Competitie Strategy

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5 FORCES OF PORTER

INTERACTION BETWEEN COMPETITION AND PROFITABILITY

# Rivalry among existing competitors (examines how intense the current competition is in the marketplace)

current competition determiney by:

- number and size of existing competitors;

- the industry growth rate;

- product differentiation between rivals and exit barriers;

# Threat of new entrants

- bring new capacity and the desire to gain market share (PRICES, COSTS and RATE OF INVESTMENTS NECESSARY TO COMPETE);

examples of barriers to entry of new entrants at the marketspace:

- economies of scale;

- customer loyalty;

- capital requirement;

- cumulative experience;

- government policies;

- limited access to distribution channels;

# Threat of substitute products or services

# Bargaining power of suppliers

- analyzes how much power and control a company's supplier has over the potential to raise its prices or to reduce the quality of purchased goods or services

# Bargaining power of buyers

- analyzes to what extent customers are able to put the company under pressure by demanding better quality

If the competitive forces are intense , the profit potential of a firm will decrease