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Summary for Strategic Marketing for MSc students. Included all the mandatory articles.
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StrategicMarketing
-‐
EBM08B05
(2015-‐2016)
Stefan
Spanjer
1
,I
Reasoning
About
Competitive
Reactions:
Evidence
from
Executives
Abstract
Much
of
the
empirical
research
on
competitive
reactions
describes
how
or
why
rivals
react
to
a
firm’s
past
actions,
but
stops
short
of
examining
whether
managers
attempt
to
predict
such
reactions,
which
we
call
strategic
competitive
reasoning.
In
three
exploratory
studies,
we
find
evidence
of
managers’
thinking
about
competitors’
past
and
future
behavior,
but
little
incidence
of
strategic
competitive
reasoning.
Competitive
intelligence
experts
and
other
experienced
managers’
assessment
of
the
results
suggests
that
the
relatively
low
incidence
of
strategic
competitor
reasoning
is
due
to
perceptions
of
low
returns
from
anticipating
competitor
reactions
more
than
to
the
high
cost
of
doing
so.
Both
the
difficulty
of
obtaining
competitive
information
and
the
uncertainty
associated
with
predicting
competitor
behavior
contribute
to
these
perceptions.
The
paper
suggests
both
a
need
for
research
on
competitive
behavior
and
an
opportunity
to
influence
and
improve
managerial
judgment
and
decision-‐making.
Introduction
There
are
two
strategic
errors
companies
often
fall
in:
1.
The
failure
to
anticipate
competitors’
moves
(actions).
2.
The
failure
to
recognize
potential
interactions
over
time
(reactions).
Decision
makers
often
do
not
effectively
conjecture
about
their
competitors’
future
behavior,
particularly
their
rivals’
reactions
to
their
own
decisions.
Not
reasoning
about
rival’s
reactions
might
be
perceived
as
harmless
in
the
eyes
of
those
who
would
contend
that
either
(1)
such
“nonstrategic”
behavior
would
correct
itself
over
time,
or
(2)
the
link
between
such
conjecturing
and
performance
is
ethereal
at
best.
Competitive
Reasoning:
the
assessment
and
consideration
of
competitors
that
serves
as
an
input
into
the
firm’s
decision
making.
The
three
forms
of
competitive
reasoning
are:
1.
Managers
may
study
their
competitors
in
a
manner
that
results
in
a
description
of
the
competitor
(competitor’s
goals,
strengths
and
weaknesses,
Porters
forces),
but
stop
short
of
making
predictions
about
the
competitor’s
future
actions.
2.
Managers
may
make
predictions
about
competitors’
behavior,
but
only
about
actions,
not
reactions.
3.
Managers
may
specifically
consider
how
their
competitors
are
likely
to
react
to
their
firm’s
own
decision
!
strategic
competitive
reasoning.
Strategic
competitive
reasoning
goes
beyond
both
describing
competitors
and
predicting
competitor’s
future
moves.
These
insights
of
competitors
may
be
difficult
to
obtain
for
a
variety
of
reasons:
1limited
move-‐
countermove
sequences,
2
delays
between
action
and
reaction,
3
competitor
responses
in
a
different
market,
4
short
managerial
tenures,
and
5
poor
organizational
memory.
Information
about
customers
may
be
more
readily
available
and
can
be
tailored
for
the
decision
at
hand.
To
the
extent
that
customer
and
internal
company
information
are
perceived
by
managers
as:
more
vivid,
more
available,
less
debatable,
more
reliable,
and
less
costly
in
terms
of
financial
resources,
time
and
cognitive
effort,
greater
attention
will
likely
be
paid
to
customer
and
internal
decisions
factors.
Purpose
of
this
paper:
This
literature
generally
characterizes
the
likelihood
of
competitive
reactions
to
a
firm’s
action
as
a
function
of:
(a) The
characteristics
of
the
firm
taking
the
action
(e.g.,
market
size,
reputation)
(b) The
characteristics
of
the
action
(e.g.,
scale
of
entry,
market
responsiveness,
visibility)
(c) The
characteristics
of
the
rival
(e.g.,
size,
performance,
desired
reputation)
(d) Environmental
characteristics
(e.g.,
turbulence,
market
growth,
industry
concentration)
The
goal
of
the
first
and
second
studies
was
to
find
out
whether
managers
considered
any
type
of
competitor
behavior,
with
particular
interest
in
strategic
competitive
reasoning.
