The competition is defined as “the race that
takes place in product or service markets between the institutions, helps the
companies to take free economic decisions.”[1] Therefore in order to be competitive in the market the companies
must be eligible enough to compete against the others. Porter’s five forces
analyses was created by Mr. Michael Porter and he has defined the forces as
shown in the following:[2]
·
The bargaining power of
customers:
o
Buyer concentration to firm
concentration ratio
o
Bargaining leverage
o
Buyer volume
o
Buyer switching
costs relative to firm switching costs
o
Buyer information availability
o
Ability to backward integrate
o
Availability of existing
substitute products
o
Buyer price sensitivity
o
Price of total purchase
·
The bargaining power of
suppliers
o
Supplier switching costs
relative to firm switching costs
o
Degree of differentiation of
inputs
o
Presence of substitute inputs
o
Supplier concentration to firm
concentration ratio
o
Threat of forward integration
by suppliers relative to the threat of backward integration by firms
o
Cost of inputs relative to
selling price of the product
·
The threat of new entrants
o
The existence of barriers to
entry
o
Economies of product differences
o
Brand Equity
o
Switching costs
o
Capital requirements
o
Access to distribution
o
Absolute cost advantages
o
Learning curve advantages
o
Expected retaliation
o
Government policies
·
The threat of substitute
products
o
Buyer propensity to substitute
o
Relative price performance of
substitutes
o
Buyer switching costs
o
Perceived level of product
differentiation
·
The intensity of competitive
rivalry
o
Number of competitors
o
Rate of industry growth
o
Intermittent industry
overcapacity
o
Exit barriers
o
Diversity of competitors
o
Informational complexity and asymmetry
o
Brand equity
o
Fixed cost allocation per value
added
o
Level of advertising expense
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