Multimarket contact and competitive aggressiveness at the marketing mix tactical level
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Description
Multimarket competition theory centers in interfirm competition, specifically when a set of firms have presence and face each other as competitors in multiple different markets (Baum & Korn, 1996; Bernheim & Whinston, 1990; Gimeno, 1999; Gimeno & Woo, 1994, 1996; Haveman & Nonnemaker, 2000; Jayachandran, Gimeno, & Varadarajan, 1999). In such situation, the chances of knowing, hurting or benefiting each other increase, allowing firms to recognize their interdependence, pressing them to be cautious when deciding which competitive actions to make because the outcome of a move depends heavily on how rivals respond to it (Baum & Korn, 1996; Bernheim & Whinston, 1990; Gimeno, 1999; Haveman & Nonnemaker, 2000; Jayachandran et al., 1999). This situation pushes firms to tacitly collude and mutually forbear (Bernheim & Whinston, 1990; Edwards, 1955; Feinberg, 1985), lowering the intensity of competition understood as the level of aggressiveness and speed of the actions and counteractions firms initiate to compete in the market (Chen, 1996). According to Smith, Ferrier and Ndofor (2001), most competitive actions can be classified as pricing actions, marketing actions, new product actions, capacity and scale-related actions, service and operations actions, and signaling actions. Each one describes a set of similar moves, that are assumed to have similar implications for the intensity of rivalry (Chen, 1996). However, in the field of marketing it is widely argued that many actions across categories are naturally interconnected (Borden, 1984; Constantinides, 2006; Magrath, 1986; McCarthy, 1978), and categorization used in competitive dynamics ignores that fact. Thus, in this dissertation, I propose to categorize all product, pricing, distribution, and promotional actions as marketing actions, and group them in the marketing mix (McCarthy, 1978), which presents marketing tactics as sets of actions that can be categorized as either product, price, promotion, or place. I emphasize in this dissertation that what is broadly accepted by competitive dynamics researchers as different competitive action categories should be considered all marketing actions, and equally important, these actions should be jointly analyzed as tactical competitive moves, rather than analyzed in isolation or as independent strategic action categories. Since tactical marketing actions, those of the marketing mix, are deployed on a day-to-day basis, even under multimarket contact conditions it may seem that competitive aggressiveness and intensity of competition increase, contrary to the tenets of the theory. In this line, I am proposing to analyze the consequences of multimarket contact from a tactical marketing perspective, mainly with the aim of understanding how firms under a multimarket contact setting deploy competitive movements at the marketing mix’s tactical level without disrupting mutual forbearance. For this, I will develop some hypotheses and test them using the Colombian car industry as empirical setting.