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6 September, 13:19

1. What are the factors affecting the intensity of rivalry in the industry in which your company is competing? Would you characterize the rivalry and jockeying for better market position, increased sales, and market share among the companies in your industry as fierce, very strong, strong, moderate, or relatively weak? Why?

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  1. 6 September, 16:27
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    The factors affecting the intensity of rivalry include: (1) having a higher than expected company's credit rating and (2) ROE.

    Step-by-step explanation:

    Porter's Rivalry Intensity Increased

    If the industry consists of numerous competitors, then Porter rivalry will be more intense. Whereas if the competitors are of equal size or market share, then the intensity of rivalry will increase. The intensity of rivalry will be high if industry growth is slow. If the industry's fixed costs are high, then competitive rivalry will be intense. Additionally, rivalry will be intense if the industry's products are undifferentiated or are commodities. If brand loyalty is insignificant and consumer switching costs are low, then this will intensify industry rivalry. Industry rivalry will be intense if competitors are strategically diverse - which means that they position themselves differently from other competitors. Then an industry with excess production capacity will have greater rivalry among competitors. And finally, high exit barriers - costs or losses incurred as a result of ceasing operations - will cause intensity of rivalry among industry firms to increase.

    Porter's Rivalry Intensity Decreased

    And of course, if the opposite is true for any of these factors, the intensity of Porter rivalry among competitors will be low. For example, the following indicates that the Porter intensity of rivalry among existing firms is low:

    • A small number of firms in the industry

    • A clear market leader

    • Fast industry growth

    • Low fixed costs

    • Highly differentiated products

    • Prevalent brand loyalties

    • High consumer switching costs

    • No excess production capacity

    • Lack of strategic diversity among competitors

    • Low exit barriers

    Porter's Intensity of Rivalry Analysis

    When analyzing a given industry, all of the aforementioned factors regarding the intensity of competitive rivalry Porter placed among existing competitors may not apply. But some, if not many, then certainly will. And of the factors that do apply, some may indicate high intensity of rivalry and some may indicate low intensity of rivalry; however, the results will not always be straightforward. As a result, consider the nuances of the analysis and the particular circumstances of the given firm and industry when using the data to evaluate the competitive structure and profit potential of a market.

    Intensity of Rivalry is High if ...

    If any of the following occurs, then intensity of rivalry is high.

    • Competitors are numerous

    • Industry growth is slow

    • Fixed costs are high

    • Competitors have equal size

    • Products are undifferentiated

    • Brand loyalty is insignificant

    • Consumer switching costs are low

    • Competitors have equal market share

    • Competitors are strategically diverse

    • There is excess production capacity

    • Exit barriers are high

    Intensity of Rivalry is Low if ...

    If any of the following occurs, then it may indicate that the intensity of rivalry is low.

    • Competitors are few

    • Unequal size among competitors

    • Competitors have unequal market share

    • Industry growth is fast

    • Fixed costs are low

    • Products are differentiated

    • Brand loyalty is significant

    • Consumer switching costs are high

    • Competitors are not strategically diverse

    • There is no excess production capacity

    • Exit barriers are low

    Porter's Intensity of Rivalry Interpretation

    When conducting Porter's 5 forces industry analysis, low intensity of rivalry makes an industry more attractive and increases profit potential for the firms already competing within that industry. In comparison, high intensity of rivalry makes an industry less attractive and decreases profit potential for the firms already competing within that industry. The intensity of rivalry among existing firms is one of the factors to consider when analyzing the structural environment of an industry using Porter's 5 forces framework.
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