in the economists’ “perfectly competitive” industry, jockeying for position is unbridled and entry to the industry very easy. the strongest competitive force or forces determine the profitability of an industry and so are of greatest importance in strategy formulation. economies of scale can also act as hurdles in distribution, utilization of the sales force, financing, and nearly any other part of a business. the causes of the decline in unit costs are a combination of elements, including economies of scale, the learning curve for labor, and capital-labor substitution. all this suggests that the experience curve can be a shaky entry barrier on which to build a strategy.
in this article, porter undertakes a thorough reaffirmation and extension of his classic work of strategy formulation, which includes substantial new sections showing how to put the five forces analysis into practice. the five forces govern the profit structure of an industry by determining how the economic value it creates is apportioned. strategy can be viewed as building defenses against the competitive forces or as finding a position in an industry where the forces are weaker.
now that we have provided you with a basic rundown of what the porter’s five forces model is all about, the next thing in line is to know about the varying attributes and elements involved in the same. the very first and possibly the pivotal factor involved in this model is the prospect of competitive rivalry. in contrast to that, you are likely to own the market if you have a less number of rivals and competitors in the market.
one way to analyze your competition – and understand your standing in your industry – is using porter's five forces model. rivalry competition is high when there are just a few businesses selling a product or service, when the industry is growing and when consumers can easily switch to a competitor's offering for little cost. this force analyzes how much power a business's supplier has and how much control it has over the potential to raise its prices, which, in turn, lowers a business's profitability. this force considers how easy or difficult it is for competitors to join the marketplace.
according to the “journal of asian scientific research” in 2015, competition is how successfully a firm will compete with other firms in the industry at both national and international levels. in the food industry, competition is relatively high. in case of having power in the backward integration for instance, customers in the food industry are able to bargain over the decrease in price of the food items, this could result as a threat for the company. (eskandari, 2015) in case of food industry the bargaining power of customer is very strong. this too is a huge force in the industry. for instance most of the restaurants sell meat.