Name and describe four of the six industry forces that shape the attractiveness of a competitive environment

What will be an ideal response?

Students can discuss any four of the following six industry forces that shape the attractiveness of a competitive environment:
(1 ) Barriers to Entry — Market entry can be blocked in many ways. They include political barriers, technological barriers, high advertising expenditures, R&D spending and sales force expenditures that can block market entry for businesses with limited resources.
(2 ) Barriers to Exit — The competitive environment is also enhanced when weak competitors can easily exit a market. Legal barriers, specialized assets, or the strategic importance of a business often prevent businesses from exiting markets when they should.
(3 ) Customer Buying Power — When relatively few customers buy in large quantities and can easily switch suppliers, there is considerable customer buying power, which lowers market attractiveness. Large, concentrated groups of customers possess a buying power that enables them to negotiate lower prices or better terms and conditions of sale. Likewise, when customers can easily switch from one supplier to another, they force increased competition, which can lower prices as well as raise the cost of serving customers. Also, when the purchased product or service is of limited importance to the customer, supplier dependence is much lower.
(4 ) Supplier Selling Power — If a business is a large purchaser of a commodity product (less important to the buyer) and is in an industry in which switching costs are low, supplier power is generally low. This is an attractive market situation that contributes to industry attractiveness and profit potential.
(5 ) Product Substitutes — The more substitute products available to customers, the easier it is for them to switch. Ease of switching intensifies competition and lowers profit potential and industry attractiveness.
(6 ) Competitive Rivalry — The more competitors in an industry, the lower the differentiation between competitors; the larger the excess industry capacity, the more likely the industry will engage in intense competitive rivalry. More intense competitor rivalry tends to lower prices and margins and raise marketing expenses in the battle to attract and retain customers. The net effect is a less attractive competitive environment in which the profit potential is lower.