4 Bargaining Power of Buyers Concentrated or large volume salesPurchased products are a significant fraction of buyer’s costsProducts are standard or undifferentiatedThere are few switching costsLow profits - pressure on suppliersBuyers pose threat of backward integrationBuyer has full information
5 Bargaining Power of Suppliers Concentrated suppliers, fragmented buyersLittle substitution threatCustomer is not an important buyerSupplier’s product is important inputHigh buyer switching costsSuppliers pose threat of forward integrationGovernment - defense, timber, regulation
6 Rivalry: Price competition, advertising, product introductions, customer service.. Numerous Competitors: More mavericksSlow Industry GrowthHigh Fixed or Storage Costs (Excess capacity often leads to price wars)Lack of Differentiation = commodityForeign CompetitorsHigh Strategic StakesHigh Exit Costs
7 Likelihood of retaliation to entry History of retaliationEstablished firms with substantial resources such as cash, borrowing capacity, excess productive capacity, distribution leverageEstablished firms with illiquid industry assetsSlow industry growth - can’t absorb new competition.