Marketing: Competition and Markets Essay

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Multiple Market Competition The purpose of this lecture is to examine the effects of multimarket contact by competitive rivals on their strategic market planning, environmental scanning, and competitor analysis activities. Multimarket contact is defined within as the situation in which two competitors face each other in more than one product and/or geographic market. The concept of mutual forbearance, and its effect on competitive strategy, is explored. This theory states that firms will compete less intensely against their multimarket rivals in some markets, in return for similar treatment in others markets. Environmental scanning is examined within the context of multimarket competition, and the traditional concept of competitor analysis is expanded in order to account for aspects that must be examined when firms are multimarket competitors.
Multimarket Rivalry and Competitive Strategy Multimarket rivalry is a concept of increasing importance to marketing practitioners and scholars. This occurs whenever two firms meet simultaneously in two or more markets, be they product markets or geographic markets. It can involve a given product in different geographic markets, or different brands in the same geographic markets. Firms involved in such rivalry tend to be well aware of the presence and actions of each other, and feel the effects of each other's actions. Sometimes, a firm will enter a given market just to establish a presence in it, thus communicating to a rival that operates in that market that it is capable of acting or retaliating in response to competitive pressures. Firms, in the process of establishing footholds in certain markets, may specifically select those markets in which key competitors presently hold a dominant or significant market position. Such presence may be established as a way of protecting their own key markets. These firms act on the assumption is that if a competitor recognizes the ability of the firm to hurt them in one or more of their key markets, the competitor will be more inclined to let the firm alone in its own key markets. Firms may plan their market entry and exit strategies with key competitors in mind. Also, their product line strategies often reflect much more than changes in market demand and consumer tastes. Often, they reflect competitive intentions and competitive strategies, both in a proactive and reactive sense of the word. The scope and intensity of multimarket competitive actions are seen in terms of frequent and aggressive changes in a firm's marketing mix elements; in particular, advertising and price. Competitive actions can be classified as aggressive, defensive, or counter-aggressive. These actions may occur when one firm decides to enter the generic or geographic "home market" of another firm, or a market that the other firm dominates. Price cuts, promotions, and service enhancements are examples of tactical moves associated with such situations, while market entries and exits and new product introductions are examples of strategic moves. The concept of market domain is of particular relevance here. Market domain refers to the product or geo-product markets in which a firm operates. Market domain includes all markets in which a firm has established a presence, regardless of whether it dominates the market or functions as a minor player. The greater the degree of market domain overlap, the better the chances that each firm understands the other's strategies, strengths, and weaknesses. Effects of Multimarket Contact Firms that are the closest competitors from a resource or marketing mix standpoint may or may not be the most intense competitive rivals. Because such firms may meet in multiple markets, they may behave less aggressively toward one another, recognizing that each has the ability to attack or retaliate on different market fronts. While there is breadth to their competitive rivalry, the rivalry may lack
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