Competitor Orientation: Effects of Objectives and Information on Managerial Decisions and Profitability

Journal of Marketing Research, Vol. 33, pp. 188-199, May 1996

22 Pages Posted: 5 Apr 2005 Last revised: 30 Dec 2011

See all articles by J. Scott Armstrong

J. Scott Armstrong

University of Pennsylvania - Marketing Department

Fred Collopy

Case Western Reserve University - Department of Information Systems

Abstract

Managers are often advised, beat your competitors, which sometimes contrasts with the advice, do the best for your firm. This may lead managers to focus on comparative measures such as market share. Drawing on game theory, the authors hypothesize that managers are competitor oriented under certain conditions, in particular, when they are provided with information about competitors' performance. Empirical studies lead to the additional hypothesis that a competitor orientation is detrimental to performance. To examine these hypotheses, the authors conduct two studies. The first is a laboratory study in which 1,016 subjects made pricing decisions. When information about the competitor's profits was provided, over 40% of the subjects were willing to sacrifice part of their company's profits to beat or harm the competitor. Such competitor- oriented behavior occurred across a variety of treatments. The second is a field study used to examine the performance over a half-century of 20 large U.S. firms with differing objectives. Firms with competitor-oriented (market, share) objectives were less profitable and less likely to survive than those whose objectives were directly oriented to profits.

Keywords: competitor, management, profitability

Suggested Citation

Armstrong, J. Scott and Collopy, Fred, Competitor Orientation: Effects of Objectives and Information on Managerial Decisions and Profitability. Journal of Marketing Research, Vol. 33, pp. 188-199, May 1996. Available at SSRN: https://ssrn.com/abstract=684661

J. Scott Armstrong (Contact Author)

University of Pennsylvania - Marketing Department ( email )

700 Jon M. Huntsman Hall
3730 Walnut Street
Philadelphia, PA 19104-6340
United States
215-898-5087 (Phone)
215-898-2534 (Fax)

HOME PAGE: http://marketing.wharton.upenn.edu/people/faculty/armstrong.cfm

Fred Collopy

Case Western Reserve University - Department of Information Systems ( email )

10900 Euclid Ave.
Cleveland, OH 44106-7235
United States

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