Kuester et al. (1999): Retaliatory behavior to new product entry
15 important questions on Kuester et al. (1999): Retaliatory behavior to new product entry
What is the paper by Kuester et al. (1999) focussing on?
What is the objective and the perspective of the paper by Kuester et al. (1999)?
- The objective of this research is to provide insight in the phenomenon of competitive retaliation by identifying the factors that influence defence decisions.
- The perspective is that of a firm threatened by a rival product, rather than by a new competitor.
Explain the figure ''Conceptualization of Reactions to Competitive Entry''.
- No Retaliation has 3 dimensions: Entry ignored, withdrawal & accomodation
- Retaliation has 5 dimensions: Instrument, intensity, breadth, speed & domain
- 4 parts of instrument: Product-, price-, promotion- & distribution mix
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What are the 5 dimensions of relatiation and what do they entail?
- Instrument
- Retaliatory move using the same or another marketing instrument. Using the same marketing instrument = reciprocal retaliation.
- Intensity
- The weight placed behind the marketing instrument
- Breadth
- The number of marketing instruments used to retaliate
- Speed
- Reaction speed, time lag between the competitive threat and respons
- Domain
- The market in which the defender counterattacks
Explain the conceptual model of the paper by Kuester et al. (1999)?
- On the left side, the characteristics are displayed.
- Entrant: Innovativeness & Perceived Threat
- Incumbent: Incumbent size & Exit Costs
- Industry: Maket growth, Industry concentration & Price sensitivity
- On the right side, the dimensions of retaliation are displayed
- Intensity of product retaliation
- Intensity of price retaliation
- Retaliation speed
- Retaliation breadth
- They are researching whether these characteristics have an influence on the dimensions of retaliation and whether there is a relationship between price retaliation and retaliation speed
From previous research on defence it turned out that three categories of factors potentially can explain incumbent defence mechanisms to new product entry. Which three factors?
- Entrant characteristics
- Industry characteristics
- Incumbent characteristics
Result: When the rival new product is very innovative, is it more or less likely that the defender will use product-based instruments to counterattack?
Result: Competitors in highly concentrated markets react
more or less strongly and more of less quickly on the product mix?
Most incumbents indicates that they reacted to the competitive new product. 93% reacted on at least one marketing mix element. Did most of them use the product or price dimension to do this?
Most incumbents indicates that they reacted to the competitive new product. 93% reacted on at least one marketing mix element. Did most of them use the product or price dimension to do this?
In conditions of price sensitivity, firms try to respond more broadly. What is the reason for this?
Result: On which two dimensions of retaliation has price sensitivity an effect?
- On price
- On speed of reaction
Result: Do industry concentration and incumbent size have a positive or negative impact on the strength of product retaliaton?
What are the 6 main results of the study by Kuester et al. (1999)?
- The more innovative a rival new product, the more likely it is that the defender will use product-based instruments
- Innovative products slow the incumbent’s response
- Market growth has positive effect on both product retaliation and reaction speed.
- Larger firms react more slowly and less strongly on product dimension when challenged by new product introduction.
- Highly concentrated markets usually are populated by larger firms → industry concentration has a negative effect on strength of product retaliation.
- Price sensitivity has significant effect on retaliation through price and on speed of reaction
What is the managerial implication of the paper by Kuester et al. (1999)?
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