BU111 Lecture Notes - Lecture 6: Oligopoly, Perfect Competition, Switching Barriers

• School: WLU
• Department: Business
• Course: BU111
• Professor: Sofy Carayannopoulos

Document Summary

Each business operates in a specific industry, and each industry has different characteristics. Helps managers analyze 5 important sources of competitive pressure competitive environment of industry. Helps managers decide what their competitive strategy should be to exploit opportunities. Competition affects price affects bottom line (profits) The bargaining power (bp) suppliers have over buyers helps determine how competitive an industry is. Suppliers: fewer suppliers or high switching costs (less substitutes) = more bargaining power for suppliers high switching costs: how much it costs you to switch from one product to another substitute. Use strategic alliance with other buyers, or internal supply to reduce dependence on outside suppliers increase bp; ex: buying shares, controlling interests or creating their own suppliers. New entrants are usually not the same industry as other business they enter with new ideas, models, better technologies change the rules of the game ease of entry = more intense competition less attractive industry.