Aggressive Growth in Retail: A Trade-Off Between Deterrence and Survival?

45 Pages Posted: 20 Mar 2017 Last revised: 14 Sep 2019

See all articles by Limin Fang

Limin Fang

University of British Columbia

Nathan Yang

Cornell University

Date Written: September 12, 2019

Abstract

We study the relationship between aggressiveness and survival under the context of retail entry strategy. Using a dynamic game of entry, calibrated with novel monthly data about fast casual taco chains (Chipotle and Taco Cabana) in Texas (1993-2015), we conduct a series of simulations to explore the extent to which a trade-off exists between aggression and survival. The results show that this trade-off can exist in certain conditions. Most importantly, we establish a set of qualifiers (i.e., opportunity zone) for aggressive entry to improve survival: (1) A rival's presence has to hurt the incumbent's profit enough to make preemption attractive, (2) the damage of the rival's presence on the firm's profit should not be too much (in the event that rival still enters), and (3) the incumbent has to be competitive enough so as to hurt its rival's profit sufficiently.

Keywords: Dynamic Games; Entry Deterrence; Early Mover Advantage; Industry Dynamics; Location Intelligence; Retail Apocalypse; Retail Performance and Strategy

Suggested Citation

Fang, Limin and Yang, Nathan, Aggressive Growth in Retail: A Trade-Off Between Deterrence and Survival? (September 12, 2019). Available at SSRN: https://ssrn.com/abstract=2936192 or http://dx.doi.org/10.2139/ssrn.2936192

Limin Fang

University of British Columbia ( email )

2053 Main Mall
Vancouver, British Columbia V6T1Z2
Canada

HOME PAGE: http://https://sites.google.com/site/fangliminecon/home

Nathan Yang (Contact Author)

Cornell University ( email )

Dyson School, Warren Hall
360E
Ithaca, NY 14853-6201
United States
6072551590 (Phone)

HOME PAGE: http://dyson.cornell.edu/faculty-research/faculty/ncy6/

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