Advancing understanding of multipoint competition
Creators: name: Jin, Tuofu
Publisher: name: The Australian National University
Year: 2022

description: Abstract In 1997, Nongfu Spring launched its 4L bottled water as its first step in entering the bottled water market. Because there was little counterattack from incumbents, this product launch brought the company a solid revenue base and customer loyalty, which were essential for its later success in the market. The Nongfu Spring example demonstrates that when deciding whether to initiate a competitive action into a market, besides considering the validity of the business model itself (e.g., whether the value a firm creates for customers is sufficiently large), a firm also needs to take into account the potential reactions from rivals (Porter, 1980). However, because many firms provide products in multiple product markets, the reactions from their rivals might not be constrained to a single market. Further, according to multipoint competition scholars, the likelihood of such cross-market retaliations from rivals often pressures firms to forbear from initiating competitive actions in their common markets (Chuang &amp; Thomson, 2017). This is the key argument of the mutual forbearance hypothesis. The concern regarding potential cross-market retaliation has a large effect on a firm's decision about launching competitive actions. A miscalculation about competitors' future reactions may cause a significant loss for a firm. There are three gaps in the existing multipoint competition literature. First, the majority of studies have examined how mutual forbearance varies depending on firm level, market level and firm-in-market level conditions. In contrast, little attention has been paid to the competitive action itself, for example, whether the action is inaugural or not. Second, focusing on the future responses from rivals, multipoint competition literature has not engaged with theoretical perspectives emphasising other time dimensions. The mutual forbearance hypothesis assumes that future is the primary time orientation in decision-making and in its current decision about whether to launch a competitive action, a firm considers its rivals' retaliation in the future. However, a firm may also be influenced by decision principles with a past orientation when making this decision. Will the rivalry-weakening effect of multipoint competition be altered by a firm's knowledge about rivals' response strategy through prior interactions and observations? Third, there is a lack of in-depth knowledge about inaugural and subsequent competitive actions. The sample for this thesis shows that many automobile firms have launched a variety of vehicles since they entered the United States of America (USA) market. This sample enables a close examination of the different types of product launches. This thesis aims to bridge these three research gaps. The empirical context of this thesis is the USA automobile market. The following major findings are demonstrated in this thesis. First, an inaugural competitive action is more sensitive to mutual forbearance than a subsequent competitive action. Second, a firm's competitive history and its observation of rivals' response strategy enhance its understanding of the mutual forbearance logic. Third, entrant automakers adopt a sequential product launch strategy which is part of their localization efforts in the USA market. Their sequential product launches have also shaped a multisegment competition environment in American automobile market. Keywords: mutual forbearance, inaugural competitive actions, subsequent competitive actions, competitive history, USA automobile market, product launch strategy