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50. Industry competition
The state of competition in the industry is determined five main forces:
1) the threat of invasion by new participants;
2) the threat of the emergence of substitute products or substitute services;
3) market power of consumers;
4) the market power of the seller;
5) by all means to achieve an advantageous position among competitors.
Together, these forces determine the industry's marginal profit potential.
The threat of new competitors. The threat of entry by new competitors depends on the existence of barriers to entry and the reaction of existing competitors, if entry barriers are high and challengers face strong opposition in the industry of competitors, which does not pose a serious danger in terms of entry.
Exist six basic prerequisitesthat create barriers to entry into the industry.
1. Economies due to growth and scale of production.
2. Product differentiation.
3. The need for capital.
4. Higher costs.
5. Access to distribution channels.
6. Government policy.
The basis of competitiveness policy is a call for an increase in the degree of research cooperation and the creation of industry consortiums, a strong limitation of direct cooperation between rivals in the industry.
Location competitive advantage is a means of identifying industries in which a firm can achieve a unique competitive advantage over competitors based elsewhere, as well as those industry segments in which a home-based environment provides the greatest benefits. The development of new business should be concentrated in these areas.
The competitive advantages of an industry are in many ways similar to the competitive advantages of an organization within the industry.
So, to external Industry competitive advantages include:
▪ high level of competitiveness of the country;
▪ active government support for small and medium-sized businesses;
▪ high-quality legal regulation of the functioning of the country’s economy, etc.
К internal The competitive advantages of the industry are:
▪ high demand for goods in the industry;
▪ optimal level of concentration, specialization and cooperation in the industry;
▪ optimal level of unification and standardization of industry products, etc.
Strong local competition contributes to the formation of unique sets of specialized professions and technologies, the development of local supplier industries (which have a ready local market at their disposal), adaptation and support of the needs of the corresponding industry.
Author: Ilyina V.N.
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