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

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

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