Essays on competitive strategies

This dissertation deals with issues that arise in firms' strategic decisions by utilizing multiple marketing mix variables focusing on how those strategies interact in terms of reinforce or restrain one another. The common theme is addressed in two self-contained essays.;In the first essay, I explore firm's problem of designing product line using persuasive advertising to enhance consumers' product valuation. Analysis of monopoly model indicates a firm will use persuasive appeals to the entire product line when there is no competition. This is driven by the opportunity of completely appropriating increased surplus due to advertising from one market segment at the cost of giving up a bit more to the other segment. When firms have to manage both intra firm cannibalization and inter firm competition at the same time, I find they tend to pursue a more targeted advertising strategy with focus on high end of the product line. The explanation comes from the negative strategic effect on one market segment which is due to the competition for the other market segment and transformed through product line cannibalization. Thus the selective use of persuasive advertising is found to be an important tool, together with other marketing mix variables (product, pricing) for firms handling multiple strategic issues simultaneously.;The second essay looks at firm's service and quality decision in competitive environment with primary interest on the incentive to provide informational service to consumers. I find there is trade off of service provision under different consumer heterogeneity and information environment. When consumers have uncertainty on preference while shopping is costlessly, only the low-quality firm would offer service. However the firm providing high quality product will be the one offering service when consumers are also heterogeneous in shopping cost, or their uncertainty is on physical product. The study thus provides important managerial guidance to firms regarding the use of service as additional strategic tool along with product and pricing to achieve competitive advantage.