BU481 Chapter Notes - Chapter 4: Structural Dynamics, New Economy, Switching Barriers
Document Summary
The decision to make initial, or further investment in an industry, depends on the industry attractiveness. We need to understand the industry economics, drivers of profitability, and the key success factors (ksfs) to understand what it takes to win in the industry. The following models are examined: porter"s five forces model. The forces are: competitive rivalry, threat of new entrants, supplier power, buyer power, and threat of substitute products. These five forces are at play in any industry and they will determine the industry"s profitability. The weaker these forces, which describe the key structural features of the industry, the greater the opportunity for superior performance by firms within the industry. The stronger these forces, the more difficult it will be to achieve competitive advantage: threat of entry. New players may also be deterred by the potential for retaliation by existing competitors, should they decide to enter regardless of the barriers.
