Porter's Five Flashcards
1
Q
Rivalry
A
- competition for market share within the market
- non-price competition drives up marginal and fixed costs
- price competition erodes industry profitability and it occurs when there are many sellers, cost advantage, overproduction, large infrequent orders, absence of price leadership, high price elasticity
2
Q
Entry
A
Entry hurts by cutting into firm’s market share and intensifying rivalry. Barriers could be exogenous (nature of the industry) or endogenous (incumbent’s strategic choices)
3
Q
What factors affect entry?
A
- minimum efficient scale
- government policies
- brand loyalty
- entrant’s access to resources
- learning curve
- network externalities
4
Q
Substitutes and compliments
A
- substitutes erode demand
- complements boost industry demand
- when price elasticity is large pressure from substitutes is also large
5
Q
Supplier Power
A
The degree of control a provider of goods can exert on their customers
6
Q
What factors determine supplier power?
A
- asset specificity
- availability of substitutes
- threat of forward integration of suppliers
- suppliers’ ability to price discriminate
7
Q
Buyer power
A
buyer concentration or relationship specific assets lead to direct power
8
Q
Main strategies
A
- cost advantage
- five forces are less severe
- reduce internal rivalries
- increase switching costs
- entry deterring strategies
- tapered integration to reduce buyer/supplier power
