Effects of competitive superiority on firms' strategic behaviour across stages of industry evolution.

Abstract

Firms are constantly faced with the decision to either adapt or change their strategy based on the stage of industry evolution as well as the actions of their competitors. They often benchmark their own strategies against the actions of competitors who are superior to them. However, they do not always know the likely behaviors of superior competitors across the different stages of industry evolution. To address this knowledge gap, this study examines the behavioral tendencies of competitively superior firms at the different phases of the industry. We consider five major behavioral tendencies of superior firms, namely, advertising aggressiveness, sales force aggressiveness, R&D aggressiveness, exploit versus exploration of growth resources and push versus pull marketing strategies. We measured these tendencies using quantitative data from Markstrat, a marketing strategy simulation which served as a microcosm of real life competitive behavior. We find that competitively superior firms exhibit different behaviors at different phases of the industry evolution: In the initial phase, these firms allocate a greater part of their budget to both advertising and sales force to defend their position, whereas in the uncertainty phase, they allocate more of their budget to R&D to defend their position. In the growth phase, superior firms exploit their resources more than they explore them. Finally, in the maturity phase, these firms tend to employ a push strategy as opposed to a pull strategy. We discuss how the findings of the study can aid mangers in making more informed decisions and how the decisions made by the dominant firm may not always be the best decision despite their superiority.