Rivalry tends to increase when there is downward

Rivalry tends to increase when • there is downward pressure on price • there are high exit barriers • demand for the product is growing slowly or not at all

Rivalry tends to increase when • competitors become more equal in size and capability • when customers’ switching costs are low • one or more competitors is not satisfied with its position

Barriers to entry • high customer loyalty (high switching costs to customers) • economies of scale • learning/experience curve

Barriers to entry • resource requirements (money, access to supplies, distribution, etc. ) • regulations, tariffs, trade restrictions internationally, local content • access to specialized resource

Rivalry, exit barriers, demand Demand conditions Demand decline Demand growth High threat of excess capacity, price wars Opportunities to differentiate, raise price, expand Low Moderate threat of excess capacity, price wars Opportunities to differentiate, raise prices, expand Exit barriers

Product life cycle • understand competitor dynamics • understand buyer behavior • predict future

Industry life cycle • beginning industry • fragmented industry • consolidated industry

INDUSTRY ATTRACTIVENESS

WEIGHT: RELATIVE IMPORTANCE OF EACH TO COMPANY RATING: ATTRACTIVENESS OF FACTOR TO COMPANY OR “STATE” OF FACTOR IN INDUSTRY

IMPORTANT POINTS: 1. DETERMINE THE FACTORS (AGREE? ) FIRST CATEGORY SECOND CATEGORY CHANGES IN CATEGORY? 2. JUDGE WEIGHTS (AGREE? ) 3. JUDGE RATING (AGREE? )

INDUSTRY FACTORS • • GROWTH RATE MARKET DIVERSITY PRICING COMPETITIVE STRUCTURE INFLATION CYCLICALITY LIFE CYCLE (PRODUCT, INDUSTRY)