Growth Dynamics in New Markets

MARKET DYNAMICS WITH A COMPETITOR

7.1 Introduction

In this chapter, you are going to incorporate your competitor RivTel into the simulation model. What you have found out in the previous chapters will continue to be useful and, if it is possible to set the values of the decision variables to the values you found in Chapter 6, Accumulated profits will still be maximized. Now, however, the population and the profits will have to be split between you and RivTel.

• The Potential customers have a choice between NewTel and RivTel.
• Each company’s Current customers have the choice of switching to the respective other company.

This twofold choice has a consequence for the ways in which rival companies compete and we distinguish between two types of rivalry (Warren, 2008): rivalry type I refers to competing for Potential customers, while competition for each other’s Current customers is called rivalry type II.

We are going to adjust the model so that the simulation experiments help you to design a strategy to implement the optimal values of your decision variables and achieve the highest possible Accumulated profits at the end of the year. RivTel’s manager is not unknown to you: it is Mary Roamer, the person who preceded you at NewTel. It is plausible that you have a good grasp of how RivTel will go about competition – and RivTel’s management can be assumed to have as well a grasp on your approach to competition. As you might expect, there is a difference between competing for Potential ...