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Forces shaping competition in Industry RIVALRY EXISTING FIRMS (High IF…
Forces shaping competition in Industry RIVALRY EXISTING FIRMS
Purpose of 6 forces
Understand strength of competitive forces
Understand interactions between forces
Industry attractiveness
High IF
Equal market share
Low or negative growth rate
Industry is
Competitive
Hyper
High fixed costs
High exit barriers
Product is a commodity
No differentiation
Corn
High strategic stake in industry
Apple
Central to reputation
Economies of scale (DEFENSIVE STRATEFY AGAINST COMPETITION)
Cost advantage
Fixed costs stay same
Capital
purchasing
Advertising
but output increases
increased scale of ops
lowering unit costs
Minimum efficiency scale
Lowest possible average unit cost
That plant etc...
With that technology
Dis-economies of scale
Min efficiency scale surpassed
Need more machines
Need bigger factory
To produce more
MAX capacity
Implications
It only works if demand is stable or rising
Max capacity could be a strategy
Create more products
Reduce unit cost
Make more sales
New tech can impact
Create efficiencies
Lower costs
But only if demand is there
Don't need such bit facilities
Reduce machines
Smaller factories
Reduce fixed costs
Exit Barriers
Limitations
Social
Legal
Bankrupcy
on-going ops
minimise disruption
loss of jobs
Political
Inter-dependencies
Feeds other business ops
Assets
Industry specific
Specific location
Emotional attachment