Impact of market entrant characteristics on incumbent reactions to market entry

Abstract

This paper attempts to examine the likelihood of incumbent firms taking defensive actions given certain market entrant characteristics. Using conjoint analysis, four market entrant characteristics, market entrant company size, price of market entrant's product, innovativeness of market entrant's product, and market entrant's reputation as a competitor were presented to marketing executives in nine simulated cases. The marketing executives were asked to indicate their likelihood of taking defensive actions before and after new competition enters a market. The relative weights associated with the four market entrant characteristics indicate that market entrant's price is the most important factor in influencing incumbent firms to take competitive actions followed by company size, market entrant's reputation as a competitor, and innovativeness of market entrant's product in both before and after market entry conditions.