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¶ … New Technology offered by a Competitor
The development and introduction of new technologies by competitors need to be analyzed and responded to in the broader context of a competitors' product, pricing, and distribution strategies, in addition to the current competitive dynamics of the industry as well. All these factors need to be taken into account when assessing the competitive risk of a new technology, then planning for how to counter and compete with them. To compete purely on price against a competitor with new technologies will lead to a price war which drains gross margins and profits out of an entire industry. What's needed is a coordinated response to new technology's potential threats, developed using a strategic framework to plan and execute from.
Using Porter's Five Forces Model to Plan Competitive Response
The development of the Porter Five Forces Model and its widespread adoption and use (Porter, 2008) makes the response to new technologies more consistent and coordinated vs. just relying on a single response using price, or rushing a new product to market for example. The essence of the Porter Model shows that only by creating a coordinated response to a new technology threat can a company hope to counter it and retain customers and competitive advantage. The Porter Model forces companies to align all available resources in terms of pricing strategies, product strategies, and their own R&D strategies to counter competitors, leading to a more effective marketing strategy than if just a single, isolated tactic was used. The bottom line from Porter's standpoint is that technology alone is not as major of a competitive threat by itself; it does however become a major threat when part of a broader competitive strategy (Porter, 2008).
Conclusion
When a competitor offers a new technology, it's important to evaluate how it either supports or detracts from their existing strengths and weaknesses, and what it means within the broader industry. Responding to a competitor's introduction of a new technology requires a highly coordinated set of strategies that take into account product, pricing, distribution, and branding to underscore competitive parity or advantage despite a new technology being introduced.
Reference:
Porter, M. (2008). The Five Competitive Forces That Shape Strategy. Harvard Business Review: Special HBS Centennial Issue, 86(1), 78-93. Retrieved March 4, 2008, from ABI/INFORM Global database. (Document ID: 1406854351).
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