Aggressive Growth in Retail: A Trade-Off Between Deterrence and Survival?
45 Pages Posted: 20 Mar 2017 Last revised: 14 Sep 2019
Date Written: September 12, 2019
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
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