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3. Competitive Forces Model Companies must contend with five competitive forces which you need to analyse (Figure 4-6) : 1Threat of new entrants 2Bargaining.

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Presentation on theme: "3. Competitive Forces Model Companies must contend with five competitive forces which you need to analyse (Figure 4-6) : 1Threat of new entrants 2Bargaining."— Presentation transcript:

1 3. Competitive Forces Model Companies must contend with five competitive forces which you need to analyse (Figure 4-6) : 1Threat of new entrants 2Bargaining power of customers and buyers 3Bargaining power of suppliers 4Substitute products or services 5The intensity of rivalry among competitors

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3 3. Competitive Forces Model cont. Three strategies for dealing with these competitive forces: 1.Differentiate product and services - make them “better” in the eyes of the consumer  Probably the most popular of the 3 strategies 2.Be the lowest-cost producer - not just a low- cost producer 3.Find a niche - e.g.: geographical market

4 The Internet tends to dampen the profitability of industries and reduce firms’ ability to create sustainable operational advantages because: – It increases the bargaining power of buyers – Decreases barriers to entry – Increases the bargaining power of suppliers – Increases the threat of substitute products and services, and – Intensifies rivalry among competitors Recommend = focus on your strategic position in an industry and how you will maintain profitability – Not growth, market share or revenue Framework Example Five Forces Analysis of the Internet


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