Rivalry tends to increase when

• there is downward pressure on price

• there are high exit barriers

• demand for the product is growing slowly or not at all

Rivalry tends to increase when

• competitors become more equal in size and capability

• when customers’ switching costs are low

• one or more competitors is not satisfied with its position

Barriers to entry

• high customer loyalty (high switching costs to customers)

• economies of scale

• learning/experience curve

Barriers to entry

• resource requirements (money, access to supplies, distribution, etc.)

• regulations, tariffs, trade restrictions internationally, local content

• access to specialized resource

Rivalry, exit barriers, demand

Demand decline Demand growth

HighHigh threat of excess capacity, price wars

Opportunities to differentiate, raise price, expand

LowModerate threat of excess capacity, price wars

Opportunities to differentiate, raise prices, expand

Demand conditions

Exitbarriers

Product life cycle

• understand competitor dynamics

• understand buyer behavior

• predict future

Industry life cycle

• beginning industry

• fragmented industry

• consolidated industry

INDUSTRY ATTRACTIVENESS

Criteria Weight Rating Weighted Score

Ind. Size 0.20 3 0.60

Profitability 0.25 5 1.25

Regulations 0.10 1 0.10

Technology 0.45 2 0.90

Totals 1.00 2.85

WEIGHT: RELATIVE IMPORTANCE OF EACH TO COMPANY

RATING: ATTRACTIVENESS OF FACTOR TO COMPANYOR “STATE” OF FACTOR IN INDUSTRY

IMPORTANT POINTS:

1. DETERMINE THE FACTORS (AGREE?)FIRST CATEGORYSECOND CATEGORYCHANGES IN CATEGORY?

2. JUDGE WEIGHTS (AGREE?)

3. JUDGE RATING (AGREE?)

INDUSTRY FACTORS

• GROWTH RATE

• MARKET DIVERSITY

• PRICING

• COMPETITIVE STRUCTURE

• INFLATION

• CYCLICALITY

• LIFE CYCLE (PRODUCT, INDUSTRY)