COMM 320 Lecture Notes - Lecture 5: Competitor Analysis, Switching Barriers, Bargaining Power
7 Dec 2018
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Must think about its position at both the company level and product/service level. Framework to understand industry"s structure comprised of forces that determine industry profitability: threat of substitutes: how easily other products/services can serve as substitutes. Industries often offer amenities to reduce likelihood that customers will switch to a substitute product: threat of new entrants: how high are the barriers to entry. Economies of scale mass production = lower average costs. Level of fixed costs: bargaining power of suppliers: suppliers can suppress profitability by increasing prices/decreasing quality. Supplier concentration few suppliers = higher power. Switching costs high costs = higher power: attractiveness of substitutes power is enhanced if there are no attractive substitutes. Threat of forward integration power is enhanced if supplier can enter buyer"s industry: bargaining power of buyers: buyers can suppress profitability by demanding price concessions or higher quality. Buyer group concentration fewer buyers = higher power.
