Consider the following statements with reference to Porter's five forces model of competitive analysis : Codes :
(a) As rivalry among competing firm intensifies, generally industry profits decline or in few cases, industry becomes inherently unattractive.
(b) Whenever new firms are allowed to enter a particular industry, the intensity of competitiveness among firms becomes haphazard.
(c) Generally competitive pressures arising from the substitute products decrease as the relative price of substitute products decline.
(d) Bargaining power of suppliers affects the intensity of competition.
Porter's Five Forces: Evaluating Competitive Analysis Statements
This section evaluates the accuracy of statements concerning Porter's five forces model, a tool for analyzing industry competitive intensity.
Statement (a) Evaluation: Rivalry and Industry Profits
Statement: As rivalry among competing firms intensifies, generally industry profits decline or in few cases, industry becomes inherently unattractive.
Analysis: Increased rivalry often leads to price wars, aggressive marketing, and higher operational costs, which erode profit margins and reduce the overall attractiveness of the industry.
Conclusion: True.
Statement (b) Evaluation: New Entrants and Competitiveness
Statement: Whenever new firms are allowed to enter a particular industry, the intensity of competitiveness among firms becomes haphazard.
Analysis: The entry of new firms typically intensifies competition by introducing new capacity, strategies, and market share ambitions. Competition becomes more robust, not haphazard.
Conclusion: False.
Statement (c) Evaluation: Substitutes and Competitive Pressure
Statement: Generally competitive pressures arising from the substitute products decrease as the relative price of substitute products decline.
Analysis: When the price of substitute products declines, they become more attractive alternatives, thereby increasing competitive pressure on the industry. The statement incorrectly suggests pressure decreases.
Conclusion: False.
Statement (d) Evaluation: Supplier Bargaining Power
Statement: Bargaining power of suppliers affects the intensity of competition.
Analysis: Suppliers with significant bargaining power can raise input costs or limit availability, directly impacting industry profitability and intensifying competition among firms vying for resources or facing higher expenses.
Conclusion: True.
Overall Assessment
Summary of statement evaluations:
- Statement (a): True
- Statement (b): False
- Statement (c): False
- Statement (d): True
Therefore, statements (a) and (d) are true, while statements (b) and (c) are false. This aligns with Option 2.
Important Questions from Competitor Analysis - Teaching
A firm's competitive advantage over its competitor is best described by the
