How Companies Respond to Competitors' Moves
The McKinsey Quarterly has an interesting article (accessible with free subscription) that gives an overview of the results of a survey about how companies respond to competitors' actions, like innovation and pricing changes. What many of you will not find surprising is that a large percentage find out about competitors' moves after the moves have been made, many rely on monitoring news feeds for competitor info and even when they do learn of their competitors' moves they are slow to react. Here's two telling paragraphs from the story's intro:
When a competitor strikes—introducing an innovative new product, for example, or slashing prices—management theory suggests that companies should immediately dive into complex analyses of their possible moves and countermoves across the whole competitive landscape, assess these potential responses with sophisticated financial metrics such as net present value (NPV), and promptly mount a response.
The real world is much simpler, according to a McKinsey survey of executives from around the world and from a variety of sectors, including financial services, manufacturing, and high tech.1 On the whole, as companies determine how to respond to a competitor’s moves, they generally assess three or fewer options and don’t look forward more than two years. About half don’t examine more than one round of countermoves by any competitor. A significant number rely on intuition to determine a response. And companies most frequently respond with whatever counteraction is most obvious in the moment—answering a price cut, for example, with a cut of their own, which often doesn’t hit the market until at least one or two sales cycles after the competitor’s move.
