Competitive Structure Of Industries. Cheat Sheet

University:
California State University, Northridge
Course:
BUS 104 | Introduction to Business
Academic year:

2023
Views:

395

Pages:

1
Author:

JJIssac

According to Porter's five forces model,the state of competition in an industryis determined by: Rivalry Among Existing Firms Competitive actions like pricecuts, new product launches,promotion campaigns Affected by number of players,growth rate, high fixed costs,lack of differentiation Can be volatile if firms havehigh strategic stakes in theindustry Threat of New Entrants New players alter competitivedynamics Barriers to entry includeeconomies of scale, proprietarytechnology, high capital needs,strong brand loyalty Government policies mayrestrict or encourage entry Threat of Substitutes Alternative products that satisfyconsumer needs Limits profit potential in anindustry Affected by consumer propensity to substitute, relativeprice/value Bargaining Power of Suppliers Suppliers can exert powerthrough limiting quality/quantities, increasingprices Strong when suppliers consolidated, limited substituteinputs, important input Weak when many suppliersavailable, standardized inputs Bargaining Power of Buyers Buyers force down prices,demand better quality or service Powerful when concentrated,purchase large volumes, lowswitching costs Weaker when fragmented, switch brands easily, lowvolumes Implications: Assess the five forces tounderstand industry competitiveness and profitability Identify opportunities andthreats posed by the competitivestructure Craft strategies to improveposition vis-a-vis the five forces Modify strategies as industryforces shift over time Leverage strengths and mitigateweaknesses relative to competitive forces Document Outline