Competitive Pressure Systems: Mapping and Managing Multimarket Contact

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All organizations sense competitive pressure intuitively, but most, says the author, do not do a good job of managing it. That is, in part, because it is often difficult to see the overall pressure system — a complex, shifting pattern of overlapping contacts among rivals that continually alters the climate of an industry by changing the incentives for players to compete, mutually forbear or even formally cooperate. This article illustrates how pressure systems can be mapped and controlled to a significant extent.

A map based on measured pressures has important implications for an organization's market' and competitor selection, growth plans, product-portfolio and diversification strategy, resource-allocation priorities, competitive-intelligence system, merger-and-acquisition strategy, and scenario-planning process. In any industry, companies can develop competitive strategy by using a pressure map to answer two critical questions: If the current pressure pattern continues, what position will my company ultimately hold? How can my company stabilize or shift the direction of pressure to reduce (or enhance) the predicted impact of the current pressure system?

Through detailed discussion of the airline, automobile and European wireless-telecom industries, among others, the author demonstrates how pressure maps can reveal the underlying competitive dynamics of an industry. He then offers a variety of mechanisms by which organizations can and do affect their competitive landscapes — stabilizing or destabilizing them to greatest advantage.

Richard A. D'Aveni is professor of strategic management at Dartmouth's Tuck School of Business. Contact him at richard.a.daveni@dartmouth.edu.

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