...Supplier Power: Discuss the differences between processors used by RIM and its competitor and compare switching cost or prices. Buyer Power: Increase in buyer’s power, product differentiation of RIM, buyer’s incentive. Barriers to entry: Government policy, entrance of new firms with old technology, access to distribution, Brand Identity. Threat of Substitute: switching costs, Supplier Power: Discuss the differences between processors used by RIM and its competitor and compare switching cost or prices. Buyer Power: Increase in buyer’s power, product differentiation of RIM, buyer’s incentive. Barriers to entry: Government policy, entrance of new firms with old technology, access to distribution, Brand Identity. Threat of Substitute: switching costs, Supplier Power: Discuss the differences between processors used by RIM and its competitor and compare switching cost or prices. Buyer Power: Increase in buyer’s power, product differentiation of RIM, buyer’s incentive. Barriers to entry: Government policy, entrance of new firms with old technology, access to distribution, Brand Identity. Threat of Substitute: switching costs, Supplier Power: Discuss the differences between processors used by RIM and its competitor and compare switching cost or prices. Buyer Power: Increase in buyer’s power, product differentiation of RIM, buyer’s incentive. Barriers to entry: Government policy, entrance of new firms with old technology, access to distribution, Brand...
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... analysis. Historically, firms concentrated only on direct competitors. ● Today, firms must study many industries, as competitors are defined more broadly. For example, the communications industry now encompasses media companies, telecoms, entertainment companies, and smartphone producers. 1/5 THREAT OF NEW ENTRANTS: BARRIERS TO ENTRY ● Can threaten market share of existing competitors ● May stimulate additional production capacity ● New competitors may force existing firms to be more efficient and to learn how to compete on new dimensions ● Entry barriers make it difficult for new firms to enter an industry and often place them at a competitive disadvantage even when they are able to enter ● High entry barriers tend to increase the returns for existing firms in...
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...has positioned itself to prosper in this environment. Taken together, these steps are the key to forecasting a company's earning power. THE SUCCESS OF A COMPANY‘S competitive strategy depends on how it relates to its environment. Although the relevant environment is very broad, encompassing social as well as economic forces, the key aspect of the company's environment is the industry or industries in which it operates. Industry structure has a strong influence in defining the rules of the competitive game as well as the strategies potentially available to the company. The intensity of competition in an industry is not a matter of luck. Rather, competition is rooted in underlying industry economics and goes well beyond the established competitors. Not all industries have equal potential. They differ fundamentally in their ultimate profit potential as the collective strength of the forces of competition differs; the forces range from intense in industries like tires, paper and steel, where no firm earns spectacular returns, to relatively mild in industries such as oil field equipment and services, cosmetics and toiletries, where high returns are common. The essence of competitive strategy for a company is to find a position in its industry where it can best cope with these competitive forces or can influence them in its favor. Knowledge of the underlying sources of competitive pressure can reveal the basic attractiveness of an industry, highlight the critical strengths and weaknesses...
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...Kampala International University Abdifatah Adan Egeh Course work material +256718275925 caloolgeele@hotmail.com Introduction The analysis of barriers to entry and exit is fundamental to the assessment of market power and market efficiency. A firm or firms may exercise market power for a significant period of time only if barriers to new entry exist. Thus in determining whether or not a proposed merger is against the public interest, or whether a firm (or firms) is abusing monopoly or market power in antitrust cases, analysis of entry conditions is of primary importance. One might therefore expect to see rather extensive and sophisticated analyses of entry conditions, or barriers to entry, in monopoly and merger cases that come before competition authorities in the United States, United Kingdom, or member states of the European Union (EU). One might also expect that competition authorities would have placed a great deal of emphasis and effort on achieving a coherent and consistent framework for the analysis of entry barriers in a manner that makes use of the latest thinking on the subject by industrial organization economists. However, until very recently no competition authority that we are aware of has attempted to formulate a coherent and detailed framework for the analysis of barriers to entry, despite the significant degree of effort that has been put into clarifying the related problems of market definition and the measurement of monopoly or market power....
