The intensity of rivalry between competitors in an industry will depend on:
- The structure of competition - for example, rivalry is more intense where there are many small or equally sized
competitors; rivalry is less when an industry has a clear market leader
- The structure of industry costs - for example, industries with high fixed costs encourage competitors to fill unused
capacity by price cutting
- Degree of differentiation - industries where products are commodities (e.g. steel, coal) have greater rivalry; industries
where competitors can differentiate their products have less rivalry
- Switching costs - rivalry is reduced where buyers have high switching costs - i.e. there is a significant cost associated
with the decision to buy a product from an alternative supplier
- Strategic objectives - when competitors are pursuing aggressive growth strategies, rivalry is more intense. Where
competitors are "milking" profits in a mature industry, the degree of rivalry is less
- Exit barriers - when barriers to leaving an industry are high (e.g. the cost of closing down factories) - then
competitors tend to exhibit greater rivalry.