The multifaceted nature of competitive response: Repositioning and new product launch as joint response to competition

Abstract

The literature abounds with theories on firms' response to competition, highlighting various response strategies. Although firms likely use combinations of these response strategies in practice, there is little attention to this in the literature. We investigate how firms coordinate two closely related strategies-product repositioning and new product launch. Our approach is to empirically document how firms use these strategies in response to moves by a dominant competitor, in order to provide insight and ground future theoretical development. Using data from the Chinese TV industry, we: (a) document that in most cases, firms respond to competitive approaches by simultaneously changing their position and product launch strategies; (b) interpret the nuanced response strategies that reflect the different combinations of repositioning and changes in product launch; and (c) assess which types of firms are more likely to choose these nuanced response strategies. We discuss how our findings can advance theory development of firms' responses to competition.