Competitive Dynamics - Meaning, Importance & Example
Published by MBA Skool Team, Last Updated: August 24, 2021
What is Competitive Dynamics?
Competitive dynamics is a term used to define a gamut of actions as well as reactions of companies taking part in a competitive business environment comprising of multiple rivals and stakeholders. Competitive actions taken by companies define competitive dynamics as each firm takes decisions and actions to strengthen its competitive position relatively in the market.
Competitive dynamics is not straightforward as competition between or 2-3 companies in a market. This includes a continuous process in which multiple rivals are trying to gain competitive edge over other through a series of actions and responses.
The main motivation for studying this stems from the fact that strategy cannot be static which is something that Porter’s model often makes one believe given the importance given to industry forces determining the performance of firms. However it is often agreed now that business factors matter as much, if not more in determining how firms perform in any industry condition.
Each firm takes certain actions which elicit responses from competitors which are then again countered leading to the competitive dynamics field. However competitive dynamics needs to be differentiated from competitive rivalry which exists when two or more firms try and garner favorable market position.
Competitive dynamics is often analyzed by understanding one’s competition.
Competitive Dynamics Example
One of the best examples to study competitive dynamics is the current smartphone industry where the life cycle of products have become very less and each competitor is pushed to take competitive actions in response to others or become irrelevant in the market place.
Hence, this concludes the definition of Competitive Dynamics along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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