In many cases, competitors learn about a new entrant into their market, but they wait to see if the entrant gains traction before offering a competitive response. However, successful companies should think about how, when, and why they might engage in preemptive action to ward off the threat from a new entrant. Such preemptive action need not always entail price cuts, nor do they even have to cost a great deal of money.
Let's take a look at an example from the Boston radio market. Here in Boston, WEEI has reigned supreme for many years as the dominant sports radio station. Several rivals have tried to compete with them, but they have not fared well at all. However, a new entrant has emerged this summer. This station - The Sports Hub 98.5 - appears to have the potential to be a more substantial threat for a variety of reasons. WEEI has made some interesting preemptive moves. First, about one week prior to the entrant's debut, they came to an agreement to allow Boston Globe sportswriters onto WEEI for the first time in years (the station and the paper had been at odds for years). This enabled WEEI to insure that they would have a substantial infusion of on-air talent, before the entrant snapped up these famous writers. Secondly, WEEI changed its format a bit. One thing that always annoyed listeners were the very long commercial breaks. Now, they have broken up the commercials into shorter chunks - breaking more often, but for a shorter period of time. The shift is also significant for another reason. By changing the regular rhythm of their breaks, and making them shorter, they are trying to discourage listeners from switching the dial over to try out The Sports Hub.
Such preemptive strikes may or may not work in this case, but as you can see, they are low cost maneuvers that are trying to defend a competitive position. I would argue that incumbents need to think hard about using such preemptive action, while trying to avoid the price wars that can damage profit margins so badly.