BU111 Lecture Notes - Lecture 1: Customer Switching, Price Ceiling, Switching Barriers

• School: WLU
• Department: Business
• Course: BU111
• Professor: Sofy C.

Document Summary

Porter"s five forces: developed by michael porter, an economist, what effects industry profitability, potential entrants, consider what other companies may join the industry, more competitors you"re going to end up facing -> lower profitability. Substitutes: may be a cheaper alternative, as price rises of product, substitute becomes more tempting (puts ceiling on what you can charge, more substitutes there are -> profitability goes down. Influence how much it costs to produce something: the more the supply costs, the lower the profit. If suppliers have more bargaining power than you do, they will charge more (lower profitability) Intensity of rivalry will go up: buyers, when buyers have a lot of bargaining power then there will be lower price (profitability down) Intensity of rivalry increases: buyers and suppliers are part of supply chain, caveat: power and influence of each force will vary by industry.