Threat of Entry

It depends on the hurdles to entry that are there, together with the response from existing challengers that the entrants can anticipate. If barriers are high the new comer can expect sharp retaliation from the entrenched competitors.Barriers of Entry

There are 6 major Barriers to Entry, which include product differentiation, economies of scale, switching costs, capital requirements, access to the distribution channels, and government policy.

Expected retaliation

Prospective entrant’s expectations concerning the response of existing competitors as well will influence the risk of entry.

Intensity of Rivalry among Existing Competitors

Competition amongst existing competitors takes the common form of jockeying for position-using strategies like advertising battles, price competition, product introduction and increased customer services and warranties. Rivalry occurs because competitors see opportunities to improve positions.

Pressure from Substitute Products

Each firm in industries is competing, among industries producing substitute products. Substitutes limit the probable profits of an industry by introducing a upper limit on the prices firms in the industry can gainfully charge .The more striking the cost performance option presented by substitutes, the firmer the lid on industry profits.

Bargaining Power of Buyers

Buyers fight with the industry by means of forcing down prices, bargaining for higher quality for more services and challengers in opposition to each other-all at the cost of the industry productivity .The power of each buyer group depends on market situation and the relative significance of its purchases.

Bargaining Power of Suppliers

Suppliers can exercise negotiating power over participants in an industry by intimidating to elevate prices or lessen the quality of purchase goods and services. Influential suppliers can thus squeeze profitability out of an industry.

Generic Competitive Strategies

Each firm’s competitive strategies is a unique construction of its circumstances. But at a general board level, these strategies can be classified into three internally consistent generic strategies.

These generic strategies are:
•    Overall cost leadership
•    Differentiation
•    Focus

Overall Cost Leadership

As the name suggests, this strategy is based on the fact that the firm enjoys cost benefits compared to the other firms in the industry. In other words, this means that the firm has the lowest cost. However  to achieve this strategy the firm needs aggressive building of well-organized scale facilities, tight overhead, dynamic search of cost reduction plans, and cost control.

Differentiation

This is a process of generating something that is professed industry wide as being exceptional. It creates a defensible position for copying with the five competitive forces. It generally takes many forms.

Focus

It is a strategy wherein the firm focuses on a specific consumer group, section of the product line or geographic market. It basically creates a market on its own.