Sign-
a lot and think that it's clear and to the posting using the six icons form the
point with lots of real stimuli. It's the resources manual was implemented in
resources where I lose the plot.” He the guide, helping to connect the
indicated that other managers in his resources with the objectives, levers and
organisation would derive value form actions. Some of the content from the
the resources manual and commented “I guide was moved to the resources
can relate to it all but get lost in all the manual, including the practical example
theories. I'm obviously not an academic used in the ‘Refinement’ section to make
and always had little patience for study.” it lighter.


Page 260

Fifth iteration – Version 5

Meetings were held and discussions were had with the interviewees to update and
improve version 4 of the guide and create the final version, version 5. The table below
lists the salient points from their feedback, as well as the corresponding updates made
to version 4.

Panel members noted that there was a The SOLAR flow-chart was implemented
fair amount of inconsistency in the use as the sole labelling approach and way of
of terms to describe the processual describing the processual competitive
competitive actions formulation process, actions model.
including SOLAR amongst others.
Interviewee 4 and a panel member The circular flow-chart was updated to
noted that the circular flow-chart in the reflect the SOLAR model and was moved
‘Refinement’ section of the guide to the ‘How to use the guide’ section,
appeared to be a second iteration of the providing readers with an explanation of
processual model, that could be re- the SOLAR model and explaining how it
labelled for the sake of consistency and should be used in the context of the
could appear in the beginning of the guide. The table in the ‘How to use this
guide. The flow-chart on page 3 of the guide’ section was also removed, as the
guide appears to be too focused on the circular flow-chart provided the same
‘Stimuli’ section of competitive actions. information and was easier to
understand. Given that a ‘SOLAR’ flow-
chart was implemented before it in the
guide, the flow-chart of page 3 was left
as it is
A panel member commented that the The arrows were updated to feed from
arrows leading from the ‘refine the the ‘Refine the action’ box back into the
action’ box in the flow-chart on page 3 competitive action at the ‘Objective’
should feed back into the competitive level.
action formulation process at the
‘Objective’ level, and not the ‘Stimuli’
level as the refinement of a competitive
action wouldn’t be triggered by a
stimulus.
Interviewee 1 noted that the ‘Stimulus’, The ‘Stimulus’, ‘Objectives’, ‘Levers’,
‘Objectives’, ‘Levers’, ‘Actions’ and ‘Actions’ and ‘Refine’ labels were made
‘Refine’ labels were too small and larger and bolder with lines that indicate
obscure and didn’t effectively indicate which parts of the SOLAR process they
which parts of the SOLAR process they relate to.
relate to.

Page 261


Interviewee 1 noted that the ‘Stimuli’ The Stimulus label was moved to the
label was positioned in such a way that it middle of the section to encompass all
appeared to only apply to the three possible stimuli.
summary circles.
The panel members noted that the six The six ‘resources’ icons were colour
‘resources’ icons weren’t clear and it was coded.
hard to follow them.
Interviewee 1 noted that while the The three objectives in the guide were
references to the use of resources are all simplified as either ‘Recover’, ‘Maintain’
contained in the guide, the key to the six or ‘Grow’.
sets of resources was contained in the
‘Resources manual’, making it very hard
for the reader to refer to the key
whenever he or she wanted more
information on any of the six sets of
resources.
The refinement process was discussed The ‘Resources’ key was moved to the
with Interviewees 1 and 4 at length and ‘How to use the guide’ section of the
several points were noted, including ‘fail guide.
quickly’ approaches, in which managers
spend relatively little time, money and
effort on new ideas before launching
them and then refining them based on
market acceptance and feedback.
A panel member noted that using figures Figures in the guide that were copied or
from articles and books in the guide adapted from those in books and articles
could infringe on intellectual property were removed.
rights and pose ethical issues.


Page 262

Shaw - R - 2016 - DBA Thesis With Guides PDF

Uploaded by

Copyright:

Available Formats

Shaw - R - 2016 - DBA Thesis With Guides PDF

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Shaw - R - 2016 - DBA Thesis With Guides PDF

Uploaded by

Copyright:

Available Formats

CRANFIELD

1. Managers’ approaches to the

Table 1: Summary of research findings and contributions

The Systematic review of literature was concerned with managers’

Semi-structured interviews were used to identify a number of competitive

In P3 a guide was developed for strategy and marketing managers to use

Project 1: Systematic literature review

Project 2: Competitive actions in practice

Table 2: P2 Research procedure

Managers formulating competitive actions in their home environments vs. in foreign

Project 3: Formulating competitive actions

Methods and objectives

Figure 2: P3 inputs and development process

Limitations of study and areas for further research

3. There appears to be a gap in the literature reviewed regarding how managers

Project 1: Systematic literature review

The Systematic review of literature was concerned with managers’

Interviews were carried out with senior managers at 21 different

P3 focused on the development of a guide for improving the formulation

The systematic literature review process

Table 2: Review panel

Table 3: Keywords/terms and their respective synonyms

Manager cognitive processes AND

Manager perception AND competitive

21 Executive comprehension AND competitive Executive comprehension

Management AND cognitive map AND

Criteria Inclusion Exclusion Rationale

Table 5: selection criteria for titles and abstracts of articles

Search EBSCO ProQuest Science After After After full After

8. The alignment of strategy and performance management

Study Results of study Limitations/scope for further research

Any manager or group of managers draws on a series of frames of reference to make

frameworks represent portfolio ‘maps’ that managers use to understand the

environmental conditions that similarly impact organisations within a cognitive group.

Study Results of study Limitations/further research

Study Results of study Limitations/further research

Study Results of study Limitations/further research

As situational uniqueness increases, accurate interpretation becomes more difficult

Study Results of study Limitations/further research

Study Evidence of Concluding remarks

Study Results of studies Implications for competitive

Study Results of studies Implications for performance

Strategy as an iterative process

Study Results of studies Implications for the strategy

Gap in knowledge and scope for further research

strategic priorities, be a problem or a source of competitive advantage and under what

Limitations and reflections

Project 2: Qualitative research

The Systematic review of literature was concerned with managers’

• Semi-structured interviews will be used to identify a number of

P3 will focus on the development of a framework for improving the

The review panel

Dr Emma Parry Director of the International Executive Doctorate Systematic

Table 1: Review panel

No. Title Description Pages

8. The alignment of strategy and performance management

Aim of the research

Competitive Consumer Threat Change in Shareholder Top