Revisiting Competition: Broadening the Competitive Environment

Document Type

Article

Publication Date

2005

Publication Title

The Academy of Marketing Science Review

Abstract

The boundaries that define competition are subject to environmental changes, such as technological advances or evolving consumer preferences (Day, Shocker and Srivastava 1979). As competitive boundaries fluctuate, competitors can emerge from new or unanticipated product categories. Recently, Shocker, Bayus and Kim (2004) urged additional research on the scope and circumstances under which intercategory competition takes place (i.e., competition among products from different product categories). This article responds to that call by integrating four forms of competition described in the marketing, management, economics and psychology literatures. Competition typically is defined as among firms within an industry producing products that are substitutes for one another. Therefore, the identification and evaluation of marketplace competitors is a key element of strategic marketing and a vital element of corporate survival. Despite the relative importance of tracking and evaluating competitors, the scope and nature of competition are not well defined or operationalized. This may be because competition is characterized from a firm’s perspective rather than a customer’s perspective (Day and Nedungadi 1994). Evaluating competition from a customer’s perspective encourages a broader view of competition because customers are not bound by the typical single-industry definition of competition. Market-oriented firms attempting to satisfy customers’ needs and wants should have an interest in understanding how their customers select products in the face of wide-ranging competition. If managers are to avoid mistakes that originate from a limited view of competition, then the alternative competitive forms must be identified and considered when developing a marketing strategy. Our review identified four forms of competition that reflect the various ways that consumers compare products when making purchases. They include product category, attribute-based, noncomparable and time-based competition. Brands that compete on key features and benefits within well-defined markets constitute the typical product category competition. Attribute-based competition is studied in the context of consumers seeking variety due to satiation of tastes or boredom with routine purchases. Noncomparable competition arises when consumers have intangible consumption goals such as an evening of family entertainment. Finally, time-based competition takes place when consumers accelerate or delay purchases to meet budgetary or personal gratification needs. Although all four forms of competition occur under different conditions, they exist simultaneously in consumer markets. When viewed simultaneously, the four consumer-based competition forms offer many valuable implications, which we group into two broad categories: ideas relating to (1) consumer decision making and (2) a firm’s strategic planning. Foremost among the consumer decision making implications is that the four competitive forms reflect the ways that consumers can choose from the set of all known products. Because the four competition forms have not been studied simultaneously before, it is unknown when a particular form is relevant to consumers or business buyers. Other ideas and implications relate to the use of marketing tools to trigger or suppress intercategory competition. The biggest implications of a consumer-based view of competition for strategic planning are based on environmental scanning and the definition of market boundaries. A framework for identifying less-recognized forms of competition can help marketing managers defend current markets and expand into new niches. A broader definition of competition has further strategic implications for segmentation, positioning and promotions.

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