Question

What can over-reliance on tools that look at competitive forces lead to?

Answer 1

Ans.

Five Forces Analysis given by Porter that looks as tool for understanding forces that shape competition within an industry. It is also use as strategy to suit your competitive environment, and to improve your potential profit it is:

· Supplier Power: the ability of suppliers to drive up the prices.

· Buyer Power: the strength of customers to drive down the prices.

· Competitive Rivalry: the strength of competition in the industry.

· The Threat of Substitution: the extent to which different products and services can be used in place of your own.

The above tools are important for industrials to analyze the competition in fact but except these above there are many other factors that can affect the level of competition in a market or industry includes –

Product homogeneity

Consumer switching costs

Excess production capacity

Network effects

Government regulation

So only depending on porter’s five is over-reliance on tools.