The
third
study
addresses
showing
the
results
of
study
1
and
2
to
managers
and
their
explanations
of
these
results.
2
,Decision
Factors
Mentioned:
I. Internal
(89%)
II. Customer
(82%)
III. Market
(65%)
IV. Competitor
Past/Current
Competitor
Behavior
(56%)
Expected
Future
Competitor
Behavior
(16%)
Expected
Future
Competitor
Reaction
(6%)
Results
Study
1:
For
all
types
of
decisions
(retrospective:
past
and
prospective:
future
new
product
and
pricing
decisions),
internal
considerations
(e.g.,
costs,
profit
goals,
capacity
constraints,
human
resources)
are
mentioned
by
the
greatest
percentage
of
respondents.
Customer
factors
and
competitor
factors
(aggregated)
were
mentioned
with
approximately
equal
frequency.
However
competitor
factors
receive
a
greater
emphasis
in
pricing
than
in
new
product
decisions.
This
was
true
for
both
retrospective
and
prospective
decisions.
The
most
interesting
observation
is
that
expected
future
competitor
reactions
are
mentioned
more
often
in
the
prospective
decision
accounts
than
the
retrospective
ones
for
both
pricing
and
new
product
decisions,
although
the
difference
between
retrospective
and
prospective
decisions
is
not
significant
for
new
product
decisions.
Summary.
In
sum,
Study
1
indicates
that
while
managers
do
report
considering
competitors
in
their
decision-‐making,
competitive
considerations
focus
primarily
on
competitors’
past
or
current
behavior
rather
than
competitor
reactions.
Study
2:
Similar
to
Study
1,
we
find
that,
in
general,
reasoning
about
competitors
involves
consideration
of
past
and
current
behavior
most
often,
and
consideration
of
future
reactions
occurs
least
often.
However,
substantially
more
of
the
respondents
in
Study
2
mentioned
competitor
factors.
(More
of
them
mentioned
internal,
customer,
and
market
factors
as
well.)
Interestingly,
the
increase
in
strategic
competitive
reasoning
from
Study
1
to
Study
2
comes
from
an
increase
in
considerations
of
competitors’
expected
future
actions,
as
the
proportion
of
managers
in
Study
2
who
considered
competitors’
past/current
behavior
and
competitors’
future
reactions
is
quite
similar
to
the
proportion
that
did
so
in
the
prospective
decision
setting
of
Study
1
(Figure
1b).
As
in
Study
1,
the
managers
in
Study
2
mentioned
considering
strategic
competitive
reasoning
much
more
often
for
pricing
decisions
than
for
the
market
selection
and
advertising
decisions.
Studies
1
and
2
Summary:
The
evidence
thus
far
supports
the
expectation
that
managers
attend
far
less
to
future
competitive
reactions
in
their
decision
making
than
might
be
expected
based
upon
traditional
economic
theory.
In
fact,
these
results
are
so
contrary
to
such
theory
that
one
might
worry
that
methodological
concerns
account
for
the
results.
Study
3:
Discussion:
Factors
Influencing
the
Value
of
Competitive
Reasoning
Part
I
Factors
Raising
the
Perceived
Cost
of
Competitive
Reasoning:
1. Accessibility
of
information
about
competitor
behavior
(11,5%)
2. Difficulty
of
competitive
analysis
even
if
competitive
information
was
available
(12,5%)
3. Limited
opportunity
to
actually
learn
about
competitors
(10,4%)
4. Risk
aversion
(10,4%)
Part
II
Factors
Reducing
the
Perceived
Returns
from
Competitive
Reasoning:
1. Internal
factors
more
important
(89,6%)
2. Decision-‐making
culture
of
the
firm
(81,2%)
3. Irresolvable
uncertainty
(58,3%)
4. Customer
factors
more
important
(53,1%)
Pricing
vs.
