The forces that together define the nature of competitiveness

The force that is usually the most powerful is competitive rivalry. This is because existing firms in an industry are constantly competing with each other to gain market share and increase profits. Competitive rivalry can be intense, especially in industries with high growth potential or where there are few barriers to entry.

Another important force is the power of buyers. Buyers have power when they can easily switch to competing products or services, or when they can negotiate lower prices or better terms from suppliers. Buyer power is often high in industries where there are a few large buyers or where the products or services are standardized.

Here are some examples of how the five forces can affect competition in an industry:

• Competitive rivalry: In the airline industry, competitive rivalry is high because there are many airlines competing for passengers. This leads to lower fares and more choices for consumers.
• Threat of new entrants: In the technology industry, the threat of new entrants is high because it is relatively easy for new companies to develop and launch new products and services. This keeps existing companies on their toes and forces them to innovate continuously.
• Power of suppliers: In the automobile industry, the power of suppliers is high because there are a few large suppliers of key components, such as engines and transmissions. This gives suppliers the power to negotiate higher prices and better terms from automakers.
• Power of buyers: In the retail industry, the power of buyers is high because there are many large retailers who can negotiate lower prices and better terms from suppliers. This keeps suppliers' margins low and forces them to be efficient.
• Threat of substitutes: In the telecommunications industry, the threat of substitutes is high because there are many different ways to communicate, such as voice calls, text messages, and video calls. This forces telecommunications companies to offer competitive prices and innovative services.

Organizations can use the five forces analysis to identify the forces that are most likely to affect their industry and to develop strategies to mitigate the threats and capitalize on the opportunities.

According to Michael Porter, the five forces that together define the nature of competitiveness in a given industry are:

1. Competitive rivalry: This refers to the intensity of competition among existing firms in an industry.
2. Threat of new entrants: This refers to the ease with which new firms can enter an industry.
3. Power of suppliers: This refers to the bargaining power of suppliers of inputs to the industry.
4. Power of buyers: This refers to the bargaining power of buyers of outputs from the industry.
5. Threat of substitutes: This refers to the threat of new or existing products or services that can substitute for the industry's products or services.