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...Entry barriers on business. Barriers to market entry include a number of different factors that restrict the ability of new competitors to enter and begin operating in a given industry. For example, an industry may require new entrants to make large investments in capital equipment, or existing firms may have earned strong customer loyalties that may be difficult for new entrants to overcome. The ease of entry into an industry in just one aspect of an industry analysis; the others include the power held by suppliers and buyers, the existing competitors and the nature of competition, and the degree to which similar products or services can act as substitutes for those provided by the industry. It is important for small business owners to understand all of these critical industry factors in order to compete effectively and make good strategic decisions. "Understanding your industry and anticipating its future trends and directions gives you the knowledge you need to react and control your portion of that industry," Kenneth J. Cook explained in his book The AMA Complete Guide to Strategic Planning for Small Business. "Since both you and your competitors are in the same industry, the key is in finding the differing abilities between you and the competition in dealing with the industry forces that impact you. If you can identify abilities you have that are superior to competitors, you can use that ability to establish a competitive advantage." The ease of entry into an industry...
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...Understanding the dynamics of competitors within an industry is critical for several reasons. First, it can help to assess the potential opportunities for your venture, particularly important if you are entering this industry as a new player. It can also be a critical step to better differentiate yourself from others that offer similar products and services. One of the most respected models to assist with this analysis is Porter’s Five Forces Model. This model, created by Michael E. Porter and described in the book “Competitive Strategy: Techniques for Analyzing Industries and Competitors,” has proven to be a useful tool for both business and marketing-based planning. Background The pure competition model does not present a viable tool to assess an industry. Porter’s Five Forces attempts to realistically assess potential levels of profitability, opportunity and risk based on five key factors within an industry. This model may be used as a tool to better develop a strategic advantage over competing firms within an industry in a competitive and healthy environment. It identifies five forces that determine the long-run profitability of a market or market segment. * Suppliers * Buyers * Entry/Exit Barriers * Substitutes * Rivalry Supplier power * Supplier concentration * Importance of volume to supplier * Differentiation of inputs * Impact of inputs on cost or differentiation * Switching costs of firms in the industry * Presence of...
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...Oligopoly ( More Differentiated)Camera, Overhead projectors Monopolistic Competition • Many Competitors • Ability of differentiate offering is high - Hotels Pure Competition • Many Competitors • Similar Offering • Scope and basis for Differentiation is low - Cereals, Cigarette, Tea, Biscuit Drivers of Industry’s Competitive Structure • • • • • • Entry Barrier Mobility Barrier Exit Barrier Cost Structure Degree of Vertical Integration Degree of Globalization Entry Barrier • • • • • • • Capital Requirements Economies of Scale Patents Licensing Requirement Location Raw materials Intermediaries Exit Barrier • Legal and Moral Obligation to Customers, Creditors, Employee • Govt. Restrictions • Low Asset Salvage Value • Lack of Better Opportunities • High Degree of Vertical Integration Mobility Barrier • Barrier when Firm Tries to go Upward, Enter More Attractive Segments ( AirAsia & Vistara; Permission to operate internationally) Cost Structure • Which Component is the major Cost Centre -Manufacturing - Distribution -Advertising -Licensing and any other Degree of Vertical Integration • Flexibility in Operating in a Highly Integrated Chain and its Disadvanatges. Degree of Globalization • How Local/Global the Firm is ? Analyzing Competitors • Strategic Groups Strengths and Weaknesses of Competitors • The three Variables to be Considered Share of Market Share of Mind Share of Heart Industry...
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...framework that helps managers in this analysis. Porter’s framework, known as the five forces model focuses on five forces that shape competition within an industry: (1) the risk of new entry by potential competitors, (2) the degree of rivalry among established companies within an industry, (3) the bargaining power of buyers, (4) the bargaining power of suppliers, and (5) the closeness of substitutes to an industry’s products. A. Potential Competitors Established companies try to discourage potential competitors from entering, since the more companies enter an industry, the more difficult it becomes for established companies to hold their share of the marker and to generate profits. Thus a high risk of entry by potential competitors represents a threat to the profitability of established companies. On the other hand, if the risk of new entry is low, established companies can take advantage of this opportunity to rise prices and earn greater returns. The strength of the competitive force of potential rivals is largely a function of the height of barriers to entry. The concept of barriers to entry implies that there are significant costs to joining an industry. The greater the costs that potential competitors must bear, the greater are the barriers to entry. High entry barriers keep potential competitors out of an industry, even when industry returns are...
