The term “competitive cognition” refers to the framework with which a manager organizes and retains knowledge about competitors and directs information acquisition and usage. It is the process by which managers make sense of the market environments in which they compete. Making sense of competitive environments is fundamentally a categorization process. Through repeated exposure to rivals, managers learn the attributes and strategies of competitors. Clark and Montgomery (1999) suggest that a manager forms a mental representation of a given rival, then assigns the target company to a category, using that classification as a guide to direct future actions.
Porac and Thomas (1990) show how industries are created through a shared interpretation of reality among business rivals. Rather than defining competitors on an individual basis, managers assign themselves to a competitive category. In a study of Scottish knitwear manufacturers, Porac et al. (1995) argue that market boundaries are socially constructed around a collective cognitive model that summarizes typical organizational forms within an industry. This model is created when companies observe one another’s actions and define unique product positions to emphasize.
In general, how many rival companies do managers identify as competitors? Relatively few. To illustrate, Clark and Montgomery surveyed 57 respondents across a range of business units. On average, respondents identified 6.46 companies that competed with their own business units. Of these companies, 3.07 were considered major... To read the complete article, login or sign-up using the form below.
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