Other
Decisions:
reasons
why
reasoning
about
potential
competitor
reactions
is
more
likely
for
pricing
decisions:
(1)
The
firm
feels
the
impact
of
a
competitor’s
reaction
to
pricing
more
quickly
and
more
obviously
than
in
other
areas,
(2)
competitor
information
about
pricing
is
easier
to
gather
because
of
its
visibility,
and
(3)
competitor
information
about
pricing,
once
gathered,
is
easier
to
analyze.
3
,
Conclusion
Studies
1
and
2
examined
managers’
reports
of
factors
considered
when
making
pricing,
new
products,
market
entry,
and
advertising
decisions.
The
data
came
from
a
wide
variety
of
competitive
contexts,
providing
sample
breadth.
A
more
controlled
environment
in
Study
2
provides
depth.
Both
studies
yielded
a
similar
conclusion:
Although
competitor
considerations
are
fairly
widespread,
strategic
competitive
reasoning
is,
relatively
speaking,
a
very
rare
occurrence.
As
anticipated,
strategic
competitive
reasoning
occurred
more
frequently
in
the
pricing
arena
than
the
other
decision
areas.
In
Study
3,
two
additional
groups
of
executives,
one
more
expert
and
one
more
generalist,
were
asked
to
react
to
the
results
of
Study
1
and
Study
2
and
offer
reasons
that
might
explain
these
results.
Overall,
these
executives
were
inclined
to
believe
the
results
hold
true
in
the
“real”
world.
They
overwhelmingly
felt
(somewhat
surprisingly)
that
explanations
associated
with
perceived
low
returns
to
competitor
thinking
were
substantially
more
important
in
explaining
limited
strategic
competitive
reasoning
than
perceptions
of
high
perceived
costs.
Only
39%
correctly
identified
low
perceived
value
as
the
dominant
reason
given.
Thus,
it
appears
that
the
results
are
not
well
known,
at
least
to
these
academic
professionals.
The
authors
were
also
incorrect
in
their
prior
expectations.
The
most
common
actual
response
to
competitors
is
“no
response.”
Recall
also
that
Clark
and
Montgomery
(1996)
found
that
most
competitive
reactions
were
not
even
perceived
by
managers
in
a
simulation
and
that
such
under
perception
lowered
performance.
Our
results
reiterate
that
attention
to
competitor
reactions
in
decision-‐making
is
limited,
and
suggest
this
may
be
driven
largely
by
low
perceived
returns
from
thinking
strategically
about
competitors.
It
is
heartening
to
note
that
respondents
in
the
first
two
studies
were
more
likely
to
consider
competitor
reactions
in
future
decisions,
perhaps
suggesting
learning.
Also,
executives
in
Study
3
suggest
that
decision
makers
better
understand
the
positive
returns
from
competitive
intelligence
as
they
become
more
experienced
in
using
it.
I
Understanding
the
Marketing
Department’s
Influence
Within
the
Firm
Abstract
Increasing
debate
centers
on
the
decreasing
influence
of
the
marketing
department
within
firms.
This
study
investigates
such
influence
and
assesses
its
determinants
and
consequences.
The
results
show
that
the
accountability
and
innovativeness
of
the
marketing
department
represent
the
two
major
drivers
of
its
influence.
However,
the
results
do
not
indicate
that
the
customer-‐connecting
role
of
the
marketing
department
increases
its
influence,
though
this
role
is
important
for
shaping
the
firm’s
market
orientation.
A
marketing
department’s
influence
is
related
positively
to
market
orientation,
which
in
turn
is
related
positively
to
firm
performance.
This
study
also
suggests
a
dual
relationship
between
the
marketing
department’s
influence
and
market
orientation.
A
key
implication
of
this
study
is
that
marketers
should
become
more
accountable
and
innovative
to
gain
more
influence.
Introduction
" The
marketing
function
is
in
steep
decline.
" Marketing’s
decreasing
influence
at
the
level
of
corporate
strategy.
" The
lack
of
respect
marketing
receives
in
organizations.
" The
marketing
function
has
dropped
lower
on
the
corporate
hierarchy.
" Marketing
and
management
issues
are
receiving
less
attention
in
the
boardroom.
" Marketing
is
now
perceived
as
a
cost,
not
an
investment.
" Marketers
are
being
marginalized,
in
the
sense
that
many
strategically
important
aspects
of
marketing
have
moved
to
other
functions
in
the
organization.
