Industry rivalry—or rivalry among existing firms—is one of Porter’s five forces used to determine the intensity of competition in an industry. Other factors in this competitive analysis are: Show
Industry rivalry usually takes the form of jockeying for position using various tactics (for example, price competition, advertising battles, product introductions). This rivalry tends to increase in intensity when companies either feel competitive pressure or see an opportunity to improve their position. In most industries, one company’s competitive moves will have a noticeable impact on the competition, who will then retaliate to counter those efforts. Companies are mutually dependent, so the pattern of action and reaction may harm all companies and the industry. Some types of competition (for example, price competition) are very unstable and negatively influence industry profitability. Other tactics (for example, advertising battles) may positively influence the industry, as they increase demand or enhance product differentiation. Structural factors affecting industry rivalryA number of structural factors can affect industry rivalry: Numerous or equally balanced competitorsWhen there are many competitors, some companies believe that they can make competitive moves without being noticed. When companies are relatively balanced in strength, they are more likely to engage in competitive battles and attack and retaliate as they strive for market leadership. Slow industry growthIn a slow growth market, companies can only grow by capturing market share from each other, which leads to increased competition. High fixed or storage costsHigh fixed costs create pressure for all companies to fill capacity, thus leading to price cutting when there is excess capacity. High storage costs push companies to decrease prices to ensure sales. Lack of differentiation or switching costsWhen products are perceived as commodities, choice is often determined by price and service, which then leads to increased competition in price and service. Capacity increased in large incrementsWhen economies of scale require large increases in capacity, it causes disruptions in the industry supply/demand balance, which then leads to periods of overcapacity and price cutting. Diverse competitorsCompanies with diverse strategies, origins, personalities and relationships to parent companies (especially foreign competitors) also have different competitive goals and strategies than “typical” companies within the industry. Their diverse approaches to the market and unique competitive strategies can upset the status quo of doing business. High strategic stakesCompanies with high stakes in achieving success may sacrifice profitability for expansion. Also, companies with high market share may feel threatened by competitors seeking to reduce their market share. High exit barriersEconomic, strategic and emotional factors can prevent companies from leaving the industry, even when they are earning low or negative returns on investments. Major sources of exit barriers include:
Read next: Bargaining Power of Buyers: Porter’s Five Forces AnalysisReferencesPorter, M. (1998). Competitive Strategy. New York: Free Press. pp. 17-23. What is an example of an internal force that can affect a company's environment?Some examples of areas which are typically considered in internal factors are: Financial resources like funding, investment opportunities and sources of income. Physical resources like company's location, equipment, and facilities. Human resources like employees, target audiences, and volunteers.
What is an example of an external force that can affect a company's environment?External influences are the factors beyond a company's control that affect operations and success. Examples include government regulations, economic recessions, population demographics, and technology.
Is an example of an external force that affects an organization quizlet?What are external forces that affects businesses? The external factors affecting a business comprise of such factors as technology, government, and its policies, economic forces and elements, socio-cultural factors, and international factors.
Which of the following is an example of an external force that may affect an organization?The economy, politics, competitors, customers, and even the weather are all uncontrollable factors that can influence an organization's performance. This is in comparison to internal factors such as staff, company culture, processes, and finances, which all seem within your grasp.
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