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...The number of firms is large. There are no barriers to entry. Firms products are identical. There is complete information. Selling firms are profit-maximizing entrepreneurial firms. In order to understand what those requirements entail, a few terms need to be defined. Price-takers refers to “a firm or individual who takes the price determined by market supply given”(Colander, 2010). Barriers to entry can be many different things that prevent a firm from entering a particular market. They are usually social, political or economic obstructions, that prevent that entry. Perfect competition only really works in one marketable industry. Since all products are the same or identical, it really attracts the agricultural world. Cotton produced in Arizona and cotton produced in Australia are exactly the same. They come from the same seed. There is no real difference between the two different cottons, only that one was grown in Arizona and the other in Australia. The cotton will still cost the same. Perfect competition markets are profit-maximizing entrepreneurial firms. This means that they have to seek out maximum profits and only profit, and the people who make the decisions, will only receive profits and no other form of compensation. Another common market structure are monopolies. A “monopoly is a market structure in which one firm makes up the entire market It is the polar opposite to competition”(Colander, 2010). The barriers to entry...
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...This is a framework for understanding an industry or an organisation’s position with respect to the forces operating in the microenvironment • It can be used to explain the performance of competitors in a market • From the analysis a number of generic competitive strategies can be derived • Cost leadership • Differentiation • Focus The five forces • The ability of firms to earn an good return depends on five forces: namely the… • Threat of new entrants‐ the ability of new competitors to enter the industry • Bargaining power of suppliers • Bargaining power of customers • Threat of substitute products • Degree of competitive rivalry The five forces framework Threat of Substitute Products Bargaining Power of Suppliers Intensity of rivalry within the industry Bargaining Power of Buyers (Customers) Threat of New Entrants The threat of new entrants Threat of new entrants • If new entrants move into an industry they will gain market share, rivalry will accelerate and profits will decline • If it is difficult to enter an industry the position of existing firms will be strengthened • Impediments to the entry of new firms are known as barriers to entry • If barriers to entry are low then the threat of new entrants will be high, and vice versa Barriers to entry • Capital cost of entry • High cost will deter entry • High capital requirements might mean that only large firms can compete • Economies of scale available to existing firms • If they enjoy absolute cost advantages based on large scale then...
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...House of Kebab Contents 1 Introduction 2 1.1 Company Summary 2 1.2 Company Ownership 3 2 Five Forces Model and Analysis 4 2.1 Barriers To Entry 5 2.2 Supplier Power 8 2.3 Buyer Power 10 2.4 Threat of Substitutes 11 2.4.1 The Threat of Substitutes are High 11 2.5 Rivalry among Existing Firms 12 3 Conclusion 17 INTRODUCTION House of Kebab is a locally owned fast food outlet that will be positioned as an international franchise through our creative approach to the company's image and detail presentation. House of Kebab will provide a combination of excellent food at value pricing, with fun packaging and atmosphere. House of Kebab is the answer to an increasing demand for kebab and shawarma fast food. In today's highly competitive environment, it is becoming increasingly difficult to differentiate one fast food outlet from another. Our main priority is to establish one outlet in Kuala Lumpur, preferably in one of prominent housing estate. Later, our effort will be a further development of more retail outlets in the surrounding area. House of Kebab will entice youngsters to bring their friends and family with our innovative environment and our main focus will be serving high-quality food at a great value. COMPANY SUMMARY House of kebab sells specially made shawarma sandwich-like wrap usually composed of shaved lamb, goat, chicken, turkey, beef, or a mixture of meats and kebab which consist of thin slices cut from a cylindrical block of minced...
