Dealing with the Competition, Chapter 7
• Michael Porter’s Five Forces
– Threat of intense segment rivalry: the greater number of existing competitors in the segment, the more unattractive the segment.
– Threat of new entrants: the easier it is for a new player to enter the segment, the more unattractive the segment.
– Threat of substitute products: the more potential substitute products there are, the less profitable the segment.
– Threat of buyer’s growing bargaining power: high buyer bargaining power will drive prices down.
– Threat of Supplier’s growing bargaining power: high buyer bargaining power drive up cost of inputs, thus lowering firm’s profitability
• Competitor Myopia: focus on current competitors rather than latent ones
• Dis-intermediation: displacement of traditional intermediaries (example: internet)
• Industry Concept of Competition
– # of buyers and Sellers:
o Pure monopoly: only 1 firm. Unregulated monopolist might charge high prices, do little or no advertising, and offer minimal service. Regulated monopolies are required to charge lower prices.
o Oligopoly: small number of firms (usually large firms). Pure Oligopoly – few companies produce 1 commodity product, so none could charge more than going price. Differentiated oligopoly few companies offer products partially differentiated by quality, features, styling or service.
o Monopolistic Competition: Many competitors who are able to differentiate their offers in whole or part (restaurants, for example)
o Pure ...