Question

Entry into a market by a new competitor evokes a reaction. As a result, a competitive dynamic-action and response begins. Before responding to a competitor, firms must understand the competitive dynamics of the business in order to succeed with a growth opportunity. Suggest and critically discuss a model that helps managers to meet this objective. ( 400 Words)

Answer 1

When any new competitor enters the market , it comes with some new strategy like product differentiation strategy in which companies tries to differentiate the attributes and characteristics of the products from its competitors and tries to create a separate image in the mind of potential customers. So in this situation managers of the rivals firms should understand the strategy and start following cost leadership pricing strategy in which company starts selling his products at lower cost than the new competitor which will hamper the sales of new entrants and they will not able to succeed easily. For example, if talk about Patanjali, the new entry in FMCG market is and is successful because it sells their products with very cheaper price with good quality which means they are dealing in very low profit margin. So Dabur thought that it will not able to provide the goods at such less price for a longer time, so dabur did not take any step against this strategy and Patanjali has started acquiring the customers of dabur because in between along with low cost leadership pricing Patanjali also adopted the strategy of product differentiation which increases its potential customer base and now Patanjali has 20 percent market share in FMCG sector in India in just two to three year which is a big success for it. If in the starting Dabur has followed the cost leadership pricing Patanjali would not have come so forward in this particular sector.

So its is righlt said analyzing the competitors strategy and taking action quickly is the only way to overcome the danger for future els it will be late as discussed above in the example which is true in real life.