The Five Competitive Forces
In a way, the five competitive forces that determine the profitability of a certain company, in the sense of sector or group of firms that operate in a certain market segment, such as the automobile industry, banks and other companies.
The first strength lies in the degree of rivalry between existing companies. In some segments, this rivalry is not perceived by customers or shareholders. predators seriously affecting the profitability of the business a good example of this are the computer industries (noteboks) where brands compete for each customer or major distributor
New Competitors
The second force concerns the threat of new competitors, the concern with prices, in this case, makes it work as a barrier to the entry of new competitors in the sector, alongside other elements such as economy of scale (it is worth remembering that the economy of scale means obtaining a greater quantity of product, using the same quantity of production factors), brand identity, licensed or patented products, access to distribution channels.
Supplier Negotiation
The third strength lies in the bargaining power of suppliers, which is determined by factors such as the differentiation of inputs, the existence of substitute inputs, the degree of concentration of suppliers, the importance of volume for the supplier, the cost of switching suppliers and other aspects of this nature.
Buyers Negotiation
The fourth force demands the bargaining power of buyers. This power occurs when the market is highly concentrated on the client side, that is, when there are few buyers, which makes the bargaining power of each one large enough to impose conditions on the industry. For the increase of buyers' bargaining power, the volume of purchases, the buyer's switching costs in relation to the company's switching costs, the level of customer information, the existence of substitute products and other aspects that denote the leverage of the negotiation.
Threat of Substitute Products
The fifth force concerns the threat of substitute products, an aspect that is linked to the buyer's perception and propensity to substitute, in addition to switching costs and the relative price performance of those substituted.