please paraphrasing the answers
Part 2:
7. What is competitive dynamics? Why has competition become more dynamic in the past few decades?
Competition dynamics is changes in the nature of market competition. Though a firm may acquire a certain market share, the business environment is always uncertain. Such market uncertainties collectively refer to as competition dynamics. For instance, a firm might enjoy good business performance with superior strategies but new entries into the market can change the whole competitive environment (Enz, 2009).
Economists use the term creative destruction to explain the concept of competitive dynamics. They argue that creative destructions are the eminent decline of large firms as a result of changes in the nature of market competition. In most cases, competitors look for creative strategies because they help organisations in eliminating competitive advantages of strong rivals or market leaders. Therefore, competitive dynamics gives all competitors hopes of surviving in the future (Enz, 2009).
Due to globalisation, competition in the business environment has intensified significantly. There are many competitors in the modern business environment, and this explains why competitive dynamics has become more important. The increase in this business phenomenon can also be attributed to advancement in IT especially the internet. Competitors now can pile up their websites with information about their products and services.
On the other hand, innovations in the contemporary business environment are also responsible for the increased competitive dynamics. For instance, innovative opportunities in the airline and hospitality industries are behind the improved services which translate to greater customer satisfaction (Enz, 2009).
8. Describe the eight strategies that reflect competitive dynamics
The best way to manage effects of competitive dynamics is using offensive strategies. For instance, a firm might opt for aggressive competitive as a way of managing the dynamism in the business environment. In the case of Southwest airlines industry, the management aggressively protected its brand against any manner of imitation. Moreover, low-fare approach was a strategy for aggressively conquering both domestic and international markets.
Businesses can also reflect competitive dynamics through defensive approaches especially government intervention to protect product patents, threatening retaliation in case of product imitation, putting barriers to duplication or barriers and collaboration with all the stakeholders and other firms with comparative advantage. When Continental Lite and the United Shuttle tried to imitate South west airline’s business strategies, it was possible to manage such competition dynamics. In the case of intensified competition in the market, a business can opt for avoidance as a strategy where it considers leaving the market as the only option for survival.
9. Of the strategies that reflect competitive dynamics, which one seems to be the highest risk? Which one seems to be the lowest risk? Why?
Aggressive competition is seemingly the riskiest strategy for responding to competition dynamics because an organisation risks most of its resources to reach a vast market. All efforts focus in overwhelming potential rivals. In Southwest airlines, the company puts most of its resources in marketing and hiring highly competent employees. For it to succeed, aggressive competition always requires high value and rare resources (Enz, 2009).
One benefit of the strategy is a high cost associated with imitation of rare resources. However, rivals are always innovative and may come up with better strategies to attack the market leader. On the other hand, there is the likelihood of losing competitive advantage in the long run. Though aggressive strategy helps firms to get large market shares, spreading of risks is always limited due to a strong focus on high value products to become a leader in the market (Enz, 2009).
The best strategy for managing competitive dynamics is strategic flexibility. In this case, an organisation can earn enormous returns and manage any possible risk. With the flexibility, the company can move from unattractive or declining markets to more attractive locations. In addition, the strategy is least risky since there are exit barriers that permit firms to exit unattractive markets at will. The case of Southwest Airlines is an example of strategic flexibility where the firm penetrates new markets with its low cost-leadership strategy. However, strategic flexibility goes in hand with collaboration.
Companies have the opportunities to leave declining markets and form strategic collaborations with better-placed firms. The two strategies, when used concurrently, have least risks on business performance as there is the possibility of pulling resources and firms can leave at free will (Enz, 2009).
10. Which of the strategies that reflect competitive dynamics would probably be the most attractive to you as a market leader? If you were a weak competitor with few resources, which strategy would likely find attractive?
As a market leader, one will always prefer a competitive strategy that protects the company’s resources from imitation. Therefore, barrier to imitation is the best strategy that can help a market leader to achieve goals and objectives of the company. In the hospitality industry, products and services are easily duplicated (Enz, 2009). To manage competitive dynamics, a company needs first to protect its innovations and new product developments. One way of discouraging imitations is differentiated products. However, a weak competitor with few resources should consider collaborating with other strong market potential firms to gain greater competencies. Briefly, collaboration is uniquely the best method of achieving competitive advantage in highly volatile markets (Enz, 2009).
References
Enz, A., C. (2009). Hospitality Strategic Management: Concepts and Cases. New York: John Wiley and Sons.
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