"The competition is alive and hungry - continue to relentlessly move the business forward"
The five forces are the following:
II. Threat of Substitutes
III. Buyer Power
IV. Supplier Power
V. Barriers to Entry / Threat of Entry
Rivalry acts in way that elicits a response from other companies intensifies the competition. In pursuing an advantage over rivals the following are competitive moves:
- Change Prices - raise or lower to gain a temporary advantage
- Improve product differentiation - improving features, and innovations in the manufacturing process and product.
- Creatively using channels of distribution - using vertical integration or distribution channel that is novel to the industry.
Intensity of rivalry is influenced by the following industry characteristics:
- A large number of firms - more firms competing for the same customer and resources
- Slow market growth - compete for market share
- High fixed costs - company must produce at capacity to lower unit costs
- High storage costs - products must be sold as soon as possible
- Low switching costs - customers have ability to switch freely
- Low levels of product differentiation - commodity competing on price
- Strategic stakes are high - when losing or gaining market share
- High exit barriers - more costly to divest
- A diversity of rivals - varying cultures, histories, and philosophies can make an industry unstable.
- Industry shake out - a large number of firms will create a shake out. The surviving firms will have to grow faster than the market.
Reference additional Strategic writings: