International Management I - Master FH Trier (Fach) / Global Competitiveness Analysis and Generic Strategies (Lektion)

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• Porter's 5 Forces - 5 Forces There are five forces influencing competition in an industry:• the threat of new entrants• the threat of substitute products or services• the bargaining power of buyers• the bargaining power of suppliers• the competitive rivalry among current members of the industry
• Porter's 5 Forces - Threat of new entrants mean downward pressure on prices and reduced profitability Barriers to entry determines the extent of threat of new industry entrants New entrants => new capacity, a desire to gain market share, new approaches to serving customer needs. New players => prices will be pushed downward and margins squeezed => reduced industry profitability in the long run.
• Porter's 5 Forces - Threat of new entrants - Barriers to Entry Economies of Scale Product differentiation (a copy isn't worth the same) Capital requirements Switching costs (costs for switching suppliers or products) Distribution channels Government policy Cost advantages independent of scale economies (access to raw material, favorable locations, ...) Competitor response
• Porter's 5 Forces - Threat of Substitute Products Availability of substitute products places limits on the prices market leaders can charge High prices induce buyers to switch to the substitute Digital era changes many rules, as digital copies are for free and new distribution channels appeared
• Porter's 5 Forces - Bargaining Power of Buyers Buyers seek to pay the lowest possible price Buyers have leverage over suppliers when–They purchase in large quantities (enhances supplier dependence on buyer)–Suppliers’ products are commodities–Product represents significant portion of buyer’s costs–Buyer is willing and able to achieve backward integration (ability to produce the goods himself)
• Porter's 5 Forces - Bargaining Power of Suppliers Leverage accrues when–Suppliers are large and few in number–Supplier’s products are critical inputs, are highly differentiated, or carry switching costs–Few substitutes exist–Suppliers are willing and able to sell product themselves
• Porter's 5 Forces - Rivalry among Competitors Ways:–Price competition–Advertising battles–Product positioning–Differentiation Reasons for rivalry: - oversaturated market- strong economics of scale and high fixed costs => high volume beneficial- products are commodities (easily substituable)- Firms with strategic interest may accept low margins to gain position

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