Competition for staff is widespread, not only in corporate settings but in non-profit and public sectors too. Rivalry for highly skilled and experienced people can be so ferocious that it is sometimes known as the ‘war for talent’. Less-skilled staff can be scarce too, so rivalry for employees concerns most organizations at some time. Type-1 rivalry to hire new staff and type-2, to persuade staff to switch from competitors, dominate this issue, since it is rare for staff to work ...
Continue Reading → ShareIntermediaries give rise to powerful type-3 rivalry, both in B2C and B2B cases. Often, a key objective for suppliers is to capture more share of the intermediaries’ attention, so they promote the supplier’s product more strongly to the end-customer.
“Attention” comes in various forms:
- A consumer-goods producer wants retailers to allocate a larger share of shelf space to its product than to rival products in the same category.
- Business supplies companies fight for more pages in distributors’ catalogues than competitors.
- Insurance companies want ...
Customers usually differ from each other on many factors – purchase rates, price sensitivity, switching costs, rationality, time to respond etc. – and these differences affect the dynamics of competition. The table below gives some illustrative characteristics for two distinct customer groups in the electricity market discussed in Briefing 57.
| Low users | High users | |
| Fraction of customers in each group | 0.7 | 0.3 |
| Quarterly usage | $400 | $600 |
Strategy Dynamics Briefing 57: Switching costs, delays and limited rationality in customer choices
Posted by: Kim Warren
Recent briefings have made some simplifying assumptions – that customers switch between rivals for any gain, no matter how small, that they do so instantly, and that they always work out what’s economically optimal – none of which are very realistic!
- Switching can require time and effort. Some costs are real, financial expenses. A Windows-PC user switching to a Mac would have to spend a lot on new software. There would also be non-financial costs, such as learning how the new ...
In industries where customers buy substantial projects, each contract is effectively a case of type-1 rivalry – either we win it, or a competitor does. Examples include construction projects in civil engineering or process industries, IT projects for government departments, and large consultancy studies. Customers usually ask possible suppliers to submit bids for a project, issuing “invitations to tender” (ITTs) or “requests for proposal” (RFPs). Although suppliers would prefer a continuing relationship, to enjoy a steady stream of all of ...
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