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...FINANCIAL INFORMATION ANALYSIS Business Policy Analysis Application Exercises Question 3 One of the fastest growing industries is the memory chip industry, which supplies memory chips for personal computers and other electronic devices. Yet the average profitability has been very low. Using the industry analysis framework, list all the potential factors that might explain this apparent contradiction. Concentration and Balance of Competitors • The concentration of the memory chip market is relatively low; • There are many players competing on a global basis, none of which has a dominant share of the market; ← Frequent price wars as individual firms lower prices to gain market share; Degree of differentiation and Switching Costs • In general, memory chips are a commodity product characterized by little product differentiation; • While some product differentiation occurs as chip makers squeeze more memory on a single chip or design specific memory chips to meet manufacturers’ specific power and/or size requirements, these differences are typically short-lived and have not significantly reduced the level of competition within the industry; • Because memory chips are typically interchangeable, switching costs for users of memory chips are very low, encouraging buyers to look for the lowest price for memory chips; Scale/Learning Economies and the Ratio of Fixed to Variable Costs • Scale and learning economies are both important to the...
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...FINANCIAL INFORMATION ANALYSIS Business Policy Analysis Application Exercises Question 3 One of the fastest growing industries is the memory chip industry, which supplies memory chips for personal computers and other electronic devices. Yet the average profitability has been very low. Using the industry analysis framework, list all the potential factors that might explain this apparent contradiction. Concentration and Balance of Competitors • The concentration of the memory chip market is relatively low; • There are many players competing on a global basis, none of which has a dominant share of the market; ==> Frequent price wars as individual firms lower prices to gain market share; Degree of differentiation and Switching Costs • In general, memory chips are a commodity product characterized by little product differentiation; • While some product differentiation occurs as chip makers squeeze more memory on a single chip or design specific memory chips to meet manufacturers’ specific power and/or size requirements, these differences are typically short-lived and have not significantly reduced the level of competition within the industry; • Because memory chips are typically interchangeable, switching costs for users of memory chips are very low, encouraging buyers to look for the lowest price for memory chips; Scale/Learning Economies and the Ratio of Fixed to Variable Costs • Scale and learning economies are both important to the memory chip market; ...
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...an industry by analyzing the competitive forces. His five forces consist of: the risk of entry by potential competitors, the intensity of rivalry among established companies within an industry, the bargaining power of buyers, the bargaining power of suppliers, and the closeness of substitutes to an industry’s products. The Carbonated Soft Drink (CSD) Industry will be thoroughly analyzed using Porter’s Five Forces. Risk of Entry by Potential Competitors With high barriers to entry, the risk of potential competitors entering into the CSD industry is low. The high cost of developing a manufacturing plant in order to meet demand is a barrier that makes the risk of entry low. Coke and Pepsi have spent numerous amounts of money to gain the brand loyalty of their customers. Because brand loyalty is already established in the CSD industry, the risk of competitors entering is lowered. Due to brand loyalty, both Coke and Pepsi have a high demand for their products. Both companies are able to produce in mass quantities and lower the variable cost for each product. With the variable cost being lowered, they are able to lower their selling price. Another barrier that lowers the risk of entry is franchise agreements that Coke and Pepsi have made with their bottlers. The agreements state that the bottlers are prohibited from developing any new contracts with present or potential competitors. Rivalry among Established Companies The CSD industry is consolidated in regards to its...
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...INDUSTRY COMPETITION AND COMPETITOR ANALYSIS. “It is not the strongest species that survive, nor the most intelligent, but the one most responsive to change.” Charles Darwin Today, two types of strategies exist: proactive/reactive. Anticipation, change, adaptability is necessary nowadays so the proactive strategy (ex: Coca Cola). External environment conditions create both threats and opportunities for firms that have major implications for their strategic actions. Regardless of the industry, the external environment is critical to a firm’s survival success. The firm’s understanding of the external environment is matched with knowledge about its internal environment to form its vision, to develop its mission and to take actions that result in strategic competitiveness and above-average returns. Factors that can have an impact on business have to be taken in consideration. Companies sometimes have to have strategic scenario in case of an unexpected factors, which can affect the external environment: - The attacks of September 11, - The coalition invasion in Afghanistan in October 2001, - The outbreak of the Severe Acute Respiracy Syndrome (SARS) - The war in Iraq in 2003, - The Madrid (2004) and London (2005) bombings. I. The general, industry and competitor environments. The external environment Demographic Global Industry environment Threat of new entrant Power of suppliers Power of buyers Product substitutes Intensity of rivalry Economic Competitor environment 14 ...
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