Competitive environment are the factors that pertain to an industry and affect

Competitive environment are the factors that pertain

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markets. Competitive environment are the factors that pertain to an industry and affect a firm’s strategy. The most commonly used analytical tool for examining the completive environment are Porter’s Five Forces: 1. The threat of New Entrants are the possibility that the profits of established firms in the industry may be eroded by new competitors. Entry barriers are: a. Economies of Scale reflect spreading the cost of production over the number of units produced. b. Product Differentiation is the degree that a product has strong brand loyalty or customer loyalty. c. Capital Requirements are the need to invest large financial resources to compete creates a barrier. d. Switching Costs are the one-time costs that a buyer/supplier faces when switching from one supplier to another. 1
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e. Access to Distribution Channels are the new entrant’s need to secure distribution for its product can create a barrier to entry. f. Cost Disadvantages Independent of Scale. Some existing competitors may have advantages independent of size or economies of scale. These derive from: i. Proprietary products ii. Favorable access to raw materials iii. Government subsidies iv. Favorable government policies 2. The Bargaining Power of Buyers
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  • Fall '15
  • Barriers to entry, Substitute Products, supplier group, Substitute Products and Services

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