" The
synergies
that
result
from
mixing
marketing
decisions
have
disappeared.
" The
roles
of
the
general
manger,
chief
financial
offers
(CFOs),
and
‘’other
penny
pinchers
and
number
crunchers”
have
become
more
important
than
the
role
of
chief
marketing
officers
(CMOs).
" Most
CMOs
are
in
the
hot
seat,
with
tenures
averaging
22,9
months.
4
, Marketing
had
substantial
influence
at
least
ten
years
ago.
They
also
suggest
that
marketing’s
influence
is
related
to:
1. External
contingency
variables,
such
as
the
frequency
and
unpredictability
of
market-‐related
changes;
2. Competitive
strategies;
3. Institutional
determinants,
such
as
whether
the
chief
executive
officer
(CEO)
has
a
marketing
background.
Results
Marketing
department
capabilities:
1. Accountability
(H1
+)
Supported:
Capability
to
link
marketing
strategies
and
actions
to
financial
performance
measures.
First,
many
marketers
do
not
measure
the
effect
of
their
actions,
because
they
are
unable
or
unwilling
to
do
so
or
because
they
do
not
use
the
appropriate
metrics
and/or
methods.
Second,
appropriate
specifications
of
metrics,
especially
metrics
that
measure
long-‐term
or
persistent
effects,
are
lacking.
2. Innovativeness
(H2
+)
Supported:
Ability
to
initiate
innovative
concepts/
products/
services
within
the
firm.
Marketing
might
play
an
essential
role
in
the
innovativeness
of
firms,
in
that
it
could
initiate
new
innovations
or
translate
customer
needs
into
the
pipeline
of
innovations.
Marketing
must
redouble
its
efforts
to
prove
its
value
to
innovation
stream.
An
innovative
culture
represents
the
fundamental
antecedent
of
effective
marketing
strategy
making.
3. Customer
connection
(H3
+)
Not
supported:
Capability
to
link
the
focal
offer
of
the
firm
to
customer
needs.
The
customer-‐connecting
role
of
the
marketing
department
differs
from
market
orientation.
Market
orientation
pertains
to
an
organization
wide
belief
to
monitor
and
understand
customer/market
needs.
Customer
orientation
constitutes
an
important
part
of
market
orientation.
The
customer-‐
connecting
role
of
the
marketing
department
pertains
to
the
extent
to
which
the
marketing
department
is
able
to
trans-‐
late
customer
needs
into
customer
solutions
and
the
extent
to
which
it
demonstrates
the
criticality
of
external
customers
and
their
needs
to
other
organizational
functions.
4. Creativity
(H4
+)
Not
supported:
Ability
to
come
up
with
new
and
creative
marketing
programs.
We
define
the
creativity
of
the
marketing
department
as
the
extent
to
which
it
develops
actions
to
market
products
or
services
that
represent
meaningful
deviations
from
common
marketing
practices
in
product
or
service
categories.
A
marketing
department’s
creativity
differs
from
its
innovativeness;
creativity
pertains
to
how
marketing
(communications)
programs
(i.e.,
positioning,
branding,
and
promotions)
deviate
from
common
practice,
while
innovativeness
pertains
to
the
marketing
department’s
contribution
to
new
products/service
development.
5. Integration/cooperation
with
other
departments
(sales,
finance,
research
and
development)
(no
expectation):
Degree
of
communication,
collaboration
and
cooperative
relationships
between
marketing
and
other
departments:
sales,
finance,
and
R&D.
Control
Variables:
1. Firm
Characteristics
-‐Short-‐term
emphasis:
focus
in
achieving
results
(short-‐
versus
long-‐term)
(-‐)
-‐
Pursued
generic
strategy:
differentiation
(+)
or
Cost
leader
(-‐)
-‐
Background
CEO:
marketing
background
(+)
-‐
B2B/B2C:
(+)
-‐
Services
versus
goods:
No
expectation
-‐
Publicly
traded
(+)
2. Environmental
Characteristics
-‐ Channel
power:
degree
to
which
the
firm
confronts
powerful
channel
partners
(-‐)
-‐ Market
turbulence:
the
rate
of
changes
in
customer
preferences,
production,
or
service
technologies
and
modes
of
competition
in
the
firm’s
principal
industries
(+)
5
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