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stions Concerning Competitors (cont’d) Entry and exit of firms in the industry Our product/service positioning Key factors for our current position in industry Sales/profit rankings of petitors over time Our vulnerability to strategic counterattack 55 Copyright 2023 Prentice Hall Key Questions Concerning Competitors (cont’d) The threat of substitute products/services Nature of supplier distributor relationships Should we keep our strategies secret from employees and stakeholders? 56 Copyright 2023 Prentice Hall Competitive Forces ?Moody’s Manuals ?Standard Corporation Descriptions ?Value Line Investment Surveys ?Dun’s Business Rankings ?Standard Poor’s Industry Surveys ?Industry Week ?Forbes, Fortune, Business Week Sources of Corporate Information 57 Copyright 2023 Prentice Hall Competitive Forces 1. Market share matters 2. Understand what business you are in 3. Broke or not, fix it 4. Innovate or evaporate 7 Characteristics of most Competitive . Firms: 58 Copyright 2023 Prentice Hall Competitive Forces 5. Acquisition is essential to growth 6. People make a difference 7. No substitute for quality 7 Characteristics of most Competitive . Firms: 59 Copyright 2023 Prentice Hall The FiveForces Model of Competition Potential development of substitute products Rivalry among peting firms Bargaining power of suppliers Potential entry of new petitors Bargaining power of consumers 60 Copyright 2023 Prentice Hall Steps to Determine if an Acceptable Profit Can be Earned 1. Identify key aspects or elements of each petitive force 2. Evaluate how strong and important each element is for the firm 3. Decide whether the collective strength of the elements is worth the firm entering or staying in the industry 61 Copyright 2023 Prentice Hall The FiveForces Model ? Most powerful of the five forces ? Focus on petitive advantage of strategies Rivalry Among Competing Firms 62 Copyright 2023 Prentice Hall The FiveForces Model ? Barriers to entry are important ? Quality, pricing, and marketing can overe barriers Potential Entry of New Competitors 63 Copyright 2023 Prentice Hall The FiveForces Model ? Pressures increase when consumer’s switching costs decrease ? Firm’s plans for increased capacity market peration Potential Development of Substitute Products 64 Copyright 2023 Prentice Hall The FiveForces Model ? Large number of suppliers few substitutes affects intensity of petition ? Backward integration can gain control or ownership of suppliers Bargaining Power of Suppliers 65 Copyright 2023 Prentice Hall The FiveForces Model ? Customers concentrated or buying in volume affects intensity of petition ? Consumer power is higher where products are standard or undifferentiated Bargaining Power of Consumers 66 Copyright 2023 Prentice Hall Conditions where Consumers Gain Bargaining Power ? If they can inexpensively switch ? If they are particularly important ? If sellers are struggling in the face of falling consumer demand ? If they are informed about seller’s products, prices and costs. ? If they have discretion in whether and when they purchase the product. 67 Copyright 2023 Prentice Hall Forecasting Tools and Techniques ? Forecasts are educated assumptions about future trends and events ? Quantitative techniques – Most appropriate when historical data is available and