COMM 4351 Chapter Notes - Chapter 2: Switching Barriers, Life-Cycle Assessment, Social Forces
11 Dec 2014
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Industry boundaries may change over time, e. g. blurred lines between computers and cell phones. High forces threats, low forces - opportunities: risk of entry. Economies of scale disadvantage for new firms, or they require capital to produce large quantities. Absolute cost advantage new entrants can"t match established company cost structure. Competitive structure number and size of companies in it. Less intense means company can raise price, or reduce cost on strategy: fragmented (sm/med businesses) threat, consolidated (large businesses, monopolies) Industry demand growing demand reduces rivalry, declining demand increases rivalry major threat. Cost conditions fixed costs tied to volume. Exit barriers companies prevented from leaving industry, severance, investment in old machinery: bargaining power of buyers. Power comes from choice, large quantities, switching costs are low: bargaining power of suppliers. Ability of suppliers to raise input prices powerful suppliers are a threat. Power comes when there are few substitutes, they can enter their buyer"s industry: closeness of substitutes.
