AFM433 Lecture Notes - Lecture 6: Switching Barriers
Document Summary
Awareness: awareness of the five forces can help a company understand the structure of its industry and stake out a position that is more profitable and less vulnerable to attack. Industry structure: industry structure drives competition and profitability, not whether an industry is emerging or mature, high tech or low tech, regulated or unregulated. The five competitive forces: threat of entry: new entrants to an industry bring capacity and a desire to gain market share that puts pressure on prices, costs, and the rate of investment necessary to compete. Barriers to entry: advantages that incumbents have relative to new entrants. It is more concentrated than the industry it sells to. It does not depend heavily on the industry for its revenues. There is no substitute for what it provides. There are few buyers, or large vol ume buyers. Buyers can credibly threaten to integrate backward. The product represents a significant portion of the buyer"s cost structure.