What are the forces in a competitive environment(Industry Environment)?

Explain the forces in a competitive environment(Industry Environment).

(a) The Bargaining Power of Buyers
Buyers threaten an industry by forcing down prices, bargaining for higher quality or more services, and playing competitors against each other. These actions erode industry profitability.


(b) The Bargaining Power of Suppliers
Suppliers can exert bargaining power by threatening to raise prices or reduce the quality of purchased goods and services. Powerful suppliers can squeeze the profitability of firms so far that they can’t recover the costs of raw material inputs.

(c) The Threat of Substitute Products and Services
All firms within an industry compete with industries producing substitute products and services. Substitutes limit the potential returns of an industry by placing a ceiling on the prices that firms in that industry can profitably charge.

(d) The Intensity of Rivalry among Competitors in an Industry
Firms use tactics like price competition, advertising battles, product introductions, and increased customer service or warranties. Rivalry occurs when competitors sense the pressure or act on an opportunity to improve their position.

(e) The threat of new entrants refers to the possibility that the profits of established firms in the industry may be eroded by new competitors.

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maurice.mutuku answered the question on April 16, 2019 at 12:26

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