5.

What factors affect the likelihood a firm will initiate a competitive response to the action taken
by a competitor? What competitive dynamics can be expected among firms operating in slow-
cycle markets? In fast-cycle markets? In standard-cycle?

The type of action whether strategic or tactical, the firm took, the competitor’s reputation for the
nature of its competitor behavior, and that competitor’s dependence on the market in which the action
was taken are studied to predict a competitor’s response to the firm’s action. Competitors commonly
respond to the actions taken by the firm with a reputation for predictable and understandable
competitive behavior, especially if that firm is a market leader. When its competitor is highly dependent
for its revenue and profitability in the market in which the firm took a competitive action, that
competitor is likely to launch a strong response. However, firms that belong to several markets are less
likely to respond to a particular action that affects only one of the markets in which they compete.

In slow-cycle markets, competitive dynamics finds firms taking actions and responses that are intended
to protect, maintain, and extend their proprietary advantages. While in fast-cycle markets, competition
is almost frenzied as firms concentrate on developing a series of temporary competitive advantages and
are subject to rapid and relatively inexpensive imitation. Standard-cycle markets experience competition
between slow-cycle and fast-cycle markets. Firms in this market are moderately shielded from
competition in these markets as they use capabilities that produce competitive advantages that are
moderately sustainable. Competitors in standard-cycle markets serve mass markets and try to develop
economies of scale to enhance their profitability.