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The Five Forces that Shape Industry Competition - Coggle Diagram
The Five Forces that Shape Industry Competition
Key themes
To strategize and cope with competition
Five forces that shape industry competition
Customers
Suppliers
Established industry rivals
Potential entrants
Substitute products
Application of the theory to a modern-day area of interest
Rivalry amongst existing competitors
Threat of new entrants
Bargaining power of buyers
Bargaining power of suppliers
Threat of substitute products or services
Alternative courses of action
Anticipating and exploiting shifts in the forces
Shaping the balance of forces to create a new industry structure that is more favorable to the company
Positioning the company to better cope with the current competitive forces
Redividing profitability
Idea in Practice
Position company where forces are the weakest
Price competition is stiff due to trucks being built to regulated standards and offering similar features. A company called "Paccar" focused on individual drivers vs companies. Paccar offers luxurious sleeper cabins
Exploit changes in the forces
Record companies attempted to develop technical platforms for digital distributions themselves, but major labels didn't want to sell their music through a platform owned by a rival. Apple stepped in with iTunes music store as a new gatekeeper. The number of major labels went from six in 1997 to four today
Reshape the Forces in Your Favor
Using tactics designed specifically to reduce the share of profits leaking to other players
Neutralizing
supplier power
for parts so your company can switch more easily amongst vendors
Counter
customer power
by expanding services so it's harder for customers to leave you for a rival
Tempering price wars with
established rivals
by investing more heavily in products that differ slightly from competitor's
Scaring off
new entrants
by elevating the fixed costs of competing
Limiting the threat of
substitutes
by offering better value through wider product accessibility