4. Industry Level strategies
Industry-level strategy addresses the question "How should we compete in this industry?" Let's find out more about industry-level strategies by discussing 4.1 the five industry forces that determine overall levels of competition in an industry as well as, 42 the positioning strategies, and 4.3 adaptive strategies that companies can use to achieve sustained competitive advantage and above-average profits.
4.1 Five Industry Forces According to Harvard professor Michael Porter, five industry forces determine an industry's overall attractiveness and potential for long-term profitability. These include the character of the rivalry, the threat of new entrants, the threat of substitute products or services, the bargaining power of suppliers, and the bargaining power of buyers. The stronger these forces, the less attractive the industry becomes to corporate investors because it is more difficult for companies to be profitable. Porter's industry forces are illustrated in Exhibit 5.7. Let's examine how these forces are bringing changes to several kinds of industries.
Character of the rivalry is a measure of the intensity of competitive behavior among companies in an industry. Is the competition among firms aggressive and cutthroat, or do competitors focus more on serving customers than on attacking each other? Both industry attractiveness and prof- Inability decrease when rivalry is cutthroat. For example, selling cars is a highly competitive business. Pick up a local newspaper on Friday, Saturday or Sunday morning, and you'll find dozens of pages of car advertising. In fact, competition in new car sales is so intense that if it weren't for used-car sales, repair work and replacement parts, many auto dealers would actually lose money
The threat of new entrants is a measure of the degree to entry make it easy or difficult for new companies to get started in an industry If new companies can easily the ins then competition will increase and prices enter profits will fall. On the other hand, if there are sufficient barriers to end such as large capital requirements to buy expensive equipment or plant facilities or the for specialized knowledge, then competition will be weaker and prices and profits will generally be higher. For instance, high costs and intense competition make very difficult to enter the video-game business. The barriers to entry for this business are extremely high given that today's average video game takes 12 to 36 months create, $10 to $20 million to develop, and teams of highly paid creative workers to ants develop realistic graphics, captivating story lines, and innovative game capabilities who must also be disciplined enough meet budgets and very strict deadlines and still produce efficient, reliable, bug-free code. These barriers to entry also in are place for online video games, liked BLIZZARDS World of Warred which are growing even faster than traditional video games. Regarding online gaming, industry analyst Arvind Bhatia says, "This is a very hard and expensive market to enter, let alone be successful.