MANAGING INDUSTRY COMPETITION

 The focal firm’s performance critically depends on the degree of competitiveness of the five forces within an industry  The stronger and more competitive these forces are; the less likely the focal firm is able to earn above-average return, and vice versa

 Bargaining power of suppliers. Suppliers to sell higher priced or low quality raw materials to their buyers.  Bargaining power of buyers. Buyers have the power to demand lower price or higher product quality from industry producers.  Rivalry among competitors. Firms have to compete aggressively for a market share, which results in low profits.

 Threat of substitutes. Threatening when buyers can easily find substitute products with attractive prices or better quality and when buyers can switch from one product or service to another with little cost.  Threat of potential entry. Determines how easy (or not) it is to enter a particular industry.

 Cost leadership. ex:AirAsia,Mcdonald  Differentiation. ex: Boat Noodle  Focus. ex: Ferrari,Rolls-Royce