Question

Explain the term strategic dependence. what kind of markets would we expect to find it in? How will it affect the behavior of firms in these markets?

Answer 1

The Strategic Dependence (SD) model offers a purposeful representation of a process in terms of a network of actor-to-actor dependency interactions.

What is strategic dependence?

A circumstance in which one or more other businesses in the industry may strategically counteract the actions of one firm with regard to price, quality, advertising, and related developments.

Only when an industry has a small number of significant enterprises can there be such dependence. The firms are the players in an oligopoly, and their rewards are their earnings.

Each player is required to select a strategy, which is a blueprint outlining how they would behave or move in certain circumstances.

By considering how much these basic interests are impacted, strategic dependencies can be found. Only on a case-by-case basis, taking into account both qualitative and quantitative factors, ecosystem-specific details, and professional experience, is this possible.

The price reduction may have strategic advantages, such as increasing market share or preventing entry, but there is a risk that competitors will simply do the same. Although there may be little to no increase, this can result in declining sales and profitability.

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