BU111 Lecture Notes - Lecture 4: Capital Intensity, Keurig, Price Ceiling
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Caveat: power and influence of each force will vary by industry. Suppliers affect volume and price (how much they are willing to sell) Rivalry among existing firms who sells something very similar to you: most powerful force. Effects: price competition, lower volume, increased costs. Solution: growth, acquisition of competitors, create/increase consumer switching costs, differentiation. Low, work harder to attract customers, constrained prices, profitability goes down. Product spoils (farmer markets sell products cheap at end of the day) Effects: creates price ceiling; increases marketing costs. Likeness or not to go for the substitute. Effects: can cause big changes & intensify competition. Solutions: grow to achieve scale, control distribution network. Lobby government: differentiate; create brand loyalty & identity. Lack of capital intensity eco. of scale. Low switching costs/ no brand loyalty or identity. More difficult if there are lots of regulations, less difficult if less regulations. Easy for customers to switch (e. g. toothpastes, soaps, etc. )
