Question

According to our text (HBR, 2011), “Rivalry among existing competitors takes many familiar forums, including price discounting, new product introductions, advertising campaigns, and service improvements. High rivalry limits the profitability of an industry. The degree to which rivalry drives down an industry’s profit potential depends, first, on the intensity with which companies compete and, second, on the basis of which they compete” (p. 56-57). For this discussion forum, describe the intensity and the basis of rivalry in the industry in which you currently work? If you are not currently working, select an industry in which you are familiar. Please choose the restaurant indusrty

Answer 1

If you have many competitors, and they offer equally attractive products and services, then you'll most likely have little power in the situation, because suppliers and buyers will go elsewhere if they don't get a good deal from you. On the other hand, if no-one else can do what you do, then you can often have tremendous strength”(Mindtools). This is very important because if the auto industry do not offer incentives and good deal to customers, then the customer will be forced to either buy your products or more likely to go elsewhere where they can get a better deal for their money. As I mentioned before, this happens a lot in the auto industry where the dealerships compete with each other in order to attract more businesses and customers. Porter in his book “The Five Competitive Forces that Shape Strategy” mentions that “Rivalry among existing competitors takes many familiar forms, including price discounting, new product introductions, advertising campaigns, and service improvements. High rivalry limits the profitability of an industry. The degree to which rivalry drives down an industry’s profit potential depends, first, on the intensity with which companies compete and, second, on the basis on which they compete”. This type of competition might be the downsize in the auto industry.The Threat of Substitution is another force that Porter mentions. “A substitute performs the same or a similar function as an industry’s product by a different means. Videoconferencing is a substitute for travel. Plastic is a substitute for aluminum. E-mail is a substitute for express mail. Sometimes, the threat of substitution is downstream or indirect, when a substitute replaces a buyer industry’s product. For example, lawn-care products and services are threatened when multifamily homes in urban areas substitute for single-family homes in the suburbs. Software sold to agents is threatened when airline and travel websites substitute for travel agents” (hbr.org). This threat has been more visible in European and Asian countries where the

Porter’s Five Forces Model to the American Automotive Industry7 replacement of automobiles for other ways of transportation has been more noticeable. In Europe and Asia for instance, more public transportation has been performed by local governments. There has been more emphasis in the use of public transportation in the US lately. Also some local governments and federal governments have been talking about building more high speed trains and improving the local transportation in several cities. This could have an impact in the Auto Industry in the future. Imagine a big percentage of people replacing their cars and start using massive transportation, the impact in the Auto Industry will definitely be severe.