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3. Competitive Forces Model

3. Competitive Forces Model. Companies must contend with five competitive forces which you need to analyse (Figure 4-6) : Threat of new entrants Bargaining power of customers and buyers Bargaining power of suppliers Substitute products or services The intensity of rivalry among competitors.

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3. Competitive Forces Model

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  1. 3. Competitive Forces Model Companies must contend with five competitive forces which you need to analyse (Figure 4-6): • Threat of new entrants • Bargaining power of customers and buyers • Bargaining power of suppliers • Substitute products or services • The intensity of rivalry among competitors

  2. 3. Competitive Forces Modelcont. • Three strategies for dealing with these competitive forces: • Differentiate product and services - make them “better” in the eyes of the consumer • Probably the most popular of the 3 strategies • Bethe lowest-cost producer - not just a low-cost producer • Find a niche - e.g.: geographical market

  3. Framework Example Five Forces Analysis of the Internet • The Internet tends to dampen the profitability of industries and reduce firms’ ability to create sustainable operational advantages because: • It increases the bargaining power of buyers • Decreases barriers to entry • Increases the bargaining power of suppliers • Increases the threat of substitute products and services, and • Intensifies rivalry among competitors • Recommend = focus on your strategic position in an industry and how you will maintain profitability • Not growth, market share or revenue

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