In: Operations Management
Identify forces that shape competition in a company’s external environment and discuss techniques for identifying strategic opportunities and threats./ defines industry, sector, market segments/ forces that shape competition in a company’s industry environment, using Porter’s Five Forces Model/concepts of strategic groups and mobility barriers/Industry Life-Cycle Analysis
The different external forces are as below=
Bargaining power of the customers= This is an important aspect of the external factors that determine the level of competition in a certain industry. Greater the bargaining power of the customers, the lesser will be the industry attractiveness and thus the level of the competition will be lower and vice versa.
Bargaining power of the suppliers= Suppliers facilitate the necessary parts, equipment and raw material. If there are less number of suppliers then they will have higher bargaining power and thus will impact the level of competition in the industry
The threat of new entrants= If there are not enough entry barriers the chances of new entrants are quite high and thus the competition level will be high.
The threat of substitute products= If the product can easily be replaced by the other service, the competition level in the industry will be quite high.
Rivalry among the player= If the level of competition among the existing players in the industry is high and they target the same customer segment then the level of competition will be quite high.
The different methods that can be used to analyze this level of competition are stated as below=
Industry life cycle =This method is used to find out the stage in which a certain industry is operating There are mainly 4 stages in which a certain industry can operate these are introduction, growth, consolidation and finally extinction. The level of competition in each phase of the cycle will vary and therefore the management has to employ new methods to deal with the competition
Porter's Five Forces model=it is a model that is usually employed in order to find out the five important competitive factors that can determine the level of competition in a given industry. With the help of this model, the management can identify the strengths and weaknesses of the given industry. This is an important model to find out the structure of the industry so that the companies can develop corporate strategies.