1. how strong are competitive forces?. Michael porter’s “the five- forces model” of competition is most widely used as a common analytical tool and framework in measuring the nature and intensity of competitive forces.
- 1. Industry rivalry – the rivalry among competing sellers in the industry.
// rivalry intensifies as the number of competitors increases and as competitors become more equal in size and capability.
// rivalry is usually stronger when demand for the product is growing slowly or the market demand drop unexpectedly. Firms (especially with excess capacity) often cut prices and deploy other sales- increasing tactics. Thereby increasing a battle for market share.
// rivalry is more intense when industry conditions tempt competitors to use price cuts or other competitive weapons to boost unit volume. When a product is perishable. Seasonal or costly to hold in inventory. Competitive pressures build quickly anytime. Firms decide to cut prices and dump excess supplies on the market.
// rivalry is stronger when customers costs to switch brands are lows.
// rivalry is stronger when one or more competitors are dissatisfied with their market position and launch moves to strengthen their position at the expense of rivals. Firms that are losing their standing or in financial trouble often react aggressively by acquiring smaller rivals. Introducing new products. Boosting advertising. Discounting prices and so on.
// rivalry increases in proportion to the size of the payoff from a successful strategic move. The greater the benefits of going after a new opportunity. The more likely that more rivals will initiate moves to capture it.
// rivalry tends to be more strong when it costs more to get out of a business (high exit barriers) than to stay in and compete.
// rivalry becomes more volatile and unpredictable the more diverse competitors in terms of their visions. Strategic intents. Objectives. Strategies. Resources. And countries of origin. Globally competitive markets often contain rivals with different competitive approaches.
// rivalry increases when strong companies outside the industry acquire weak firms in the industry and launch aggressive. Well- funded move to transform their newly acquired competitors into major market contenders.
// rivalry can be characterized as cutthroat when competitors engage in prolong price wars or habitually employ other aggressive tactics that are mutually destructive to profitability.
// rivalry can be considered fierce when competitors are initiating frequent moves and countermoves in a battle for market share so strong that profit margins are being squeezed.
// rivalry can be moderate when sellers are active using the various weapons of competition at their command yet are still usually able to earn acceptable profits
// rivalry is weak most companies in the industry are relatively well satisfied with their sales growth and market shares. Rarely make attempts to steal customers away from one another. And have comparatively attractive earnings and return on investment.