Introduction The model of the Five Competitive Forces was developed by Michael E. Porter in his book „Competitive Strategy: Techniques for Analyzing Industries and Competitors“ in 1980. Since that time it has become an important tool for analyzing an organizations industry structure in strategic processes. Porters model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. Especially‚ competitive strategy should
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willing to pay P1 for Q1. Unit costs are only P2 so the firm is making an abnormal profit of (P1-P2)*Q1 The four key characteristics of monopoly are: (1) a single firm selling all output in a market‚ (2) a unique product‚ (3) restrictions on entry into and exit out of the industry‚ and more often than not (4) specialized information about production techniques unavailable to other potential producers. These four characteristics mean that a monopoly has extensive (boarding on complete) market
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Industry According to porter the key barriers to entry are economies of scale capital expenditure requirements ‚ customer switching costs ‚ access to industry distribution channels ‚ and the threat of retaliation by the existing Industry players . Considering these factors for the Petroleum Industry the economies of scale is very high because of its capital-intensive nature of operations there fore new entrants face economies of scale as a barrier to entry in to Petroleum industry . As explained above
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keep the threat of substitutes low in the near future. 2) Threat of Entry Since the new proprietary technology will make us become profitable relatively quickly‚ the water filtration industry will become more attractive to the outside industry. Due to absolute cost advantages over competitors ($1.00/cubic meter)‚ We will become experience absolute cost advantages over competitors. However‚ due to a high threat of entry‚ we will have to constrain its prices to the competitive level. One of
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Porter’s Five Forces Rivalry Among Competing Sellers: HIGH/MODERATE The rivalry among competing sellers‚ often the strongest competitive pressure‚ is also fairly high for Panera in the restaurant industry. No switching costs‚ numerous competitors‚ and an increase in the availability of healthy food For a company in the restaurant industry‚ there are no switching costs for consumers. It is not like‚ for instance‚ the cable industry where cancellation fees are prevalent or an electronics industry
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empirical literature. The recent burgeoning of theoretical work in industrial economics provides a rich set of models that help make our understanding of first-mover advantages more precise. There is also a growing body of empirical literature on order-of-entry effects. Our aim is to begin to provide a more detailed mapping of mechanisms and outcomes‚ to serve as a guide for future research. We define first-mover advantages in terms of the ability of pioneering firms to earn positive economic profits (i.e
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can exert a considerable amount of power over metal can manufacturers. Barriers to entry 1. The capital investment is low. A typical two-pieces can line cost between $20 and $25 million‚ and a three-pieces can line cost approximately $1.5-$2 million. So the capital is not the barrier to entry. 2. The efficient scale is not more than 15 lines‚ so the economy of scale is low and can put barrier to entry 3. There are no switching barriers because the products are indifferent and buyers
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137 How competitive forces shape strategy Awareness of these forees can help a company stake out a position in its industry that is less vulnerable to attack Michael E. Porter The nature and degree of competition in an industry hinge on five forces: the threat of new entrants‚ the bargaining power of customers‚ the bargaining power of suppliers‚ the threat of substitute products or services (where applicahle)‚ and the jockeying among current contestants. To estahlish a strategic agenda
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Porter’s Five-Force model consists of rivalry‚ threat of substitutes‚ buyer power‚ supplier power and threat of new entrants and entry barriers. I believe Porter’s Five-Force model offers a corporation a solid backbone foundation in developing an international business strategy. The first part of Porter’s Five-Force model is rivalry. According to Porter‚ rivalry focuses on two main factors which are a high concentration ratio and a low concentration ratio. A high concentration ratio indicates
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used. Porter (1980:3) states that “competition in an industry depends on five basic competitive forces”. As seen below in figure 1. Figure 1. Threat of new entrants Porter (1980:7) states that there are “six major sources of barriers to entry”; economies of scale‚ product differentiation‚ capital requirements‚ switching costs‚ access to distribution channels and government policy. “New entrants to an industry bring new capacity and a desire to gain market share that puts pressure on prices
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