The collective strenght of these forces determines the profit potential of an industry and thus its attractiveness. On the other hand, when there are many suppliers or low switching costs between rival suppliers a company can keep input costs lower increasing profits.
The supply industry depends on the buyers for a large percentage of its total orders. Each force will be elaborated on below with the aid of examples from the airline industry to illustrate the usage.
The product that they sell has few substitutes and is vital to the company. How does the quality of their products or services compare with yours?
Threat of substitute products or services This force studies how easy it is for consumers to switch from a business's product or service to that of a competitor. The power of customers depends on: The part of the total market turnover that is purchased per buyer The importance of the product for the buyer The degree of product standardisation The switching costs and the profits of the buyers The threat of vertical integration The importance of the products within the business sector and the quality for the buyer The degree in which buyers are informed about demand, market prices and costs within the business sector Threat of Substitutes All companies compete in a broad sense with other business sectors where substitutes are produced.
Under Armour does not hold any fabric or process patents, hence its product portfolio could be copied in the future. Vertical integration The possibility of vertical integration determines how easy it is for suppliers themselves to produce certain products with a high demand within a business sector.
Answer these questions: How many competitors do you have? The five forces identified are: These forces determine an industry structure and the level of competition in that industry.
You can find new Free Android Games and apps. It has created a threat to the publishing industry.