No Competition, No Progress

I am not in competition with anyone but myself. My

goal is to improve myself continuously.

Competition wis always a good thing. It forces us to do

our best. A monopoly renders people complacent and
satisfied with mediocrity.

The higher the “entry barriers” the lower the chance

Competition or Rivalry of entry of new players.
o Porter's Five Forces is a framework for ● Economies of scale
analyzing a company's competitive ● Customer loyalty
environment. ● Capital requirements
o Michael Eugene Porter is an American ● Cumulative experience
academic known for his theories on ● Government policies
economics, business strategy, and social ● Access to distribution channel
causes.
o The five forces are frequently used to 3. Power of suppliers (exert power to
measure competition intensity, overprice)
attractiveness, and profitability of an  Number of suppliers
 Supplier concentration
 Switching costs
 Available substitutes
 Strength of distribution channels
 Uniqueness of supplier’s product
The presence of powerful suppliers reduces the
profit potential in an industry. Suppliers increase
competition within an industry by threatening to raise
prices or reduce the quality of goods and services. As
a result, they reduce profitability in an industry where
companies cannot recover cost increases in their own
prices.

industry or market.

Porter's five forces are:

1. Competition in the industry or Rivalry among
Existing Competitors
 Number of competitors
 Size of competitors
 Industry growth
 Product differentiation among rivals
 Exit barriers
When is rivalry high?

2. Potential of new entrants into the industry

 Prices
 Costs
 Investments
 4. Power of customers or buyers
 Exert control over price
 Number of buyers
 Bulk purchasing
The presence of powerful buyers reduces the
profit potential in an industry. Buyers increase
competition within an industry by forcing down
prices, bargaining for improved quality or more
services, and playing competitors against each other.
The result is diminished industry profitability.

Internet makes Buyer Powerful

BUYERS have lot of power when there
weren’t many of them and when there are
many alternatives to choose from.
BUYERS power is low when they purchase in
small amount, acts independently and
suppliers product is different from its
competitors.
Company is decreasing Buyer’s power by:
a. Loyalty programs
b. Product differentiation

5. Threat of substitute products

 Substitute Products fulfills the same need
although they may not look identical in the
surface, customer switch to alternatives
 Number of substitute
 Buyers willingness to substitute
 Price performance
 Trade off (substitute)

You notice that you are becoming dependent to one

supplier
Q. Is it good if you are a buyer?
Q. What if you are the supplier?